DeFi Insight: ShapeShift’s transformation from a centralized platform to a DAO

What led to the decentralization of ShapeShift?

In early 2020 the crypto industry witnessed the rise of DeFi and decentralized exchanges like Uniswap. The interest for these exchanges rose exponentially to the point where Uniswap could sometimes rival Coinbase by trading volume. During this time, ShapeShift decided to decentralize.

The announcement of the Shapeshift DAO on Twitter
Figure 1: The announcement of the Shapeshift DAO on Twitter

Technological Setup and the FOX token

ShapeShift partners with 0x (a DEX aggregator that facilitates the peer-to-peer (P2P) exchange of ERC-20 tokens) and cross-chain swapping protocol THORChain to compile over 50 DEXs and around 1,000 trading pairs into one interface. Thanks to THORChain, users can even swap native BTC with ETH. ShapeShift picks the protocol needed to execute the trade depending on the type of trade. Shapeshift aims to become a multi-purpose DeFi tool platform for portfolio tracking and asset management that aggregates protocols and services for trading and yield generation.

FOX on-chain transactions chart
Figure 2: Daily active FOX users (source: dune.com)
FOX on-chain transactions chart
Figure 3: FOX on-chain transactions (source: dune.com)

FOXy and vFOX

FOXy is an ERC-20 rebasing Token redeemable 1:1 with FOX Tokens that offers a gas-efficient way to earn optimal yield. FOXy is granted to any user who stakes their FOX in the FOXy contract. A user’s FOXy grows in quantity through rebasing.

Foxchain

ShapeShift Corp. currently pays AWS (Amazon Web Services) to host meta-data centrally. FOXChain will be a Cosmos SDK-based blockchain data availability network using Tendermint consensus with the goal of hosting blockchain data in a decentralized manner and will be developed in collaboration with Coinbase Cloud. The idea of Foxchain is to store metadata for every blockchain ShapeShift interacts with. Anyone who needs node data will be able to use Foxchain for their projects. This project is considered the last step in the full decentralization of ShapeShift. The Foxchain will incentivize node operators to host blockchain metadata and take the role of a decentralized back-end infrastructure for the DAO.

The classification of FOX according to the ITC:

Figure 4: The FOX Tokenbase entry (Source: https://itin.itsa.global/JV9DFTDG4)

The International Token Standardization Association (ITSA) e.V.

The International Token Standardization Association (ITSA) e.V. is a not-for-profit association of German law that aims at promoting the development and implementation of comprehensive market standards for the identification, classification, and analysis of DLT- and blockchain-based cryptographic tokens. As an independent industry membership body, ITSA unites over 100 international associated founding members from various interest groups. In order to increase transparency and safety on global token markets, ITSA currently develops and implements the International Token Identification Number (ITIN) as a market standard for the identification of cryptographic tokens, the International Token Classification (ITC) as a standard framework for the classification of cryptographic tokens according to their inherent characteristics. ITSA then adds the identified and classified token to the world’s largest register for tokens in our Tokenbase.

  • The International Token Identification Number (ITIN) is a 9-digit alphanumeric technical identifier for both fungible and non-fungible DLT-based tokens. Thanks to its underlying Uniform Token Locator (UTL), ITIN presents a unique and fork-resilient identification of tokens. The ITIN also allows for the connecting and matching of other media and data to the token, such as legal contracts or price data, and increases safety and operational transparency when handling these tokens.
  • The International Token Classification (ITC) is a multi-dimensional, expandable framework for the classification of tokens. Current dimensions include technological, economic, legal, and regulatory dimensions with multiple sub-dimensions. By mid-2021, there will be at least two new dimensions added, including a tax dimension. So far, our classification framework has been applied to 99% of the token market according to the market capitalization of classified tokens.
  • ITSA’s Tokenbase currently holds data on over 4000 tokens. Tokenbase is a holistic database for the analysis of tokens and combines our identification and classification data with market and blockchain data from external providers. Third-party data of several partners is already integrated, and API access is also in development.

Remarks

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ShapeShift cover image by ITSA

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International Token Standardization Association

International Token Standardization Association

The International Token Standardization Association (ITSA) is a not for profit organization working on holistic market standards for the global token economy.