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ShapeShift altcoin-to-altcoin trade

ShapeShift Vs. Poloniex – Two Very Different Crypto Exchanges

The key difference between ShapeShift and Poloniex is that ShapeShift is far more beginner friendly. ShapeShift’s intuitive wizard guides you through the process of trading one cryptocurrency for another. All you have to do is provide the necessary cryptocurrency addresses.

The main advantage that Poloniex has over ShapeShift is that it’s fees are not as high. Though ShapeShift doesn’t charge any upfront fees, it does take some money off the top of every trade by offering a higher-than-market-value price for every cryptocurrency that it supports. The difference in the spread typically results in a 0.5% fee. Poloniex’s fees start at 0.1% maker / 0.2% taker, plus you can fine tune your trades by placing limit orders. In addition, Poloniex gives fee discounts to frequent traders.

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

ShapeShift Poloniex
Strengths
  • Supports bitcoin and over 50 altcoins.
  • Altcoin-to-altcoin trades.
  • No verification needed.
  • Beginner friendly.
  • Supports bitcoin and over 60 altcoins.
  • Low fees.
  • Margin trading available.
  • Limit order functionality.
Weaknesses
  • No support for fiat currencies.
  • No advanced trading options.
  • Residents of New York and Washington can’t register.
  • Expensive compared to Poloniex.
  • No support for fiat currencies.
  • Not beginner friendly.
  • Residents of New York, Washington and New Hampshire can’t register.

Background

ShapeShift

ShapeShift altcoin-to-altcoin trade
Source: ShapeShift

ShapeShift has an unusual origin story. Its CEO Erik Voorhees used a pseudonym during the early months of his exchange’s history.

Though Voorhees claimed that he didn’t want his personal fame to detract from the innovations that ShapeShift brought to the market, the real reason that he chose to remain anonymous early on likely had more to do with the fact that he had signed a settlement agreement with the US Security and Exchange Commission in 2014.

Voorhees was required to sign the agreement because he did not register with the SEC before selling shares of SatoshiDICE and FeedZeBirds. The settlement mandated that Voorhees would not be allowed to make any type of bitcoin security offering for the next five years.

Voorhees didn’t remain undercover for long. In March of 2015, he revealed his identity– and shortly thereafter, ShapeShift raised $525 million dollars in seed funding.

ShapeShift became immediately popular because it provided a quick and easy way to exchange all the major cryptocoins. Most other crypto exchanges at the time weren’t beginner friendly and required their users to go through an extensive verification process.

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

Poloniex

Poloniex interface detail 3
Source: Poloniex

Like many early crypto exchange leaders, Poloniex’s founder Tristan D’Agosta had no financial world experience when he opened his exchange in 2014. In fact, prior to starting Poloniex, D’Agosta was a musician. He received a BA in music from Rutgers and learned how to program in his spare time.

D’Agosta’s lack of experience hurt the exchange early on when hackers stole 12.3% of its bitcoin funds in 2014. Following the attack, D’Agosta decided to temporarily borrow money from his customers to make up for the loss. Several months later, Poloniex was able to make its customers whole again.

In February of 2018, D’Agosta sold Poloniex to Circle Internet Financial — a large mobile payments company that’s backed by Goldman Sachs. Though no official figures were released, an unnamed source told Fortune that Circle paid around $400 million for the acquisition.

Now that Poloniex is under new leadership, it has an entirely new direction. Circle founder and CEO Jeremy Allaire told CoinDesk that Poloniex will soon introduce an entirely new menu of blockchain-related products.

“We see the future of Poloniex as a full marketplace where tokens can represent all kinds of assets and all kinds of contractual agreements.”

Allaire went on to say that the exchange’s long-term plans involve introducing support for fiat currencies and revamping Poloniex’s slow customer support system.

Related: Poloniex Review: Large Basket of Coins and Wall Street Backing

Supported Currencies and Listing Policies

Currently, ShapeShift and Poloniex are both “crypto only” exchanges. In other words, there’s no way to deposit US dollars or any other type of government-issued currency into either platform. This makes both exchanges somewhat inconvenient. If you want to turn your fiat funds into cryptocurrency, you have to use some other site to make the initial fiat-to-crypto conversion.

Both exchanges support bitcoin and a large variety of different altcoins. ShapeShift’s menu of supported coins changes regularly, but the site currently supports around 50 digital currencies. Poloniex supports around 60 altcoins.

Listing policies

Poloniex and ShapeShift are both somewhat vague when it comes to revealing the logic behind how they decide whether or not to list a coin or token. Poloniex published a short blog post that briefly describes the “honesty test” it uses to evaluate tokens. The ShapeShift site, on the other hand, doesn’t have any information about its coin/token listing policies. Developers must contact ShapeShift directly to get information about the criteria it uses for listing digital currencies.

Security and Hacks

ShapeShift and Poloniex are about even when it comes to their security track records because both exchanges have been successfully hacked. A ShapeShift employee stole $230,000 worth of bitcoin in 2016 and Poloniex lost 12.3% of its bitcoin in 2014.

ShapeShift and Poloniex seemed to have improved their security systems since those attacks, though, because neither exchange has been hacked again. ShapeShift went as far as to publish the results of their security investigation on CoinDesk.

ShapeShift has less to worry about when it comes to security than Poloniex because ShapeShift is a non-custodial exchange. Or to put it another way, ShapeShift does not hold its customers’ funds. Poloniex, on the other hand, does– but that doesn’t mean that Poloniex is not safe to use.

Like most custodial crypto exchanges, Poloniex now stores most of its funds in offline “cold wallets.” Because cold wallets aren’t connected to the internet, they are very difficult to hack. Poloniex also allows its customers to protect their wallets with 2FA (Two-Factor Authentication). 2FA functionality adds another layer of security to your account, since it requires you to effectively provide two different passwords every time you log in.

