In 2014, I was working with Erik on another crypto project, when he came to me and said that he had a new idea that he would like to explore simultaneously. He recounted a story where he had been trying to buy some altcoin (there weren’t many back then), and how cumbersome the process had been. He said since these crypto assets were natively digital, all the friction made no sense. He should be able to just “send one asset, and receive another one.” He wanted to scope out an initial solution to this idea, and he had a name for what we should call it — “ShapeShift.”
Bitcoin Transaction c88532239d11a0901779cafc02b1475686811fbf5493572e52000d8ca6bc4bbe
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Follow ShapeShift’s first-ever customer transaction — BTC to LTC on 7/30/2014.
In that moment, the simple identification of a problem and a potential solution, what we now know as “ShapeShift,” was born. Most moments of genius seem obvious in hindsight, but at the time this radical concept of just “send on one blockchain and receive on another” was just that. It also helped establish an ethos among those involved with ShapeShift early on, that I believe still exists, and I want to make sure always exists at ShapeShift. I consider it core to our company DNA — this is the thought that we should “build where things are going to be, not where they are.’’ This is the innovative spirit at its core. Build for the future, certainly not for yesterday, but perhaps not always even for today.
When we built ShapeShift, every crypto company in the space was focused on building fiat on and off ramps for bitcoin, merchant processing (another form of a fiat on and off ramp), and some open source wallets. This is where the space was at the time, but we saw most of these efforts were ways to bridge the old world (fiat) and the new world (crypto), and as a result it came with all the friction of the old world.
ShapeShift, was one of the first to see that we should be building for the new world and not worry about the old, and as a result we could eliminate a ton of the friction. The old world was holding progress back, and that required us to take a risk and build something for a long-term market we were not sure yet would develop, but we were willing to take that risk.
Following this spirit, we made the decision early on (even though Erik was still somewhat of a “maximalist” at the time) that ShapeShift should remain asset agnostic. We didn’t know what the future held for us or the space. We wanted to give the market a chance to decide what should flourish, instead of trying to figure that out for ourselves. At the time, altcoins represented mostly “Copycats and scams,” to bitcoiners. In hindsight, if that maximalist perspective is shifted slightly, they should instead be viewed as the decentralized economic and technical innovation labs of the space. These alternative assets represented experiments, many of which failed. However, a number of them created significant opportunities in the space, or opened doors on the backs of their failed experiments for better, more successful ones.
In the early days, we saw this shift start to happen after many assets started to break the model of the original coins we added. The original coins, were almost exclusively UTXO-based at that time. They were either forks or derivatives of Bitcoin, meaning they all fit into relatively similar design patterns — things like Litecoin and Dogecoin. We saw this shift begin occurring within the first year of ShapeShift. All of a sudden, new assets came on the scene that we started to explore. Things like NXT, Monero, BitShares, even Ripple became more prominent on the scene. They represented something different than what came before them.
They weren’t just playing with a few economic variables like the coin supply and block time. They were trying to bring totally new types of assets and functionality to a blockchain, in such a way that they were not forking from bitcoin’s code at all; they were something new from the ground up. This made them a much heavier lift engineering-wise. Sometimes our team spent months of effort on a particular asset, because they broke our design patterns. Yet they also represented such interesting experiments, and potential opportunities like true on-chain privacy, decentralized asset markets, prediction markets, decentralized stable coins, and a universe of “tokens” built on top of particular chains. We didn’t know if any of these experiments would succeed, but we knew that we wanted to stick with our ethos to build for where things were going. As a result, we wanted to add coins and tokens that were innovative, and let the market decide if they were valuable or not.
This led to ShapeShift developing a reputation as a place where “cool,” “new” assets were being added quickly. This helped develop our devoted following and brand in the early days. People used ShapeShift not just to trade the new coin they were interested in, but as a place to discover what the new interesting assets and protocols were going to be. This really ramped into gear after we spent 3–4 months laying groundwork to add a new, very different type of asset/protocol than we had ever added before: Ethereum.
When we chose to start investing time in Ethereum, we had no empirical data supporting that this would be a good volume play. All we had was a strong sense that there was a lot of hype around Ethereum, and our own intuition as we worked with the code that something important was likely going to happen. So we invested the time and resources, and worked through many different engineering pains, going back and forth with the Ethereum developers about problems with the new software. It was anything but easy or straightforward on the engineering side, but as a result we were ready to launch Ethereum day one of its mainnet blockchain “emerging from consensus.” Our reputation and brand in the industry gained an immense amount of momentum from becoming well known as one of the first exchanges to add ETH. If we had launched it a number of months later, it is very likely we would not have captured the kind of momentum we did.
This ended up being a turning point towards ShapeShift’s early growth in late 2016 and 2017. Not only did Ethereum end up being immensely more popular than any other protocol we had seen before other than Bitcoin, our integration opened up our system and ourselves philosophically to the world of tokens that would be built on Ethereum. This was an opportunity none of us had originally predicted, but the more we worked in this ecosystem, the more obvious it became that this was something ShapeShift should be building towards.
Our philosophy of building for where things will be, not where they are, paid dividends from the time we invested in adding Ethereum. This occurred at a time when very few crypto exchanges were interested in supporting much outside of Bitcoin. This was a time when competitors were jealous of our foresight, well before a company like Coinbase had even considered a world outside of Bitcoin. They found themselves chasing our lead in regards to innovation and new assets. This investment of aiming where things will be, beget new opportunities and insights into things we should be looking at next. We had been somewhat prepared for ideas like tokens and ICOs through our previous investments in assets in the pre-Eth world (something very few crypto companies were doing at the time). This helped us recognize and capitalize on the token boom that followed, when we saw how Ethereum was doing things in such a way that would really allow these things to flourish.
In my years at ShapeShift, I have seen this story play out countless times. A new asset/protocol seems “small” or “insignificant,” and over time the more it grows and is developed upon, new opportunities spring forth from it. Many experiments fail, but some bear precious fruit that sow the seeds for the next important round of innovation in the space. Assets are both our lifeblood and our competitive advantage. Our ability to continually innovate, and not rest on our laurels will be the difference between longevity and being no more than a flash in the pan of crypto’s primordial soup.
In order to compete, we cannot solely focus on refining a competitive service offering in the current space (though in the immediate short term this is paramount). We must always be on the cutting edge; exploring things that other crypto companies are squeamish about with excitement. We must be spelunking deep into the dark caves of crypto innovation, to mine and pull out the gems. This means adding and understanding innovative protocols, assets, dapps, and things we have not even begun to understand; often before the rest of the market thinks its a good idea.
We will not capitalize on our opportunities by trying to just be a better mousetrap. We expand by understanding and capitalizing on the opportunities that others don’t see coming before they can. We do this by innovating and embracing that our destiny and fortune lies in becoming the “Crypto Hipsters” of the space. That means capitalizing on new assets/protocols and opportunities, before others in the space realize it’s “cool.” While our company has evolved on many fronts, our DNA of innovation and building for the future remains the same. We should do our best to never let that flame die.
We only find these opportunities by taking some risks with our resources and exploring new frontiers.
We only can retain that pioneering edge by continually moving forward to where the new frontier is, and in this industry that frontier shifts under our feet on a daily basis. I never want us to forget that just because we can’t see something yet, that is not always an argument against its existence. Let us not become blind to that which we cannot readily see now, when we know our vision will adjust as we reach towards the horizon.