ShapeShift crypto exchange review: Does the service justify higher fees?
- ShapeShift crypto exchange review: Does the service justify higher fees?
- What is the ShapeShift Exchange? – Background
- Test of the ShapeShift platform
(4.6 / 5)
Mobile & Desk
If you’re the kind of trader that does not mind paying a little extra for convenience, you’ll also understand what it’s like to overpay for a service. Several exchanges exist out there that offer features like debit cards and crypto loaning, making them worth taking a chance on. ShapeShift is a well-known exchange that’s been a part of the industry for over six years. But do the features it offers to justify the higher fees?
And since the company does not charge deposit and withdrawal fees, how does it make money? We’ll answer those questions and more in this review. Moreover, we take a look at the trading platform itself, how to fund money and what trading options are available. Let’s take a look.
What is the ShapeShift Exchange? – Background
Bitcoin veteran Erik Voorhees founded ShapeShift in 2014, a little after Bitcoin had taken the world by storm. It is the only company that offers zero-commission trading and works on the basis of self-custody. The company operates globally, is headquartered in Switzerland, and has offices in the UK and the US. However, it is vital to note that the company is run out of Denver.
In less than a year after the company was founded, ShapeShift received a $525,000 seed-stage investment by Roger Ver – renowned as the world’s first investor in Bitcoin startups. A few months later, in September 2015, the company received additional funding of 1.6 million dollars. This time around, the list of investors included big names like Bitfinex, Bitcoin Capital, Mardal Investments, and the Digital Currency Group.
The platform was made available to mobile users on iOS in June 2015, and an app was later released on Google Play Store for Android users.
ShapeShift has over 1000 unique trading pairs, which is very impressive. However, the company does not operate in New York and Washington because it does not hold to the regulations put in place by the authorities in those states.
(Risk warning: Your capital can be at risk)
ShapeShift: Regulation and safety
As mentioned earlier, ShapeShift allows you to trade over 100 different assets and boasts over 1000 unique trading pairs. The company facilitates trading for thousands of users, and while there is no way to find the exact trading volume, it is safe to assume that it processes millions of dollars worth of crypto every day. But before you start using it to trade, it is essential for you to know what measures the company takes to safeguard its users.
The development team at ShapeShift prioritizes optimal user security at the top. ShapeShift is considered to be one of the safest exchanges to use since identity verification is not required to make transactions. Also, the exchange is able to offer better security because of its non-custodian business model. There is no hot wallet that hackers can access and steal user funds. If you are looking for an exchange that promises anonymity, ShapeShift is one of your best options.
To keep the exchange protected from hackers, it implements the following measures:
- Users with Level 2-5 accounts need to go through know your customer (KYC) and anti-money laundering (AML) verifications.
- All users get access to Keep Key cold storage wallets that have PIN and password phrase protection.
- Users can activate two-factor authentication to protect their ShapeShift account.
- A system that detects fraudulent transactions and bad wallet addresses is put in place.
- All user data is encrypted and air-gapped.
Hacking attempts and security slip-ups
While there are crypto exchanges out there that have never been hacked before, ShapeShift is not one of them. Between March and April 2016, the exchange was attacked three times, resulting in millions of dollars in losses. The funds were taken straight out of hot wallets, and the exchange had to shut down, so the infrastructure can be rebuilt securely.
On the website, ShapeShift reports that the reason behind the attacks was a rogue employee that sold company information to criminals. The company’s CEO insisted that no customer funds were lost, and no accounts of any losses were reported either. Now that ShapeShift pushes users to use the Keep Key hardware wallet, the risk of hacks has gone down significantly. Sure, the company has been hacked before, but the security measures currently taken make it a safe exchange that any trader shouldn’t hesitate to use.
ShapeShift leaves us with nothing to worry about safety-wise. However, it is not regulated and does not operate in regulated jurisdictions. When the BitLicense was first announced, ShapeShift relocated from New York to Denver. The exchange also does not operate in Washington since 2017, when BitLicense-style regulations were imposed in the state.
