CoinIQ

ShapeShift Vs. Gemini – Contrasting Attitudes Towards Regulators

If you’re a beginner cryptocurrency investor, you’ll need to sign up with an exchange like Gemini that supports fiat-to-crypto exchanges. Gemini is a good exchange to use to buy the most popular cryptocoins because it’s one of only a handful of US-based crypto exchanges that supports US dollar deposits. In addition, Gemini has a solid security record and good availability in the US and Canada.

Once you’ve used Gemini to purchase some crypto funds, you can diversify your investment through ShapeShift. Unlike Gemini, ShapeShift doesn’t accept any type of fiat currency. However, because ShapeShift is compatible with Gemini’s cryptocurrency wallets, you can use both services together once you’re ready to diversify your cryptocurrency investments.

Keep reading to learn more about the key similarities and differences between ShapeShift and Gemini.

ShapeShift Gemini
Strengths
  • Supports bitcoin and over 50 altcoins.
  • Altcoin-to-altcoin trades.
  • No verification needed.
  • Beginner friendly.
  • Good worldwide / US availability.
  • Good US availability.
  • Advanced trading options.
  • Stable and well-funded.
  • Has never been hacked.
Weaknesses
  • No support for fiat currencies.
  • No advanced trading options.
  • Doesn’t accept debit or credit cards.
  • Poor altcoin support.
  • High commission fees.
  • Verification required.

Background

ShapeShift

ShapeShift Review
Source: ShapeShift

ShapeShift founder and CEO Erik Voorhees is a self-described “political ideologue.” Like many of the early supporters of bitcoin, Voorhees thinks that society is currently stuck in an “economic dark age” and believes that cryptocurrencies will eventually make fiat currencies obsolete.

At the time of its launch in 2013, Voorhees’s ShapeShift exchange provided a small step towards bringing cryptocurrency into the mainstream. In those early years, most crypto exchanges were highly technical and difficult for beginners to use. Complicated, buggy interfaces and lengthy verification requirements were keeping newcomers from getting involved in the crypto marketplace. Also, high-profile hacks had made some wary of trusting crypto exchanges with their money.

ShapeShift addressed the weaknesses of other exchanges by offering a simpler, safer way to exchange cryptocurrencies. ShapeShift’s non-custodial structure leaves it less vulnerable to hacks compared to exchanges that hold their customers’ funds in one place.

Another key innovation of ShapeShift has to do with its user friendly design. Instead of charts and graphs, ShapeShift’s main interface of ShapeShift consists of a simple wizard that prompts you to select which cryptocurrency you currently have and which one you want to get. ShapeShift manages the rest of the exchange for you once you enter in the required information.

Voorhees explained how ShapeShift works to CoinDesk:

“There is a better way. Bitcoin services can be built to significantly reduce or eliminate the need for trust at all … ShapeShift was built as a demonstration of this principle: exchanges occur without custodianship of user funds. Indeed, there are no user accounts whatsoever.”

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

Gemini

Source: Gemini

Like ShapeShift’s Erik Voorhees, Gemini leaders Cameron and Tyler Winklevoss want to bring cryptocurrency into the mainstream– but the similarity between the two exchanges ends there.

In 2014, the “Winklevii” announced the debut of Gemini– an exchange that was built to act as a bridge between cryptocurrency markets and existing financial institutions. Part of their strategy involves cooperating with (instead of criticizing and avoiding) government regulators.

Cameron Winklevoss summed up his exchange’s pro-compliance attitude in a blog post:

“Gemini must look and feel as safe, secure, and compliant as any other top tier financial institution in the world. In short, we take licensing and compliance very seriously and think that asking for permission, rather than forgiveness is the right approach in this case.”

Besides the difference in philosophy, another distinction between ShapeShift and Gemini is the way the two exchanges are structured. In order to use Gemini, you have to send money directly into the Gemini exchange.

