Shapeshift was founded by Erik Voorhees in 2014 as an instant crypto exchange. With Shapeshift Erik aimed to reduce the lengthy process of signing up on a service before being able to exchange digital asset. He described Shapeshift as a wending machine where people can put one currency in and get another digital currency in exchange. Since then, the startup has gone under many changes. Initially, the app was launched only on IOS platform, but now it is available on Android and web as well.
Erik started Shapeshift in Switzerland, but all operations of the exchange are run from Denver USA. In total three rounds of funding, Shapeshift has managed to raise 12 million dollars. Digital Currency Group owned by Bary Silbert, Pantera Capital, and Earlybird Venture are some of the investors who put capital in Shapeshift. The company has strict no fiat currency rule to avoid regulation issues from the government of any country. Currently, the exchange supports 34 cryptocurrencies and is available worldwide to users.
Erik Voorhees; the industry veteran
CEO of Shapeshift, Erick Voorhees is considered as an industry veteran by many. He is among the few people who started trading in bitcoin very early. Before founding Shapeshifter, Erick had co-founded two startups, first was Coinapult, a company that transferred bitcoins via email and SMS. The startup was initially a success and managed to get investments worth 750,000 dollars, but in 2014, he quit the company because of regulatory issues that the company was facing from the US government. Erick also co-founded bitcoin gambling startup SatoshiDice. Securities and Exchange Commission of USA fined him 50,000 dollars for selling unregistered securities. He then sold the startup to an anonymous investor for 126,315 bitcoins which valued at 11.47 million dollars at the time of transaction earlier this year. Erik is known for advocating unregulated use of cryptocurrency around the world. He was also the Head of Marketing and Communications at BitInstant LLC. And he has also been a Member of Cryptocurrency Advisory Board at MGT Capital Investments, since June 2016.
The time Shapesihft got hacked.
The exchange lost 230,000 dollars in a series of hacks earlier in 2016. Later it was reported to be an inside job. An employee stole worth100,000 dollars in various cryptocurrencies. The same employee then went on to sell sensitive information to an outsider who later took 130,000 dollars in coins. There was no loss of users of the exchange as the company did not hold digital assets on behalf of the consumers. After the scam, the company went offline to improve its security features and reopened in late April of 2016.
Shapeshift ends the anonymity feature.
In September 2018, Shapeshift changed the very model that it was built on by introducing mandatory KYC to make an exchange on the platform. The startup was different from every other exchange as it did not require users to sign up or give any information before making an exchange. This decision brought down heavy criticism from the users. CEO Erick wrote in a blog post that it “sucks” to collect its users’ data, but it is essential, and he added, the exchange will handle the data with care and will keep promoting privacy. The exchange also introduced a member feature in which when a user signs up with KYC, he becomes the member and is rewarded with loyalty points. Since this decision was implemented, many partners and investors have also indicated to withdraw support from the company.
The struggle of Shapeshift with regulators
The government is making it tough for cryptocurrency businesses to survive with imposing new regulations all around the world. Shapeshift suffered the most as the sole identity of the platform was changed by CEO Erick because his company was spending immense resources to navigate the laws. ConsenSys, Bitmain, SpankChain, and Steemit are also among the startups that got battered due to increasing regulatory scrutiny. In January of this year, Erik announced in a blog that the company had let go 37 employees of the company that reduced the size of staff by a third. In his introspective post, he mentioned that regulatory issues consumed a lot of time and focus of the executive team.
Erik also talked about how the last year was not as good as the price of the crypto market saw a downfall. But in the end, he did not blame anybody but himself for the poor performance of the company. Erik further details the challenges of multiplying from 10 staffers to more than 100 and which lead to the problem structure, and communication. According to Erik, “lack of focus” from the executive team and venturing new products was also a mistake. He believes that the company neglected its core product in the way.
But all is not lost, there is a silver lining for the company as Erik mentioned that they would soon launch a “new Shapeshift” which they are developing since last year. This new version of the app would allow individuals to manage their own crypto-finances. Erik described this as “rebirth” of the company which would help make “financial sovereignty…a pillar of 21st-century civilization.”