Because ShapeShift doesn’t offer its own hosted wallet service, it doesn’t have to concern itself with protecting its customers’ passwords. ShapeShift only holds your money temporarily during the transaction. After the transaction is complete, your funds will get deposited directly into whatever crypto wallet you specified when you initiated the order.

Availability and verification

ShapeShift and Poloniex are about even when it comes to availability. Both exchanges are accessible in most– but not all– US states. The United States has tougher crypto laws than most other countries, which is why fewer cryptocurrency exchanges are available there.

With the exception of New York and Washington state, all US residents can use ShapeShift. However, US-based ShapeShift users won’t see as many options when they place a trade. ShapeShift recently started placing geographic blocks on some altcoins. These geographic blocks prevent some US residents from trading certain altcoins. Read the full statement to find out more information. Outside the US, ShapeShift is available pretty much everywhere except places like North Korea and Iran.

Poloniex is also not available in New York and Washington state. In addition, Poloniex left New Hampshire in 2016 when the state rolled out stricter cryptocurrency regulations. Outside of those states, nearly anyone can sign up for Poloniex except for residents of countries that are enemies of the US.

Verification policies

Because “crypto only” exchanges like Poloniex and ShapeShift don’t accept fiat currencies, the regulatory situation around them is a gray area. Even though neither exchange is technically required to comply with AML (Anti Money Laundering) standards or have their users provide KYC (Know Your Customer) information, Poloniex nevertheless has a mandatory identity verification policy. ShapeShift, on the other hand, doesn’t require any form of verification at all.

In order to make the verification process less of a hassle, Poloniex recently introduced an automated verification system. If the automated system works as intended, new users can begin using all the exchange’s features immediately. If an error causes the automated system to send your documents to customer service for a manual review, however, verification can take anywhere from a few days to several weeks.

Trading, Fees and Apps

Trading interface

ShapeShift is more beginner friendly compared to Poloniex.

To get started with ShapeShift, all you have to do is provide two wallet addresses. The first address is where your funds will end up once the transaction is complete, and the second address is where your funds will go in the event that some type of error prevents the exchange from happening.

sendone
Sourceː CoinIQ

After you provide those two addresses, you’ll be able to send your funds to ShapeShift. Once you initiate the transfer, ShapeShift takes care of the rest of the process for you.

sendrecieve
Sourceː CoinIQ

Poloniex’s interface is designed to appeal to people who have experience using brokerage services. The box on the right side of the interface lets you pick a market. Four tabs appear there– those represent the four most popular cryptocurrency markets on Poloniex. The real-time chart on the left allows you to view the exchange rate for whatever market you selected. The three boxes on the bottom of the screen are for placing orders.

Poloniex TradeInterface Top
Sourceː CoinIQ

Fees

Poloniex is cheaper to use compared to ShapeShift.

ShapeShift doesn’t charge any upfront fees, but it makes money by offering cryptocurrency prices that are always about 0.5% higher than the going market rate. Poloniex’s fees start at 0.1% maker / 0.2% taker and decrease from there, depending on how much and how often you trade during any given 30-day time period.

Mobile apps

ShapeShift is the clear winner in this category. ShapeShift has highly-rated apps for Android and iPhone, but Poloniex doesn’t have any official apps at all.

If you do happen to run into an official-looking Poloniex app, don’t make the mistake of downloading it. Last year, CoinTelegraph spotted several fake Poloniex apps in the Google Play store. Hackers were using the fake Poloniex apps to harvest usernames and passwords.

Customer Support and Community

ShapeShift and Poloniex both have standard customer support systems. They rely on ticketing systems to track and address any problems their users run across while using their services. In addition, both exchanges offer knowledge base articles for resolving minor issues. Phone and chat support is not an option on either of the exchanges.

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

Cryptocurrency Regulation

Though both cryptocurrency exchanges have been in the crosshairs of US financial regulators, ShapeShift has a more rebellious attitude regarding regulation compared to Poloniex.

Prior to being acquired by Circle, there were rumors circulating that the US Securities and Exchange Commission was on the verge of investigating Poloniex and several other US-based crypto exchanges. After Circle bought Poloniex, however, the SEC may have decided to give Poloniex a “free pass.”

New York Times journalist Nathaniel Popper uncovered a confidential slide from a Circle presentation. The slide indicated that the SEC had informed Circle that it would “not pursue any enforcement action for prior activity” following the acquisition.

slide
Sourceː CoinIQ

After Popper posted the slide, it controversy within the cryptocurrency community.

Circle plans to register Poloniex as an ATS (Alternative Trading System). In the US, ATS-designated exchanges are regulated differently. Instead of typical rules for standard stock exchanges, ATS-designated exchanges must comply with rules regarding broker-dealer organizations.

ShapeShift also has had a rocky relationship with US regulators. Along with Kraken CEO Jesse Powell, ShapeShift CEO Eric Voorhees has been a harsh critic of New York state’s BitLicense. During a meeting between regulators and cryptocurrency leaders, Voorhees stated that BitLicense is an extreme example of regulatory overreach.

“Here we are two miles from the Statue of Liberty and you cannot sell CryptoKitties in the state without that license. That’s the absurdity of what’s happened here,” he said.

Though ShapeShift refused to apply for a BitLicense, it has implemented geographic blocks on various altcoins. These blocks prevent residents of various US states from buying certain digital currencies and tokens.

Final Thoughts

If all you want to do is invest in a promising altcoin, ShapeShift is the best option because it’s more convenient and easier to use. Though ShapeShift’s fees are slightly higher, you won’t notice the difference in fees unless you’re a high volume trader.

Alex Munkachy

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