No More KYC with ShapeShift(erikvoorhees.medium.com)
erikvoorhees.medium.com
No More KYC with ShapeShift
https://erikvoorhees.medium.com/no-more-kyc-with-shapeshift-6d95a3e63ddf
77 comments
I have no idea how this system works - how are you harmed if someone claims unemployment in your name?
You still have to pay taxes on unemployment income
... they get the money you could have received.
CISO of ShapeShift here.
If our values speak to you, and you're a security researcher - WE ARE HIRING
https://shapeshift.com/careers
In liberty,
--Michael
If our values speak to you, and you're a security researcher - WE ARE HIRING
https://shapeshift.com/careers
In liberty,
--Michael
I hope to see more support for monero considering the supposed privacy values
This is an often seen opinion and there is some nuance to this idea.
Monero doesn't enable privacy by default, but its known as a privacy coin. The first means that people could be unaware of the extra steps they need to take to get privacy, but the second is the risky one.
Monero is known as a privacy coin and this makes it the target of governments that indeed made ShapeShift start to to KYC a year or more ago.
Monero is unduly targeted for standard features because governments don't like perfect privacy...
The good news is that privacy does not have to be built in to a coin for it to be capable of giving privacy. If we reverse the Monero situation we might get something that is actually useful for the majority of us. A coin like Bitcoin that doesn't have more than semi-privacy can have mixing added to become private.
Now, mixing as historically done on BTC is both expensive and centralized, which has caused several servers to be confiscated and people arrested. Again, governments really don't like what you do with your money being private.
I'm personally a big fan of https://cashfusion.org ticks all these boxes. It is built on a semi-private (bitcoin-like) coin and it solves the other problems as well with a mix (sorry, fusion) costing you nearly nothing.
Monero doesn't enable privacy by default, but its known as a privacy coin. The first means that people could be unaware of the extra steps they need to take to get privacy, but the second is the risky one.
Monero is known as a privacy coin and this makes it the target of governments that indeed made ShapeShift start to to KYC a year or more ago.
Monero is unduly targeted for standard features because governments don't like perfect privacy...
The good news is that privacy does not have to be built in to a coin for it to be capable of giving privacy. If we reverse the Monero situation we might get something that is actually useful for the majority of us. A coin like Bitcoin that doesn't have more than semi-privacy can have mixing added to become private.
Now, mixing as historically done on BTC is both expensive and centralized, which has caused several servers to be confiscated and people arrested. Again, governments really don't like what you do with your money being private.
I'm personally a big fan of https://cashfusion.org ticks all these boxes. It is built on a semi-private (bitcoin-like) coin and it solves the other problems as well with a mix (sorry, fusion) costing you nearly nothing.
Privacy is much more difficult than people think - when it comes down to technical details, it is required for privacy to be default, otherwise it simply doesn't work. Even when every single transaction is mixed, and values are hidden, there are STILL not-insignificant risks. If it is not mandatory then it is just not good enough, even for people that are not doing high-risk things.
>Monero doesn't enable privacy by default, but its known as a privacy coin. The first means that people could be unaware of the extra steps they need to take to get privacy
That is erroneous.
>Monero doesn't enable privacy by default, but its known as a privacy coin. The first means that people could be unaware of the extra steps they need to take to get privacy
That is erroneous.
> when it comes down to technical details, it is required for privacy to be default, otherwise it simply doesn't work.
Absolutely, we are in agreement.
The point I was making is that the coin itself, the base protocols, adding these privacy options makes it the difference between a generic payment protocol and one specifically made to evade the governments controls.
There being a way to do great privacy while leaving the coin itself to be a generic payment coin gives you the best of both worlds.
The point you make is still true, it is required for privacy to be default on. And this can be included in one wallet that people use for this purpose. Now its the choice of wallet that makes the privacy, not the choice of coin.
Absolutely, we are in agreement.
The point I was making is that the coin itself, the base protocols, adding these privacy options makes it the difference between a generic payment protocol and one specifically made to evade the governments controls.
There being a way to do great privacy while leaving the coin itself to be a generic payment coin gives you the best of both worlds.
The point you make is still true, it is required for privacy to be default on. And this can be included in one wallet that people use for this purpose. Now its the choice of wallet that makes the privacy, not the choice of coin.
> Monero doesn't enable privacy by default
It does in fact enable privacy by default. If you want to show someone the details of a transaction or an address balance, you have to provide viewkeys.
