The invention of cryptocurrencies brought to the world the perks of knowing that they could transact using a digital currency anywhere around the globe and within the digital space.
This meant that, unlike the traditional system whereby the holder of fiat currency had to transact through intermediaries, where the onus was on them to carry out these transactions at their own convenience – decentralization. With cryptocurrencies such as Bitcoin has gained acceptance around the globe, it became easier for people to use them nearly as fiat currency to transact with their counterparts.
Over time, other cryptocurrencies were developed with most coming to serve industry-specific purposes and others to solve the problems akin to Bitcoin. With the acceptance rate for the above coins increasing by the day, it wasn’t a surprise when the market has begun valuing them as highly as their pioneer. As such, investors and other traders begun developing the need to hold such cryptocurrencies in a bid to either gain from the gains in their value or to transact using them.
As such, the need for a favorable exchange became clear as days progressed.
As a result of the above, the idea of cryptocurrency exchanges was born. Over time, different exchanges were formed each with its own niche or differentiating factor, however, none compares to the idea behind the formation of Shapeshift.
Shapeshift was formed in Switzerland back in 2013 by two developers: Roger Ver and Barry Silbert. The two received about $525,000 in seed capital which they used to develop the platform. Over time, the platform had grown significantly thus requiring them to acquire another $1.6 million from a group of other investors in second round financing. Finally, their third and final round of financing happened in March 2017 when they acquired an additional $10.4 million from Earlybird Venture Capital.
As from the name, the platform was meant to enable people to swap their currencies across tokens or other altcoins. As such, the funds were used to build an API platform on which individuals would convert either Bitcoin or other alternative coins to the cryptocurrencies of their choice. Over time, they went further to develop a mobile platform which would help them do the same.
The company’s value proposition was quite simple, individuals and other legal persons would benefit from exchanging a wide range of cryptocurrencies over the platform at high speeds. Given the growing need for exchanges around the globe, Shapeshift created the most amicable solution to this problem.
However, another significant problem was the fact that exchanges were hacked very often – this has become a serious problem has been seen with the hacking of Coincheck, one of the largest cryptocurrency exchanges in Asia where over $500 million in NEM tokens were stolen by the hackers. As such, Shapeshift came up with another brilliant idea: they kept not the currencies on their platform.
The platform’s developers came up with a plan; a platform that did not require any accounts for the transactions to be carried out. Instead, the charges were made based on which transaction the user had carried out (miner’s fee). Given the above, the safety of the money was upheld (as will be discussed later).
Over time, the site has grown remarkably and is currently one of the largest such platforms, building its reputation as a force not to be reckoned with.
Shapeshift has an advantage over most of the cryptocurrency exchanges in that it does not have any limitations to the countries it offers its services to. This is mainly because the platform does not support fiat currency, therefore, does not require banks or other country-specific details to conduct its operations.
However, there are two exceptions. The residents of New York are limited from using the platform as a courtesy of the new Bitlicense law passed by the state. Entities such as Shapeshift – which allow people to transact without opening accounts on the site – are not allowed by this law to operate within this state. Finally, their services are not offered in North Korea.
Creation of an Account
As previously stated, users do not need to create an account with Shapeshift as it merely serves as an exchange rather. Holders of the cryptocurrencies would need to have other wallets from which they can transfer their cryptocurrencies from and to via the Shapeshift platform.
This is shown in the next section of this piece.
How to Convert Between Cryptocurrencies
The Shapeshift cryptocurrency exchange platform looks as in the image above. From this, one can notice that there exists no registration or account opening button. However, conversion of cryptocurrencies is done simply using the section on the right.
On the section to the right, the user chooses which cryptocurrency they wish to convert from and which they wish to convert to. In this section, we will use Bitcoin and Ethereum to make it easier for the reader.
From then, the user should click the “Quick” button and proceed to click “Continue”.
They will then see the popup below:
From then, one enters the destination address – the Ethereum address in this case – as well as the refund address – the Bitcoin address. The refund address ensures that the holder can get back their cryptocurrency in case the transaction is not completed. This address is mainly the address of the cryptocurrency the user wants to convert from.
