ShapeShift, an old-school exchange, announced its transformation into a DEX aggregator due to losing users to KYC requirements.

The veteran exchange ShapeShift has announced a major update, transforming its platform into a decentralized exchange (DEX) and integrating multiple platforms to become a DEX aggregator. The KYC requirements previously implemented due to regulatory demands have been removed, while the old platform can still be accessed on the website and mobile app.

ShapeShift Embraces Decentralization

ShapeShift founder Erik Voorhees announced a major update on his personal Blog, stating that the new platform will no longer require KYC verification. The platform has integrated order books from mainstream DeFi projects such as Uniswap, Balancer, Curve, Bancor, Kyber, 0x, and mStable, with ShapeShift being able to earn a portion of the fees from each DEX. Other key updates include:

• Native Bitcoin support in the first quarter, non-wrapped form, and integration with major public chains
• Coexistence with the old platform, where users will need KYC verification, which will be discontinued in the future
• Fiat providers will still require KYC

Voorhees emphasized that blockchain on-chain records are far more efficient than KYC. ShapeShift will continue to work within regulatory boundaries and collaborate with regulatory authorities. By sharing market liquidity across multiple DEXs, ShapeShift aims to provide users with better prices than a single DEX.

From KYC to DeFi

ShapeShift was founded in 2014 and introduced KYC verification in September 2018 at the request of regulatory agencies. Voorhees claimed that KYC resulted in losing 95% of users and served no purpose. He stated:

Approximately 20 million Americans have their personal information stolen each year, with the Department of Justice estimating victims lose over $17 billion annually, surpassing the total losses from robberies and thefts. When seeking evidence, KYC involves not only the personal information of specific suspects but the privacy of all innocent users, which violates ethical principles.

So why didn't they opt for a transition to a decentralized exchange in 2018? Voorhees explained that decentralized trading protocols were not mature at that time, but the rise of DeFi in 2020 has made him excited.

Despite the current high Gas Fees on the Ethereum chain that may hinder DEX operations, the crypto community is generally optimistic about ShapeShift's transition, indicating its future competition with DEX aggregators like 1inch.