However, things are changing for the company. Since 2018, ShapeShift requires users to verify their identity to make use of the platform. While you can send and receive crypto without verifying your identity, you cannot trade any assets if your account isn’t verified.
This move enables the company to operate in more jurisdictions, and it is positioned to obtain licenses that will make it more trustworthy.
One of the most important things to note if you’re considering using ShapeShift is that it does not store your seed phrase for you. If you sign up for ShapeShift, we recommend writing down your seed phrases when it is issued and storing it in a secure location. The company will not be able to help you if you forget or lose your password or seed phrase. You will lose whatever was in your account.
Furthermore, you must remember that the company collects and processes user data to gain insight into how it can improve its services. This data may include information about the browser you’re using, your location information, the date and time of access, and the sections of the website you access. Some of this collected information is shared with third parties for the same purpose – to improve its services. However, you don’t have to worry about your data being stolen or misused since the company takes all the necessary steps to prevent that from happening.
All the data for the services that require KYC is encrypted with a 4096-bit RSA key using open-source GPG software. The data collected for this purpose is stored in the company’s database, and in most cases, is never used again since there is no need to reference it for any business reason.
Test of the ShapeShift platform
ShapeShift has an intuitive interface, but it is extremely basic. While there are charts that you can look at and get a gist of the cryptocurrency’s trends, there are no charting tools you can use to analyze it further. Trading the crypto in your wallet for other crypto is easy. All you have to do is navigate to the “Trade” section from the dashboard and select the currencies you want to sell and buy. Next, you enter the quantity you want to sell using the simple slider and hit the “Start Trade” button to initiate the transaction.
Considering the fees, though, we’d expected a more comprehensive interface that caters to both new and experienced traders. The interface offers no features that seasoned traders can use to make smarter trades, which is disappointing. While the platform may not be suited for buying and selling crypto, the slick interface makes it an excellent candidate for sending and receiving coins.
You can use ShapeShift on your phone by installing the Android or iOS app. You don’t have to verify your identity to use the mobile wallet, which means you can install and set it up in a matter of minutes. Like the web interface, the app makes it easy to transfer funds. All you have to do is select the crypto you want to deposit or receive and complete the transaction. One benefit the mobile apps offer that the web interface doesn’t is that the app will retain a record of your previous transactions for you. It also gives you the ability to sort through digital addresses by date or currency.
(Risk warning: Your capital can be at risk)
How to trade with ShapeShift?
Most crypto exchanges require you to supply all of your details and register an account. However, ShapeShift allows you to send and receive crypto without registering an account. All you have to do is specify the coins you want to deposit and the coin you want in exchange for it. After this, you can either select the “Precise” or the “Quick” order option to complete the transaction.
If you select the “Precise” order option, you will not need to supply your receiving address immediately. You only need to enter the amount of crypto you intend to deposit, and the trader will then receive the amount after the payment is complete. The chief advantage of this kind of order is that the exchange rate that ShapeShift applies remains constant throughout the trade. Furthermore, the deposit limit is also higher when compared to the other option.
If you pick the “Quick” order option, you will need to enter the receiving address swiftly, so you can go ahead with the transaction. You will also get access to ShapeShift’s wallet address, so you can deposit the coins there. While the transaction will look like you’re buying coins from ShapeShift, the company is essentially executing an order on your behalf. As the name suggests, using the “Quick” order option is quick. However, the exchange rates fluctuate wildly, with the platform updating the rate every ten seconds.
How to open an account with ShapeShift?
The easiest way for you to start using ShapeShift is to click on the “Get Started” button on the homepage. On the page that appears, you will need to enter your email address and set a username and password. While you can simply set credentials that you will remember, we recommend using a password manager to remember them for you. If you forget your credentials, you will lose access to your account since there is no recovery procedure. After you complete the captcha, you must verify your email by clicking on the link in the email in your inbox. If you cannot find the verification email in your inbox, check the spam folder.
You can now send and receive crypto as required. However, to use ShapeShift to buy and sell crypto, you will need to verify your personal information. Upload your passport, driver’s license, or other government-issued ID to the website, and enter all of your information accordingly. After your details are validated, you can use ShapeShift to buy any sell crypto assets. You will also get some free FOX tokens and can earn FOX tokens as you use the exchange.