The fact that Gemini is responsible for protecting their customers’ funds creates an obvious security challenge– but the Winklevoss twins have taken significant steps to ensure that their customers are protected from hackers. In addition to Gemini’s mandatory 2FA (two-factor authentication) policy, the exchange also relies on a proprietary “cold wallet” technology to keep its crypto funds secure.

So far, Gemini’s approach to building a crypto exchange has worked. Gemini has maintained a squeaky clean security record and is now one of the 30 most popular exchanges, according to CoinMarketCap.

Related: Gemini Review: Winklevoss Twins Seek to Legitimize Cryptocurrency

Supported Currencies and Listing Policies

ShapeShift supports far more digital currencies compared to Gemini.

Currently, Gemini only lists a few of the most popular cryptocoins: bitcoin, ether and zcash. ShapeShift, on the other hand, offers over 50 digital coins.

Gemini has one significant advantage over ShapeShift when it comes to currency integration, though: it supports US dollar deposits. You can quickly and easily link your bank accounts to Gemini and use your fiat funds to make cryptocurrency purchases. ShapeShift still doesn’t accept any type of fiat purchases or deposits.

Listing policies

ShapeShift and Gemini don’t offer many details regarding how they decide whether or not to list a digital currency. Neither exchange formally documents their selection criteria.

Security and Hacks

ShapeShift’s security record is also quite good, especially when its comparatively long history is taken into account. The one security problem that ShapeShift ran into was when an employee made off with $230,000 worth of bitcoin in 2016. That incident actually ended up earning the exchange kudos, because customers weren’t affected and the details of its investigation were shared with CoinDesk.

So far, Gemini’s security-first approach to running a custodial exchange has worked. Unlike many first-generation custodial crypto exchanges, Gemini has never been hacked. The difference in results is likely due to Gemini’s focus on security as part of its overall strategy. Gemini requires its employees to obtain multiple signatures before accessing any of its wallets and it relies on Amazon’s security system to protect its “hot” (in other words, internet accessible) funds. In addition, Gemini has developed a proprietary cold wallet security system to keep its offline funds secure.

Availability and verification

ShapeShift and Gemini both have good availability in North America, but ShapeShift operates in more countries in other parts of the world.

Though ShapeShift is available in every state except New York and Washington, some features of ShapeShift are not available in the US. ShapeShift recently decided to block its US-based customers from buying certain altcoins. The reason for the blocks could have something to do with the fact that the US Securities and Exchange Commission has been looking into several recent ICOs (Initial Coin Offerings).

Gemini operates in almost every state, district and territory in the US except Arizona and Hawaii.

Gemini Availability
Sourceː CoinIQ

Verification policies

Because ShapeShift only supports cryptocurrencies and doesn’t accept any type of government-issued currencies, it falls into a legal gray area in the US and most other countries. ShapeShift isn’t required to make its users provide KYC (Know Your Customer) information– so it doesn’t.

Gemini has followed a completely different approach to complying with financial service standards. All Gemini customers must identify themselves by uploading a picture ID. Gemini still hasn’t implemented an automated ID verification system, though. As a result, their customers have to wait for the Gemini customer service team to process their IDs before they can use the exchange’s core features.

Trading, Fees and Apps

Trading interface

ShapeShift allows complete novices to exchange one cryptocurrency for another. Gemini’s interface is also fairly intuitive, but if you’ve never used an online brokerage service before, you may find it to be a bit confusing.