> I'm personally a big fan of
Now your comment reads like an attempt to shill, which would explain the misinformation about Monero.
According to HN's rules, I have to assume you have better intentions than that. Please explain what you meant, since I must have misunderstood you.
It does in fact enable privacy by default. If you want to show someone the details of a transaction or an address balance, you have to provide viewkeys.
> I'm personally a big fan of
Now your comment reads like an attempt to shill, which would explain the misinformation about Monero.
According to HN's rules, I have to assume you have better intentions than that. Please explain what you meant, since I must have misunderstood you.
> It does in fact enable privacy by default.
Ok, my statement was maybe too black/white and you jumped on top of that. The point is that Monero has Privacy level / mixin settings, the default is not completely open, but certainly doesn't qualify as super private either.
> Now your comment reads like an attempt to shill
I shared a link to a product that I feel is very successful in reaching privacy. I have no ties to this product (though I have used it).
Ok, my statement was maybe too black/white and you jumped on top of that. The point is that Monero has Privacy level / mixin settings, the default is not completely open, but certainly doesn't qualify as super private either.
> Now your comment reads like an attempt to shill
I shared a link to a product that I feel is very successful in reaching privacy. I have no ties to this product (though I have used it).
> The point is that Monero has Privacy level / mixin settings
I'm sorry but you clearly have no idea what you're talking about
I'm sorry but you clearly have no idea what you're talking about
>Monero has Privacy level / mixin settings,
What are you even talking about?
What are you even talking about?
I'm trying to better understand Shapeshift's business model. How do you make money?
ShapeShift is a platform that provides users with much more than just trading: we are a mobile wallet, a hardware wallet provider with KeepKey, a DEX, and an easy place to manage your crypto assets while retaining control of your private keys. And, for developers, we’re building a powerful software development kit (SDK). ShapeShift is building an ecosystem with the FOX Token at its core, and there are many opportunities to ensure a sound business model within it. We are looking to continually build value into FOX Tokens for the benefit of its holders while establishing a solid financial foundation for our company and our employees.
Can you simplify a bit? Can I take my USD dollars and buy crypto on your platform or not? If not, how would I obtain crypto and leverage those solutions that you support?
ShapeShift partners with Banxa to process debit and credit card transactions.
This allows you to buy BTC directly with USD, and the BTC is delivered directly to your own wallet with keys that are in your control.
Note that Banxa performs their own KYC for their own MSB services.
Once you have some crypto, you can then trade it for other crypto with a few taps on your smartphone, or clicks in your browser.
Search your smartphone's app store for ShapeShift and give it a whirl yourself :)
Note that Banxa performs their own KYC for their own MSB services.
Once you have some crypto, you can then trade it for other crypto with a few taps on your smartphone, or clicks in your browser.
Search your smartphone's app store for ShapeShift and give it a whirl yourself :)
> Note that Banxa performs their own KYC for their own MSB services.
Ok and so does Coinbase. So at any point I, an American citizen, must do some level of KYC.
Is the idea that I can simply buy Crypto from another exchange and then send the hash to another wallet on your platform (where KYC isn't performed)?
> Search your smartphone's app store for ShapeShift and give it a whirl yourself :)
No offense, but I won't. It's hard for me to trust a wallet that clearly (or technically unclearly) is operating in a grey area of the law.
Ok and so does Coinbase. So at any point I, an American citizen, must do some level of KYC.
Is the idea that I can simply buy Crypto from another exchange and then send the hash to another wallet on your platform (where KYC isn't performed)?
> Search your smartphone's app store for ShapeShift and give it a whirl yourself :)
No offense, but I won't. It's hard for me to trust a wallet that clearly (or technically unclearly) is operating in a grey area of the law.
Some kind of a miner fee: https://shapeshift.com/miner-fees I think to be able to execute the transaction.
Miner fees are charged by the various blockchain networks, and not by ShapeShift.
If the Bitcoin network is charging 0.00066 BTC for a transaction, ShapeShift passes this charge through to users transparently.
If the Bitcoin network is charging 0.00066 BTC for a transaction, ShapeShift passes this charge through to users transparently.
"Remote" job, physical requirements: "The employee must occasionally lift and/or move objects up to 50 pounds."
;-)
You gotta lift your laptop every now and then :P
Any plans to get added to 3commas?
