ShapeShift Is Going Elephantine DeFi to Lose KYC Principles
ShapeShift is swapping enterprise structures all over again, this time by casting off its entire trading desk.
The Colorado-primarily based non-custodial swap is now routing orders thru decentralized finance (DeFi) functions in a describe to place away with know-your-buyer (KYC) rules that gutted the cryptocurrency trading platform lend a hand in 2018.
The firm will gradually segment out its own centralized trading job (and KYC coverage) in settle on of a decentralized different as it turns into “100% DEX-primarily based for possibilities,” ShapeShift founder and CEO Erik Voorhees informed CoinDesk in an electronic mail.
“ShapeShift’s long-established model changed into once designed to give protection to users, providing prompt liquidity with out requiring them to believe a custodian,” Voorhees said. “We had to be the counterparty – the market maker – to originate that service at scale. The decentralized protocols are now providing a fine service, so we’re embracing this evolution and helping our possibilities with out complications join with them.”
From KYC to DeFi
Founded in 2014, ShapeShift added a KYC requirement to its swap in September 2018 following “duress” from regulators. Generally regarded as a vocal libertarian, Voorhees said at the time that ShapeShift added the constraints as “a proactive step … to de-chance the firm amid uncertain and changing global rules.”
Voorhees later said KYC implementation designate the platform 95% of its users.
Two years later the swap has now constructed-in with multiple decentralized exchanges (DEX) together with “Uniswap, Balancer, Curve, Bancor, Kyber, 0x, mStable and half a dozen various DEXs,” Voorhees said. In step with DeFi Pulse, DeFi functions for the time being lend a hand some $17.86 billion.
Bitcoin (BTC) will likely be accessible for trading by the DEX integration this quarter, he said. Cryptocurrencies and tokens from various non-Ethereum blockchains will furthermore be accessible in Q1 as neatly.
Voorhees said the combination just isn’t going to handiest allow U.S. possibilities to use the platform with out wanting to design KYC onboarding, but furthermore will let ShapeShift originate up “more jurisdictions, not fewer” because the swap “removes itself from regulated job.”
“Because ShapeShift just isn’t any longer performing as any invent of monetary intermediary or counterparty, this unusual, frictionless [user experience] frees users from having to originate non-public, non-public data,” an announcement from ShapeShift states.
Counterparty no more
DEXs operate as trading programs on top of blockchains, such as Ethereum. Actual DEXs are completely permissionless and hold eaten into centralized swap volumes over 2020. To illustrate, Uniswap cites itself because the fifth-ideal space-trading cryptocurrency swap, after riding $6 billion in month-to-month trading volume in each August and September that briefly surpassed dominant U.S. swap Coinbase.
Voorhees said costs on ShapeShift must protect pleasure in DeFi liquidity as users compose more designate exposure by routing orders thru multiple exchanges. Indeed, the composable nature of DeFi markets has made some asset pairs more aggressive than centralized attainable decisions such as ETH/USDC.
“By integrating a dozen unusual liquidity sources, the pricing of sources is even more aggressive. So, there might be not any swap-off for pricing. These unusual markets are highly liquid, and to boot to high quality pricing possibilities will now relish worthy increased convey dimension limits,” he said.
ShapeShift receives a portion of trading payments that each DEX costs in return for directing traffic to the DEX, Voorhees said. ShapeShift possibilities furthermore accumulate the swap’s native token, FOX, in return for every swap performed on the platform to abet facilitate a feeless ride.