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ShapeShift Review

ShapeShift.io Review: More Altcoin Trading Options than Most Exchanges

ShapeShift.io in Brief

ShapeShift.io is a cryptocurrency exchange that supports more than fifty altcoins. Unlike the big centralized exchanges, ShapeShift does not restrict the number of markets where you can trade those coins. You can trade just about every altcoin with every other altcoin – hundreds of trading pairs.

Speed, privacy and security are the hallmarks of ShapeShift’s design. Our ShapeShift review will take you through all of the features that make it such an innovative player in the cryptocurrency world.

Pros

  • Fast transactions.
  • Support for 50-60 cryptocurrencies.
  • Support for hundreds of trading pairs.
  • No need for accounts or complicated verification.
  • Non-custodial business model is inherently secure.
  • Strong reputation, especially after a major hacking incident.

Cons

  • Trades can be more expensive than on advanced exchanges.
  • No advanced trading options

What is ShapeShift.io?

Shapeshift.io is a Switzerland-based cryptocurrency exchange that supports more than 50 coins and hundreds of trading pairs. As a non-custodial exchange, Shapeshift offers higher levels of security and fast trades without the need for user accounts or verification.

History

Benefits of shapeshift
Source: ShapeShift

Serial entrepreneur Erik Voorhees founded Shapeshift in 2014 after starting several early Bitcoin companies. Voorhees told Forbes that, upon learning about Bitcoin,“I was very excited about a currency that was not controlled by a central government, that could be a free market currency.”

That excitement was tempered by the frustrations he developed trying to trade Bitcoin and other early cryptocurrencies.

At its launch in August 2014, ShapeShift only supported two cryptocurrencies: Bitcoin and Litecoin. By the end of 2015, the trading service had added another 23 altcoins. Today, ShapeShift supports more than 50 cryptocurrencies.

2016 ShapeShift hack

Shapeshift hack
Source: ShapeShift

ShapeShift’s security-first approach had its first test when it got hacked in 2016. A rogue employee stole 315 Bitcoin from the SS hot wallet. Weeks later, he gave inside information to a hacker who promptly compromised ShapeShift’s Bitcoin, Ethereum and Litecoin hot wallets. The hack was so comprehensive that ShapeShift shut down its website for a week while its developers rebuilt everything from the ground up.

ShapeShift’s total loss (at 2016 exchange rates) was $230,000 in Bitcoin and other altcoins. “In all cases, no customer funds were lost or were at risk,” Voorhees explained in an update.

Voorhees maintained such consistent communications with users via Reddit and with the cryptocurrency press that his trading service saw little backlash. ShapeShift even released the full third-party investigation into the hack for publication on CoinDesk.

Leadership and investors

Shapeshift investment round
Source: ShapeShift

Beyond Voorhees’ leadership role, ShapeShift does not disclose any information about its executive team. In fact, it was not until early 2015 that ShapeShift even admitted Voorhees was the founder. In the announcement, the trading service explained that the secrecy was driven by Voorhees’ desire to “build a service that was safe and trustworthy by design, not by faith in the creator”.

There may have been other reasons. Months before ShapeShift launched, the United States Securities and Exchange Commission charged Voorhees with conducting unregistered public share-offerings in two Bitcoin-related companies.

The first company, FeedZaBirds, paid Twitter users Bitcoin for tweeting the advertising company’s content. The second company, SatoshiDICE, was an online gambling service based on Bitcoin.

Voorhees settled with the SEC and paid more than $50,000 in penalties. According to the SEC’s announcement, “Voorhees agreed that he will not participate in any issuance of any security in an unregistered transaction in exchange for any virtual currency including Bitcoin for a period of five years.”

Prior to founding ShapeShift, Voorhees was the co-founder of Coinapult, a cryptocurrency market-maker and digital wallet provider. According to The Business Journals, Voorhees “stepped away from managerial responsibilities to see to legal issues” from the SEC investigation.

Early capital rounds in 2015 raised more than $2 million, led by cryptocurrency investors Roger Ver and Barry Silbert who previously funded Voorhees’ creation of Coinapult. A $10.4 million Series A investment round closed in 2017. The lead investor, Earlybird Venture Capital, focuses on European technology startups.

