Founded in 2014 by Erik Voorhees, the service allowed users to simply access the shapeshift.io home page to submit one cryptocurrency to a specific address and then receive a different coin at a different address (thus the name: shape shift).
It all happened without login or the user having to place bids on a traditional bid/offer cryptocurrency-pair exchange. The Shapeshift system chose the best exchange rate and performed the trade automatically.
All you had to do was access the Shapeshift home page, send some crypto to a specific address and receive a different crypto on an address you provided.
Originally, the service allowed anyone to create a new cryptocurrency address for the deposit coin and the system would send the exchanged coins to an address provided by the users.
This could be done 100% anonymously, a fact that quickly attracted regulators’ attention.
Internally, the Shapeshift system created a “ticket” which contained a source cryptocurrency + address pair and a destination cryptocurrency + address pair. Shapeshift would then use its own API against some popular exchanges, perform the exchange, and then withdraw the new currency. Once received, the amount would be sent to the target address.
There was a small fee per transfer, which covered operational costs and kept the service going.
Later, KYC and AML regulations forced Shapeshift to require users to signup and identify themselves before exchanging cryptos.
From September 2018 onwards, users had to provide identification in order to exchange cryptos at Shapeshift. A move which led TNW to publish that “they might as well just shut down their business”.
The signup and KYC procedures made Shapeshift work like a traditional exchange, turning many users away from the originally innovative exchange.
Early exchange rates were fair and the system provided a very fast and inexpensive method to switch between cryptocurrencies.
Today a bid/offer type exchange gives users more flexibility and control over the exchange process.
The signup/login and ID verification requirements removed most of the benefits originally provided by the previous anonymous system, mainly speed and ease of use.
Crypto used to be a lot more fun before regulation! The original Shapeshift was a truly useful tool, especially when you had to access different cryptocurrencies quickly. During the 2017 ICO craze, lots of different tokens were purchased using Ethereum. Shapeshift was especially useful in exchanging BTC for ETH.
The new Shapeshift seems to attempt to rescue some of the original features using a dApp. This application connects to your wallet and allows you to exchange several cryptocurrencies.