We've got connections for sure
https://www.cameo.com/v/LP_Hemal_W
Can you please share your thesis for ShapeShift from an equity upside standpoint?
I'm not sure I follow the question, but I think you're asking about comp and whether employees have opportunities to earn equity.
We do!
Every ShapeShift employee has equity and has opportunities to earn more. It is vitally important that our employees benefit from ShapeShift's successes and I'm proud to be a ShapeShift employee.
More important to me than equity is the feelings of accomplishment and camaraderie that we already feel for building such a great platform that holds user privacy and self-sovereignty above all else.
We do!
Every ShapeShift employee has equity and has opportunities to earn more. It is vitally important that our employees benefit from ShapeShift's successes and I'm proud to be a ShapeShift employee.
More important to me than equity is the feelings of accomplishment and camaraderie that we already feel for building such a great platform that holds user privacy and self-sovereignty above all else.
I am sorry for the unclear question. I was curious about the bull case/potential upside for ShapeShift equity. Specifically, what makes you believe (if you do):
1) ShapeShift will succeed as a business long term
2) ShapeShift will capture value as a business
Broadly, where do you see the company in 5-10 years :) What makes you bullish about it!
Broadly, where do you see the company in 5-10 years :) What makes you bullish about it!
Done; I’m very interested.
Applause. KYC is the most abused wealth verification requirement, worst modern plague of freedom, personal data protection and privacy of wealth accumulation.
Did this get checked by a lawyer before posting?
Reading this, I get the hacker vibe: "The law says this, but I came up with this clever hack so it does not apply to me."
Unfortunately for this view, the law and judges who apply the law care a lot about intent, and are not very impressed by "hacks" of the law. Advertising that you are doing an end-around KYC, is something that a judge will find very interesting if this comes to court.
In addition, KYC is a big priority of the US Treasury department and there is pretty bipartisan support for it.
Basically, the US Treasury Department does not want any company to facilitate large money transfers anonymously. If you are doing that, they will likely come after you, despite whatever clever legal "hacks" you may think you have.
I don't see this ending well.
Reading this, I get the hacker vibe: "The law says this, but I came up with this clever hack so it does not apply to me."
Unfortunately for this view, the law and judges who apply the law care a lot about intent, and are not very impressed by "hacks" of the law. Advertising that you are doing an end-around KYC, is something that a judge will find very interesting if this comes to court.
In addition, KYC is a big priority of the US Treasury department and there is pretty bipartisan support for it.
Basically, the US Treasury Department does not want any company to facilitate large money transfers anonymously. If you are doing that, they will likely come after you, despite whatever clever legal "hacks" you may think you have.
I don't see this ending well.
First, it's important to note that we will continue to KYC users when they trade directly with us as the counterparty (this is our old model and we have to KYC in this case). When it comes to DEX trading, it means we are not part of the trade; we are not a custodian, a counterparty, or an intermediary of any kind. Thus, we are not regulated in that case because we are not engaged in a regulated activity and are in full compliance with regulatory guidelines.
But then they would have to go after all the other decentralized exchanges like Uniswap etc. no?
The article is light on technical details, but if Eric managed to actually pull that off in a truly decentralized manner, this is quite an accomplishment, congratulations.
I assume that Treasury will have their own view of this, but I generally applaud attempts to shake status quo. I will be checking on you guys from time to time now.
> Treasury will have their own view of this,
What will be interesting to see is if these views are physically enforceable.
Having more technical details would be interesting.
What will be interesting to see is if these views are physically enforceable.
Having more technical details would be interesting.
As long as the officers of ShapeShift or its shareholders are within reach of the U.S. government, those rules are physically enforceable.
lol, good point, it's not like actual rules matter anymore.
On the contrary, the rules -- especially their spirit -- are what actually matter. Not the games people play with numbers in computers.
It's a mouse and cat game. As of now, there are no KYC rules for decentralized exchanges, and thus they are under the radar of the law. It'll take a couple of years before the SEC/FTC catches up with them, by that time they would have already found another loop hole.
how will they make money if they aren't involved in the transaction and won't transact with the customers?
Yeah, this is an astute observation. If they're taking a cut of the transaction, I suspect they'll still fall under KYC (either because the legislation today is sufficient or because it'll be changed as soon as they become a threat).
they will release their own governance token through an airdrop. It's the new way to fund decentralised startups - no need for VC. Essentially it's the equivalent of an IPO on day 1.