Protecting customers’ coins

Legal and regulatory compliance

ShapeShift deliberately refuses to deal in fiat currencies to avoid the many issues that handling money creates. Of course, that does not mean ShapeShift can ignore the regulators.

ShapeShift withdrew from the state of New York in 2015 when the BitLicense regulatory framework went into effect. The company also left the state of Washington when it enacted similar regulations.

“ShapeShift AG takes regulatory compliance seriously,” the company said in a blog post. “As such, we are terminating service to Washington. Unfortunately, this means that Washingtonians will be required to use less-secure, more-expensive services. As in New York, the future of finance will no longer flourish there.”

All New York and Washington residents (and North Koreans) who try to access the ShapeShift.io website are blocked and redirected to the PleaseProtectConsumers.org website.

In April 2018, ShapeShift instituted a more nuanced  approach to the shifting ground of cryptocurrency regulation. The company now tailors the products and services it offers you based on the location data from your browser.

“We take our position as a leader in this industry very seriously,” ShapeShift said in the announcement, “and will not allow the actions of one jurisdiction to affect our customers residing in other jurisdictions.“

When presented with a request from law enforcement, however, ShapeShift has been known to help. A Scientific American article on the WannaCry investigation reported that ShapeShift helped authorities by blacklisting the extorted Bitcoins and identifying the specific XMR those Bitcoins purchased.

Coin listing policies

Shapeshift described its coin listing policies when it announced it would geo-fence its services. The brief statement at the end of the post said that the company “considers a large number of factors encompassing considerations from leadership, operations, finance, business development, and legal” when evaluating coins to list. The statement added that a formal process to add coins to ShapeShift is in the works.

Network security

The main protection ShapeShift offers for customers’ data is the fact that the company does not collect any data worth stealing. Since you don’t create an account, ShapeShift does not hold any personally-identifying information.

Since ShapeShift is a non-custodial service, it does not hold your coins in its own wallets. If the company’s servers get hacked, as they did in 2016, the only cryptocurrency that gets stolen is ShapeShift’s, not its customers’.

ShapeShift also distributes its operations on servers around the world. None of those servers are in the United States where they would be subject to clandestine reporting requirements.

Even then, ShapeShift logs some trackable data. In the past, the company has provided logs of wallet addresses and IP addresses to law enforcement. The most prominent example was ShapeShift’s support for the WannaCry investigation.

In a statement reported by CoinTelegraph ShapeShift explained that “Any transactions made through ShapeShift can not be hidden or obscured and are thus 100 percent transparent, making laundering of any digital tokens impossible.”

Customer support

For general information about ShapeShift and its products, the company provides a comprehensive self-service support site. For more specific questions about your transactions, turn to the ticket-based email support system.

As early as June 2017, the exploding popularity of cryptocurrency trading had overwhelmed ShapeShift’s customer support organization. Voorhees apologized on the company blog. “With six full-time customer support agents, we could get through about 800 tickets on our best day,” Voorhees explained. “But when 2000 tickets open each day, and this goes on for 1-2 weeks, you can do the math and discover the outcome.”

Now that last year’s hyper-growth has settled down, the ShapeShift ticket support system has response times of less than 48 hours. The quick turnaround does depend on how completely and accurately you enter the information. Since ShapeShift does not keep customer records, the burden is on you to get it right.

ShapeShift staff also monitor social media and the ShapeShift forum on Reddit. They will answer questions about the service and how to make trades, but will not address customer-specific issues.

ShapeShift reputation

Because of Voorhees’ long involvement in the cryptocurrency world, ShapeShift received accolades from industry leaders, such as Litecoin founder Charlie Lee and CoinKite CEO Rodolfo Novak, right from the start.

The 2016 ShapeShift hack, gave the company another opportunity to shine. The Ledger Labs executive brought in to investigate the hack, Michael Perklin, had high praise for the company’s openness. “Never before have I witnessed a breach which has been publicized so transparently, either in the Bitcoin space or elsewhere,” Perklin told BTCManager. “Most companies hide when they’re hacked often out of embarrassment… ShapeShift should be commended for the way they are addressing this daunting scenario.”