Once this is done, the user should accept the terms and conditions – by clicking on the checkbox shown above – then click on the “Start Transaction” button.
From then, the pop-up below will appear on the screen:
As shown in the image, the system will receive the deposits from the deposit address, convert them via the platform to the new cryptocurrency and send the funds to the destination address. In this case, the funds would be received from the Bitcoin address – the deposit address – converted to Ether and sent to the Ether address – the destination address.
As seen, the process is fairly easy for the user. The system also gives the user the best exchange rate to be used for the conversion process, the minimum deposits that can be made as well as the maximum deposits.
However, in case the amount is not delivered to the deposit address, then a reversal is necessary. This means that the user’s already converted cryptocurrency will be reconverted back to the initial cryptocurrency – Bitcoin for the case of our example – and sent back to the refund address – which is mostly the deposit address. As such, the user’s money is led securely during the transaction period.
The company has maintained low fees that ensure its likeability among market players. Unlike other platforms, however, their fees are defined as miners’ fees as they are not associated with the user-specific accounts.
The fees are given on the company’s website with a sample of the fees being shown below:
The above fees are as per the transaction conducted by the client. As is seen, the fees differ between the coins one is converting between.
However, the company gives a caveat in that the miner’s fees will still be deducted from the auto-returned transaction in the case that a reversal occurs. Furthermore, a refund equivalent to or less than one euro (€1) cannot be refunded as the cost to the entity would be more than the cost of refunding the amount.
Finally, if the user enters the wrong destination address, an extraction fee equivalent to €50 is charged to their account. This figure is charged using the spot exchange rates on the mis-sent asset.
Shapeshift Vs Changelly
The two platforms differ significantly on their modus operandi. First is the first that unlike Changelly, Shapeshift does not require its users to create accounts with their platform. According to Shapeshift, this ensures that they do not hold any of their users’ personal information thus ensuring the safety of the identities of their users. Furthermore, Changelly accepts fiat currency – both the Euro and the US dollar – which is a lot different from Shapeshift which only deals with cryptocurrency.
Given the longer period within which Changelly has operated, the platform allows for transactions between over 85 cryptocurrencies, more than the over 40 that Shapeshift supports. Finally, the fees on Shapeshift vary per transaction whereas those at Changelly are fixed at 0.5% of the transaction value of the coin that is being transacted.
All in all, however, both exchanges serve their users quite amicably and professionally.
Is Shapeshift safe?
Over time, Shapeshift has experienced a number of security flaws that have led them to suffer greatly from the effects of hacking.
Back in 2016, the company was hacked and the hacker made away with about $230,000 worth of Bitcoin and Ethereum cryptocurrencies. However, since then, they have tightened their security as well as come up with other measures – such as the no user information policy which protects their identities – in a bid to ensure the above doesn’t recur.
Thus far, their security has been proven to be quite strong.
Shapeshift Customer Support
The company provides email support to their clients as well as a database of questions held via the Shapeshift help center. Their customer care support hours are from Monday to Friday from 11:30 am EST to 7:00 pm EST. They remain closed over the weekend but always try to pop in and answer some of the requests by their clients.
Shapeshift Frequently Asked Questions
Key among the frequently asked questions is about their terms and conditions. Furthermore, a question as to why some users cannot access the Shapeshift web platform is also asked.
From this, the solutions are that the terms and conditions can be accessed via this link and that users within either New York or North Korea cannot benefit from using the platform due to the reasons mentioned earlier in this article.
As is seen in this article, the revolution in the cryptocurrency exchange segment has been monumental and Shapeshift is pioneering it. Despite a few hiccups that have been witnessed along the way, Shapeshift has overcome them and is currently on the path to being one of the best exchanges on the market.
We expect that the platform will keep growing and keep being better going forward. Attention, however, has to be paid on matters security. Once this is done, Shapeshift will soon be the best cryptocurrency exchange in the market.