Cryptocurrency exchange ShapeShift has launched a mobile app that enables users to buy, sell, and transfer digital currencies using their smartphone
ShapeShift looks to stand apart from its competitors by allowing users to control the encryption keys for their own digital wallets in what is know as a self-custody wallet.
That’s a sharp contrast from mainstream cryptocurrency exchanges like Coinbase, which take custody of users’ wallets and control the encryption keys. ShapeShift never knows or retains access information for users’ wallets, placing the burden of security on individual traders.
Self-custody wallets
ShapeShift already offered a similar exchange platform through its web interface, but the new trading app meets many crypto users where they are: on their mobile devices.
“With one email and password users can enjoy self-sovereign finance on both web and mobile,” says ShapeShift founder Erik Vorhees. “We’re here to make it easy.”
The self-custody model has proven appealing to cryptocurrency users as hacks have increasingly focused on exchanges that host users’ digital wallets. In April, hackers stole $25 million in assets from users on the DForce exchange, and ShapeShift was hacked in 2016, but no user funds were stolen since its exchange doesn’t retain keys for any users’ encrypted wallets.
Self-custody wallets are also gaining in popularity since they are required for a wide range of blockchain-based financial applications.
While exchanges with hosted wallets can buy and sell crypto on a user’s behalf, hosted wallets are walled off from most of the blockchain-based financial ecosystem. Financial transactions such as purchasing decentralized insurance, making blockchain-based loans, and trading crypto derivatives all require a self-custody wallet.