More recently, Forbes placed ShapeShift on its FinTech 50 for 2018 list alongside Coinbase and Ripple.

How to Join ShapeShift

Who can join?

ShapeShift lets anyone trade on its service. The only exceptions are residents of the US states of New York and Washington as well as North Koreans.

Verification

Since ShapeShift does not have customer accounts and does not handle fiat currency, its customers do not have to go through a verification process.

What Can You Trade on ShapeShift?

Trading volume on Shapeshift
Source: ShapeShift

Cryptocurrencies

ShapeShift lets you trade between any combination of more than 50 cryptocurrencies. Beyond market cap leaders like Bitcoin, Ethereum and Litecoin, you can find Voxels, Golem, Komodo and more. The Chinese-based asset digitization token NEO is the most recent addition, appearing on the exchange in January 2018.

Fiat currencies

Although ShapeShift does not deal in fiat currencies, a Simplex widget on the ShapeShift website that lets you buy Bitcoins with a credit card.

Currency exchanges

Coins traded on Shapeshift
Source: ShapeShift

Many exchanges limit their markets to the highest-volume coins like Bitcoin and Ethereum. Within those markets, you can trade a subset of the altcoins the exchange supports. ShapeShift, on the other hand, supports hundreds of altcoin-to-altcoin trades.

Advanced trading

Prism exchange by shapeshift
Source: Prism

In mid-2017, ShapeShift launched a new service to let investors create portfolios of cryptocurrencies. The Prism Exchange uses smart contracts on the Ethereum blockchain to create a pool of cryptocurrencies without having to manage multiple wallets.

Users select which coins they want and their distribution. After depositing Ether into the smart contract address, the system automatically tracks the value of the pooled investment. Prism users can close out at any time and get the equivalent value of Ether deposited in their Ethereum wallets.

“Gone are the days of trusting a 3rd party with one’s wealth,” Voorhees said in a statement. “Prism’s digital asset portfolios, built entirely on non-custodial smart-contracts, demonstrates a new standard in financial security.”

During the beta phase, customers only pay rebalancing fees (0.5%) since Prism has not set its monthly fees and has waived its closing fees. Once the service goes public, the closing fees will be 0.5ETH plus 2.4%.

Prism is still a closed beta, but you can register for an invitation on the site.

ShapeShift business solutions

Shapeshift offers several solutions for merchants who want to accept more than Bitcoin but don’t have the resources to do it on their own.

Shifty is a block of HTML that online retailers can integrate into their payment pages. The code uses ShapeShift’s system to give customers the option to pay with any altcoin ShapeShift supports. The exchange converts that altcoin payment into Bitcoin and deposits it into the retailer’s wallet.

Skeleton is a widget anyone can place on their website to let their visitors make instant, ShapeShift-powered crypto-to-crypto trades without leaving their website.

Companies can go even further and make crypto-to-crypto exchanges and altcoin payments look like a natural function of their website through the ShapeShift API.

Trading Tools and Fees

Trading interface

In his interview with Forbes, Voorhees described ShapeShift as “sort of like a vending machine where you just visit the website, send one kind of digital currency, and we send you a different kind of digital currency.”

The quick, simple approach to cryptocurrency trading results in a very streamlined web interface. The first step is to choose the coins you want to trade and which of the two trading options you want to use. Quick Exchanges are as you would expect the fastest way to trade while Precise Exchanges give you better rates and higher limits.

Quick Exchange

Starting a trade on shapeshift
Source: ShapeShift

When you make a Quick Exchange, ShapeShift gives you a deposit address in advance. Within a specified range, you can deposit as much of that cryptocurrency as you want. You can also reuse the address.

Quick exchanges on Shapeshift
Source: ShapeShift

The downside to the Quick Exchange process is that the quoted exchange rate changes every ten seconds. That means the rate on volatile markets could change dramatically between the time you start filling out the form and the time the exchange actually happens.