IPOs raise money in exchange for equity, they don't create any profits.
I understand. Governance tokens are equity (usually with voting rights), and are used to generate a capital base for a decentralised product (think: crowdfunding). Not all governance tokens are airdropped and the secondary market for said tokens often results in them appreciating over time. I would suspect shapeshift to fund itself and generate wealth for the founders through doing this both at the point of issuance and over time.
With no incoming revenue, it seems like you've just described a pyramid scheme, albeit with extra technical steps. Can you help me understand the difference?
The various companies use such coins as a way to do the same thing as shares in a company. In fact, shares are just a pyramid scheme too, if you assume there is no obligation from the company to pay dividends or such.
The difference between coins and shares is such that shares can only legally be owned by a very very small number of people that are licensed to. You can ask them to buy and give you a certificate, but you yourself probably are not one of the few that can own stock. (series 7 in https://www.investopedia.com/articles/financialcareers/07/se...)
On the contrary, coins like these can be bought and sold by anyone. And this makes the balance very different. Should you see the company do stupid things, you can sell your coins in a very short time for nearly no cost and without asking for permission or waiting for banking-hours. Noteworthy is that you can sell them to anyone on the Internet.
Naturally, such companies (and there are quite a lot doing this today) pay out dividends as well. Typically to coin-holders addresses they arrange an air-drop. So simply you own 1000 and they pay 10 extra to that address.
Other strategies are buy-backs when the company is profitable which are meant to make the price go up because there is more demand than supply.
As you can see, there are quite a lot of similarities to stocks, and certainly also differences.
The difference between coins and shares is such that shares can only legally be owned by a very very small number of people that are licensed to. You can ask them to buy and give you a certificate, but you yourself probably are not one of the few that can own stock. (series 7 in https://www.investopedia.com/articles/financialcareers/07/se...)
On the contrary, coins like these can be bought and sold by anyone. And this makes the balance very different. Should you see the company do stupid things, you can sell your coins in a very short time for nearly no cost and without asking for permission or waiting for banking-hours. Noteworthy is that you can sell them to anyone on the Internet.
Naturally, such companies (and there are quite a lot doing this today) pay out dividends as well. Typically to coin-holders addresses they arrange an air-drop. So simply you own 1000 and they pay 10 extra to that address.
Other strategies are buy-backs when the company is profitable which are meant to make the price go up because there is more demand than supply.
As you can see, there are quite a lot of similarities to stocks, and certainly also differences.
> In fact, shares are just a pyramid scheme too, if you assume there is no obligation from the company to pay dividends or such.
Yes, a company that promises to never make a profit, pay out any dividends to its shareholders, or buyback stocks is a pyramid scheme. Your statement here is a bit like saying a credit card is just like bank robbery, if there's no obligation to pay off the balance.
Yes, a company that promises to never make a profit, pay out any dividends to its shareholders, or buyback stocks is a pyramid scheme. Your statement here is a bit like saying a credit card is just like bank robbery, if there's no obligation to pay off the balance.
notice that the disingenuous statements came not from me, but from the parent comment who asserted (without basis):
> With no incoming revenue []
I didn't want to be an ass to point this out, seems I confused you instead.
> With no incoming revenue []
I didn't want to be an ass to point this out, seems I confused you instead.
I'm still not sure I understand the revenue stream. Stock generally is a bet on the future value of the company. That value is derived from the business itself (revenues, costs, new business markets, etc). If a company isn't actually taking in any revenue, what's it paying payroll with? The alt coin they created and trading amongst third parties? Are they taking a cut of this? Or just constantly selling more of their coin reserves once it appreciates?
Generally even loss-leading plays that try to create a huge community before monetization still have plans to monetize that community. I asked how this is different from a pyramid scheme/Ponzi scheme. I don't feel like you actually addressed this point. How will ShapeShift make money on connecting these users in a way that doesn't require following KYC rules?
Generally even loss-leading plays that try to create a huge community before monetization still have plans to monetize that community. I asked how this is different from a pyramid scheme/Ponzi scheme. I don't feel like you actually addressed this point. How will ShapeShift make money on connecting these users in a way that doesn't require following KYC rules?