ShapeShift’s core interface consists of a simple wizard. To use it, all you need is a pair of crypto addresses. The first address is where your funds will go once the exchange is complete. The second address is a backup address that will let you recover your funds if ShapeShift can’t process your transaction.

sendone 2
Sourceː CoinIQ

Once you press the Start Transaction button, all you have to do is send in the funds that you want ShapeShift to exchange. You can either copy and paste the address or use the QR code to upload your cryptocurrency to the site.

sendrecieve 2
Sourceː CoinIQ

The first thing you’ll need to do after signing up with Gemini is set up 2FA (Two-Factor Authentication). Unlike most crypto exchanges, Gemini doesn’t let you skip this step. As a result, you can’t use the exchange unless you have a mobile phone that can receive text messages.

pasted image 0 2
Sourceː CoinIQ

This is what Gemini’s dashboard looks like. The Buy and Sell buttons allow you to place orders and the Transfer Funds button lets you link your bank account to your Gemini account. The Recent Trades window gives you an overview of the last orders that you’ve initiated.

gem3 1024x607
Sourceː CoinIQ

Fees

ShapeShift and Gemini both offer fairly good deals when it comes to fees. However, ShapeShift is slightly cheaper to use.

ShapeShift makes money by offering profitable exchange rates to its customers. In other words, the cryptocurrency prices that you’ll get through ShapeShift are slightly higher than the prices that you’d be able to find if you used a more advanced exchange to place your order. The difference between ShapeShift’s price and the going price of the coin on the market usually amounts to a 0.5% spread, which ShapeShift keeps for itself.

Gemini’s trading fees start at 1%, but high volume traders can get fee discounts depending on how much and how often they trade. The minimum available fee is 0%, but to earn a full discount you have to place a maker or auction order and trade more than 2,000 bitcoin in a 30-day period.

feetable
Sourceː CoinIQ

Mobile apps

ShapeShift wins this category because Gemini has yet to release an app. ShapeShift has highly-rated apps for Android and iOS.

Customer Support and Community

Both exchanges rely on ticket-based systems to deliver customer support. They also both provide detailed knowledge bases, which you can use to find the answers to most questions. Neither exchange offers live phone or chat support.

ShapeShift Gemini
Ticket-based system Yes Yes
Telephone support No No
Online chat No No
Knowledge base Yes Yes
FAQ No No
In-house forum No No

Cryptocurrency Regulation

Given the fact that ShapeShift’s leader Erik Voorhees believes that fiat currencies will eventually be replaced by cryptocoins, it’s perhaps no surprise that his exchange has done little to embed itself within the existing financial system by complying with today’s financial service standards.

Voorhees has been openly critical of state cryptocurrency legislation passed in Washington and New York. ShapeShift left both regions after their crypto bills became laws.

“We would be required to spend hundreds of thousands of dollars to maintain a [Washington state] license, only to extract our users’ personal information and store that information for hackers to steal.”

The Winklevoss twins are in the opposite camp regarding government regulation. They believe that regulation is a key step along the path of cryptocurrency adoption.

Tyler Winklevoss told Bloomberg that he believes that New York’s stricter crypto laws are a good thing.

“These technologies can’t flourish and grow without thoughtful regulation that connects them to finance. As long as jurisdictions strike the right balance, we think it’s going to be a huge boon and win for cryptocurrencies.”

Final Thoughts

Despite the fact that the Winklevoss twins and Erik Voorhees have different ideas about how crypto exchanges should be run, one thing is clear: ShapeShift and Gemini are both useful tools for trading cryptocurrencies.

If you’re a beginner crypto investor, Gemini may be the only exchange that you’ll ever need to use. Gemini provides an easy way to turn your fiat money into several major cryptocurrencies. If you’re interested in buying one of the lesser-known altcoins, though, ShapeShift provides a convenient way to do so.

Alex Munkachy

Affiliate Policy

Please note that CoinIQ is reader-supported. When you sign up for products or services through links on CoinIQ, we may receive an affiliate commission.

We maintain strict editorial standards and our recommendations are in no way affected by these commissions.  We do not compromise on our critical approach for any product, service, person, or company.

Exchange Reviews

Purchase Guides

State of Crypto Logo

 

Subscribe to our newsletter!

We'll send you a roundup of the most important news in crypto, every week.

Our mission is to bring you the stories that are most relevant and important in understanding the state of the cryptoeconomy.

Thank You! You'll receive a confirmation email within 5 minutes.