Crypto to crypto blockchain asset exchange ShapeShift announced an updated fee structure for its recently unveiled and soon to launch non-custodial portfolio platform Prism. The company said it welcomed over 6,000 registrations in the first 24-hours.
However, they noted broad criticism with people saying the fees were too high. People were clearly willing to pay for the service, but not with the fee structure initially formulated. Thus, ShapeShift chose to make a change which is listed below.
Original Prism Fee Structure:
– 1% per month capital fee
– 0.05 ETH +2.4% closing fee (waived during beta)
– 0.5% rebalance fee
New Prism Fee Structure:
– 0% per month capital fee (to become market-based post-beta)
– 0.05 ETH +2.4% closing fee (waived during beta)
– 0.5% rebalance fee
The monthly fee is intended to pay the cost of collateralized capital. ShapeShift provides all the collateralized ETH capital on the Seller side – but in the future, Prism will open up the Seller side, such that Prism customers can take the long or short position on any basket of digital assets. When this happens, this monthly fee will be set by the market: paid by Buyers to Sellers, or Sellers to Buyers, wherever the equilibrium exists at a given point in time.
CEO of ShapeShift, Erik Vorhees commented on the change:
“When a Prism is created, the “Buyer” (you) and the “Seller” (ShapeShift, for now) both put up 100% of the value of the portfolio, in ETH, as collateral into the smart contract. This allows the Prism portfolio to lose or gain 100% of its value and remain fully-collateralized and trustless (no need to trust that a counterparty will pay out, often called “performance”).”
“But capital isn’t free, and when ShapeShift, as the Seller, puts up ETH capital, it stays locked there until the Prism is closed. Thus, Prism as a service needs to offer some time-based rate of return on that capital (this would be true whether ShapeShift or anyone else is the Seller). Hopefully, that explains why that monthly fee exists: it exists to incentivize capital to collateralize the Prisms. It is not primarily intended as a revenue generator.”
“Short-term, for launch, we chose 1% per month, which is roughly commensurate with the ETH borrowing rates at exchanges recently. Long-term, however, the plan was always to let this rate float, meaning the monthly fee would be set by the market. Indeed, once we open the other side of the service (allowing people to short), then Prism will have some users going long (the Buyers), and some going short (the Sellers).”
“The key point: whichever group is bigger, will end up paying a monthly capital fee to the group that is smaller. Thus an equilibrium will be achieved, at some monthly rate. This monthly rate will change in real time and can go either direction. In fact, if more people want to short than go long, the monthly fee for Buyers will actually be negative (i.e. – a fee is paid by the Sellers to the Buyers).”
“The 1% monthly fee from Buyers to Seller was thus a placeholder until that more advanced market-based capital fee was established. Given the widespread community feedback, which saw that fee as a significant pain point, we’ve decided to adjust things.”