Precise Exchange

You make a Precise Exchange by telling ShapeShift how much you want to deposit in advance. ShapeShift can use that information to get better rates and lock the quoted rate for five minutes. At the same time, you can make larger deposits than you can with Quick Exchanges.

Precise exchanges on Shapeshift
Source: ShapeShift

Precise Exchanges come with their own limits. The deposit address ShapeShift gives you only accepts the amount of coin you originally proposed. Enter anything different and the exchange will fail.

In addition, there are some cryptocurrencies whose mining networks are too slow to work within the five-minute window. In those cases, the dynamic pricing of the Quick Exchange works better.

Mobile app support

Shapeshift on mobile
Source: ShapeShift

ShapeShift launched its mobile apps for Apple and Android in 2015. Both apps provide all of the features you’ll find on the ShapeShift website with instant trades between the service’s supported cryptocurrencies.

Users on both mobile platforms give the app similar scores: ShapeShift for iOS gets 3.4 stars and ShapeShift for Android gets 3.5 stars. The app itself gets positive reviews. Most of the negative reviews were the result of excessive response times from ShapeShift’s customer support staff during the recent hyper-growth.

Other apps

CoinCap market data by shapeshift
Source: CoinCap

Shapeshift has created several tools to make trading cryptocurrencies as easy as possible.

One common pain point is that very few merchants who accept cryptocurrency will accept anything other than Bitcoin. ShapeShift Lens is a browser extension for Chrome and Firefox that lets you pay those merchants with any altcoin ShapeShift supports. You simply enter the merchant’s Bitcoin address and the altcoin you want to use. ShapeShift converts your altcoin into Bitcoin and deposits the Bitcoin into the merchant’s wallet.

ShapeShift is not really a trading tool. It works best on those occasions when you want to convert an amount of one coin into another. ShapeShift launched CoinCap to give customers a way to time exchange rates. The CoinCap website and mobile apps provide real-time data on cryptocurrency pricing. They also integrate with ShapeShift so you can make one-the-spot crypto-to-crypto exchanges.

The CoinCap mobile apps let you create “altfolios” to track investment strategies. You can set alerts for your altfolios or for specific altcoins.

Deposits and withdrawals

ShapeShift is a non-custodial exchange so you do not make deposits or withdrawals.

Transaction fees

In almost every case, ShapeShift will not charge you for your exchange. The company makes money on the spreads between the exchange rates they get and the rates they quote you.

The spreads are not too excessive, generally around 0.5%. That said, you can get much better deals by trading through exchanges like Kraken, but the required effort may only make sense for frequent traders.

Lowering mining fees

As with every other exchange, ShapeShift passes the blockchain miner fees on to you. What is interesting is the way ShapeShift keeps network fees as low as possible. Rather than sending each transaction to the blockchain network one by one, ShapeShift bundles them together. The pre-packaged bundles make processing the transactions much easier for the miners which translates into lower network fees.

Other fees

ShapeShift will charge you for your own mistakes. If a trade fails and the amount of the trade is less than the mining fees, ShapeShift will not refund your coins because “deposits under the posted miner fee are too small to be refunded due to the mining fee and administrative costs.”

If you send your coins to the wrong address, like sending Bitcoins to a Ripple wallet, then ShapeShift will charge you a coin-equivalent €50 “extraction fee” to cover the time and effort of getting your coins back.

ShapeShift Affiliates

The Affiliate Program pays commissions to websites that refer customers to ShapeShift. The affiliate receives a 0.25% commission on all trades generated through their site. High-volume affiliates receive priority support and access to ShapeShift developers.

Final Word

ShapeShift is a fast and easy way to convert one altcoin into another. The fact that ShapeShift is non-custodial and does not require user accounts make it a strong candidate when security and privacy are a priority.

For new traders

As new traders begin to amass various altcoins, they need someplace to go where they can convert them into something else. The straightforward ShapeShift interface makes that an easy process.

For advanced traders

While ShapeShift does not offer the sophisticated trading tools of the major crypto exchanges, it does offer a much wider variety of cryptocurrency trading pairs. Most exchanges limit the pairings to Bitcoin and the major altcoins. By comparison, ShapeShift offers hundreds of trading options.

Christopher Casper

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