Shapeshift changing its business model, dropping KYC.

in LeoFinance3 years ago

Shapeshift CEO Erik Voorhees today announced that his company Shapeshift would be totally changing its business model, and shifting to become basically a DEX aggregator to facilitate swaps through DEX protocols, rather than its old model of being a CEX, and counterparty to all trades initiated by customers. Up until now, they operated as a centralized exchange, but one where users retained custody and conducted swaps. Shapeshift would hold a reserve of the assets listed, and when a customer made a swap, they would receive one token and send back to the customer the other.

This business model is being phased out, in favour of facilitating true trustless and decentralized swaps. Basically, Shapeshift becomes a software platform that acts as a front end for various DEX's. This means they will no longer be required to KYC their customers as they don't hold any customer funds, and are no longer a counterparty to the trades. In effect, Shapeshift is itself completely shifting it's own shape, from being a centralized swap provider to a DEX aggregator, and in the process repositioning itself for the future of DeFi.

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Erik dislikes KYC.

In his announcement post, Erik Voorhees states the following:

And so, for the past two and a half years, we’ve been engaged in a practice that is not only ineffective, but that I and others find plainly unethical and dangerous: the warrantless collection and surveillance of personal, private information of innocent individuals.

It is obvious from the post that Eric has a philosophical objection to the processes and KYC procedures his firm has had to implement. Privacy has been infringed, in the name of Anti-money laundering and other "perceived criminal activities". The issue many in crypto have is the double standards at work here. If you go to the shop and buy a chocolate with cash, there is obviously no KYC involved. Why then, in theory, would a similar transaction using crypto, require KYC. The Crypto industry is demonized over black market activities, yet most of such activities still occur using fiat cash.

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What about Bitcoin?

DEX's are great, and negate the need for KYC, but what about Bitcoin? most DEX's currently are Ethereum based, enabling ERC20 swaps and liquidity pools. How then will Shapeshift enable access to other assets, like Bitcoin (plus many other non-Ethereum assets). Without specifying how this will happen, in the announcement Eric addresses this as follows:

Today, the decentralized protocols we’ve integrated only support Ethereum and ERC20 assets. We expect native, non-wrapped Bitcoin and several other leading chains to be supported for decentralized trading in Q1 2021.

The answer to cross-chain swaps, the Shapeshift will facilitate, is Thorchain. He has not specifically mentioned it, but Thorchain is the way Shapeshift will facilitate native BTC swaps.

At this point I'll refer you to two previous posts of mine from November last year, in which I drew the conclusion that this integration was a possibility:

Can't help myself, and its not 100% confirmed yet, but I told you so. I am now 99.9% certain that Shapeshift will become one of the first front ends to Thorchain as soon as native BTC is rolled out.

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Thanks for reading, let me know in the comments you thoughts,

Cheers,

JK.

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Looks like Erik Voorhees grew some balls over the years!

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LOL I was going to say the same thing his been a big yes man for years now his walking the talk which I have to respect

He's pretty O.G. in crypto, and while this is a shift to keep his company relevant, it genuinely feels like he is happy to be able to move away from KYCing his customers.

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He must be very happy for sure.
Shapeshift will probably be relevant again!

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Then it looks like my buying of some RUNE earlier this year is turning into a better and better purchase!

Which is largely due to scouting about the many blogs of LEO one of which I think was yours, so cheers! :OD

Glad you found RUNE early and got onboard. The current rune to around $1.60 is just the beginning, wait until native BTC and ETH gets underway,

I can't wait till we can set up a WLEO/RUNE pool and @khaleelkazi integrates cross chain swaps into LeoFinance's wallet page.

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Yeah, got in ages ago. When I read about it and also read both yours and Khal's posts on it I knew there was something solid behind it. Worth a punt, at the time it was about 50 pence (sorry, I never deal in cents) so snaffled up a wad. Ever since it has been a steady climber to over double that.

Cross chain swaps will be awesome, launch us even more into the stratosphere!

Have you considered adding to an LP? Here's my latest results in the rune/btcb pool:

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Even during the last 3 weeks of mega bullish BTC run, I'm still not suffering Impermenant Loss.

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That looks good. To be honest, I looked at it and it all went over my head a tad. My bad I suppose. I read a few posts about impermanent loss as well and it gave me the heebs!

Yeah, IL is a thing, but if you are pooling with two assets you like, it doesn't really matter at all. Probably a good move now to wait till the multichain roles out, I'll make some guides (and Khal will also no doubt) when that happens.

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I shall follow those guides!

Why wLEO/RUNE, I'm looking for LEO/RUNE pool ;-).

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Hey, @jk6276, thank you for letting us know about ShapeShift. Back in 2017, I used it very actively.

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Yeah, I think many in crypto used it in the past, good to see they are moving with the times, and have found a way to ditch KYC.

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Useful and very interesting.

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More info why you see this.

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Thank you OneAlfa, always appreciate your visits.

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The other day I just wrote about Keepkey a hardware wallet which they took over. I honestly hated the platform though and the APP is total trash lol. I'll be curious what that means or if it's going to in effect the hardware wallets.

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Hopefully they improve the app - I haven't seen it but will be looking at the platform in detail as this all unfolds. Having all this defi stuff available cross chain with an integrated hardware wallet will be interesting.

Nice to see Shapeshift regaining their roots and being able to offer their service without KYC.

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Is Erik Voorhees braver now? Haha!

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I think from what I've seen he is relieved to be able to do make this move, and try and rebuild his business more in line with his morals, after having to comply with legal ramifications which drastically hurt his business.

I watched an interview Naomi Brockwell did with him, and it is quite amazing how much coercion from government departments in America is going on behind the scenes of crypto. Must be challenging to balance the goals of crypto with keeping out of legal trouble.

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4 years too late, there are much better services now. Shapeshift is a prime example of how over-regulation cripples businesses

Yup, he is on record as saying he lost 95% of his business when they introduced KYC. It'll be interesting to see if this can revive Shapeshift's fortunes.

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This is great news!
Why do we have different requirements than cash???

So glad to hear people standing up to KYC

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Because Crypto is only used by criminals, of course...

But seriously, the double standards are incredible.

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is it me KYC is becoming the crypto dork everybody wants to get rid of? :)

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There were talks on RUNE telegram about using RUNE with Shapeshift thing. If yes, that would be great.

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great oportunity

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This is very intriguing.
I believe that as Thorchain and BLocknet finish up their projects we will see a greater capability for wallet to wallet trestles trading open up to us.
The question is will we ba able to harness these possibilities to bring attention and investment to our corners of the cryptocurrency universe.
The future belongs to the bold.

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That is great news. I stopped using Shapeshift because they instituted KYC.

Now I'll look at using them again.

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KYC - Know Your Customer

This is a requirement base for real trust.

Blockchain solves the trust in transactions.

But real trust involves knowing the individual behind the transaction.

The blockchain can take us to a much better place but also to dangerous places.

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