Founded in 2014 by Erik Voorhees, the service allows users to submit one cryptocurrency to a specific address and then receive a different coin at a different address (thus the name: shape shift).
This is done without the user having to place bids in a traditional bid/offer cryptocurrency-pair exchange. The Shapeshift system chooses the best exchange rate and performs the trade automatically.
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 which quickly attracted regulators' attention.
Later, KYC and AML regulations forced Shapeshift to require users to signup and login before exchanging cryptos.
From September 2018 onwards, users must 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 procedure made Shapeshift a lot more 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.