I'm by far not an expert in this space, but governance coins can also be utility coins - eg provide you with certain rights to use a service, or use a service at a discount or priority in some way ( eg. see Celsius). In this way, the coins circulate and can be used as a form of payment in an alternative to fiat but that were originally bought with fiat (similar to tokens at a laundromat). Overall, I recommend you look into DeFi for a few examples of this (eg Uniswap, Celsius)
ok but making a coin doesn't solve the lack of revenue problem which is I thought aidenn0 was proposing they would. it seems totally unrelated to the question at hand.
Edit: Simon not aiden
Thanks for the clarification.
So essentially a security scam.
Seems unlikely that they are actually going to be able to get around KYC.
Why would they need KYC if they don't handle any money?
They wouldn’t, but they might still be considered to be running an exchange if they keep a centralized orderbook. So i don’t know how they will get around that.
ShapeShift has never had an order book.
I just think the law will either be changed or re-interpreted to not allow this. Too great a potential for use in laundering money/tax evasion on capital gains.
If they don't handle any money, how do they make money?
Did ShapeShift migrate to a Uniswap-like dex?
No, we're simply integrating with DEX's on the platform. ShapeShift is moving away from handling the exchange and turning that functionality over to outside providers.
But then why not use the DEXes directy?
ShapeShift's software sets it up so that customers DO use the DEXes directly.
Decentralized trading seems like it would be a problem from the perspective of paying your taxes. Or maybe not. Maybe it’s just the honor system.
Keep track of all your assets, what you bought and sold them for, and tell your accountant if you have one. Or learn the tax laws surrounding capital gains.
Keep track of all your assets, what you bought and sold them for, and tell your accountant if you have one. Or learn the tax laws surrounding capital gains.
Regulations have a way of evolving to meet people's attempts to evade them. Whatever ShapeShift is doing might work for a while, but in the long run it looks like a cat-and-mouse game.
Everything is cat-and-mouse game in the end.
> Bad guys: we are not your friends. There are various ways of surveilling blockchain transactions that are far more effective than KYC. Not only will we continue to cooperate with authorities where required by law, but we actively collaborate with industry groups to monitor and root out sinister activity. We are here to protect good people, and as such, stand resolutely against evil.
"Against evil"...now where have I heard that before...
Translation: "We, a private corporation, get to determine what good and evil is. YMMV how/why you qualify for either or."
"Against evil"...now where have I heard that before...
Translation: "We, a private corporation, get to determine what good and evil is. YMMV how/why you qualify for either or."
What's the alternative to every individual determining for themselves what they view as good and evil?
How is this an example of that? The company is explicitly saying that IT is determining who is a bad actor and who is not.
A company is a collection of individuals. It wouldn't make sense to say an individual can determine X but 10 individuals voluntarily organizing together can't determine X.
> A company is a collection of individuals.
What's your point? Facebook is a collection of individuals, but if Zuck wants political ads barred from his platform he can snap his fingers and make it happen.
Having individual private companies become the arbiters of justice for good/bad actors is not a sound resolution...especially when it comes to fraud/identify theft.
What's your point? Facebook is a collection of individuals, but if Zuck wants political ads barred from his platform he can snap his fingers and make it happen.
Having individual private companies become the arbiters of justice for good/bad actors is not a sound resolution...especially when it comes to fraud/identify theft.
In that case, individuals join a collective knowing that they are deferring their viewpoints to the shareholders. And the individuals are free to leave at any time if they feel their views aren't aligned with the company view.
And what's the alternative? Who is the decision outsourced to if not the individual/company?
And what's the alternative? Who is the decision outsourced to if not the individual/company?
> Who is the decision outsourced to if not the individual/company?
KYC is a regulation requirement, so then the government.
KYC is a regulation requirement, so then the government.
Fairly simplistic to argue that the government laws are the be all end all of discussions about good/evil.
I can gaslight my spouse into insanity if I want completely legally. I guess that isn't evil since there is no law against it.
I can gaslight my spouse into insanity if I want completely legally. I guess that isn't evil since there is no law against it.
And the worst they can do is choose to not do business with them...
Whereas you doing full KYC with most companies, who are by law also forced to determine who is a bad actor, doesn't scare you?
Whereas you doing full KYC with most companies, who are by law also forced to determine who is a bad actor, doesn't scare you?
So glad to see this view rising up. When so many private and public parties are required to collect my private data, how can it remain private? I've had unemployment claims made in my name this year due to a breach, and it was on me to fight the fraud that would harm me. The collection of private data does not protect us, it results in a honeypot and puts us at risk.