If you don’t pass the verification process, don’t worry too much. There may be several reasons why you may not have passed the background check. The picture of your ID may not have been clear enough. Contact customer support to understand how you can apply again.
(Risk warning: Your capital can be at risk)
Does ShapeShift offer demo accounts?
Demo accounts are a powerful tool that boxes the user off from exchange and gives them demo coins to try out their strategies.
Some companies offer these accounts, enabling new and experienced traders to try new trading strategies and see how they work. While the user will not experience any losses if the strategy doesn’t work out, they will also not get any profits if the strategy works well.
ShapeShift does not offer demo accounts to its customers. If you’re looking for a service that offers demo accounts, you can use a service like eToro.
What makes ShapeShift unique is that the company does not charge any other fees except the miner’s fee. But this does not mean that the transactions are entirely free. The company offers its own exchange rate for every coin, and the fee is updated every thirty seconds depending on the market conditions. ShapeShift makes money by offering a profitable exchange rate, and it typically takes a 0.5% cut (or 50 basis points) on every transaction you make.
Whenever you make a transaction, you will see the exchange change applied and the amount you need to pay. The company never charges more than the specified amount. Let’s assume that 1 BTC = 31.41679239 ETH. So, to calculate the amount of crypto you will receive in your wallet, you must first take into consideration the amount of Bitcoin you are depositing. If you’re depositing 0.5 BTC, you will receive 0.5 x 31.41679239 = 15.70839619 ETH. On top of this, you will need to pay the company a miner fee. At the time of writing, the miner fee for Ether is 0.0042 ETH.
So, the total amount of crypto you will receive in your wallet is 15.70839619 – 0.0042 ETH = 15.704196195 ETH. You can increase the volume of funds you receive by using FOX tokens. After you sign up to ShapeShift.com, you will see a breakdown of the transaction you’re making on the right side of the screen. The breakdown will include the “Free Trading” rate, and to be eligible for receiving more of your desired crypto asset, you must hold FOX tokens in your account.
If there are no FOX tokens in your account, the breakdown section on the right side of the screen will show you how much more of the asset you could have received using FOX. Using ShapeShift will only make financial sense if you decide to use the FOX tokens. Otherwise, there are far cheaper exchanges out there that offer similar features at lower costs.
ShapeShift limits and liquidation
The company has five membership levels. Level 1 accounts are free to create and do not require any identity verification. The transaction limit for these accounts is $10,000, and there is a monthly cap of $50,000. To get a Level 2 account and above, you will need to verify your identity with the company. The main benefit of getting a Level 2 account is the higher transaction limit. To increase your account level further, you must get your hands on FOX tokens. These are Ethereum-based tokens that serve several purposes for the company.
The more FOX tokens you hold, the higher your account level will be. While ShapeShift does not disclose it, the company does place a limit on transactions. There is a dynamically set limit per coin, and the transaction will not complete if you try to send more than the limit. ShapeShift also does not disclose the limit size, so there’s no way for you to know if your transaction will go through until you attempt to complete it.
Support and service
One of the best things about ShapeShift is that customer support is available 24/7. You can connect to the customer support team at any time by submitting a request on the Help Center page. Alternatively, you can use the live chat widget on the website to get your issues resolved. If you think you have a rather common query, you can search the Help Center page. It has several articles about how you can use the platform.
In addition to this, the company also offers a FAQ section on the website that also helps out with general questions. If you need further information, you can also take a look at the company’s blog.
(Risk warning: Your capital can be at risk)
Conclusion of the ShapeShift exchange review
ShapeShift has a lot going for it – the interface is easy to navigate, customer support is available around the clock, and the company respects user privacy. It takes all the necessary steps to safeguard users and makes opening an account to trade crypto very approachable. However, the slightly higher fee and the relative lack of features make it difficult to recommend. So are the higher fees really justified? We doubt it. Still, ShapeShift offers a great selection of cryptocurrencies for traders around the world under secure trading circumstances.
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