Bitcoin Forum

 They have the quick the fast options and all. Why is shapeshift different from any other altcoin exchange? I don't know what is different about it. Can someone please elaborate?

Shapeshift isn't really an exchange. You can't set up buy/sell orders etc with Shapeshift like you can on an exchange. They simply provide a way to quickly exchange coins between different altcoins but you usually will pay a higher markup when using a service like this versus a normal an exchange.

They hold an inventory of every coin. Regular exchanges have multiple people trading their coins.
You get a fixed rate for every coin. No limit orders like a regular exchange, meaning you're always trading around market price.

The creator of ShapeShift, Erik Voorhees, was trying to exchange from one coin to another and experienced a big hassle and delay. He thought to himself this is ridiculous - with cryptocurrency exchange from one to another should be available easily and instantly. No option for that existed so he created it himself as ShapeShift, making it easy to exchange coins instantly, no accounts or signup needed.

No orderbooks, so no free market. They are trailing behind the prices set by real exchanges. That always results for their customers in a worser exchange rate.
On the other side: Ease of use. No deposits, no accounts. Simply send coins of one sort and recieve another sort on your provided return adress.

Does shapeshift have its own accounts at exchanges to restock disproportionately popular coins? How do they acquire coins in bulk every day?

So ShapeShift does not function like Poloniex or Bittrex but more of a facilitator for anyone to convert one coin to another and in the process they are making money because they control the rate that they want to release for a member. This is actually similar to CoinPayments and when I analyzed it the rate is definitely lower in there compared to outside exchangers.

I only use shapeshift if I know I need an altcoin fast. It rarely comes up, but it's handy when it does. The fees are high so it's not something I would do regularly (like if you're planning on day trading altcoins) but if you want to trade 100 obscure altcoins for 75 of some other obscure altcoin it is the place to go. The other choice would be to go to a large exchange, place a bid to sell your coins for bitcoins, then trade those bitcoins for the other altcoin you needed. You're mainly just paying a convenience fee.

You're missing two huge benefits: identity, or lack of it, and not keeping your money locked in an exchange.  Every exchange requires some form of identity, especially if you will be trading big amounts. Shapeshift is totally anonymous and instant. Also the fact that they immediately send funds back to your own wallet, instead of locking it up, is a big benefit. Sure you could manually do that on an exchange, but it is less convenient enough that people don't do it. I moved to shapeshift for all my trading, including big amounts, it's worth the small additional cost (less than 0.5% off polo in general).

Don't they simply sell or buy into the current orderbook?

Atleast that is what they used to do around the lisk ico, where people got less bitcoin than expected due to low liquidity when using the service.

It pulls coins from other exchanges and holds some coins. So it uses exchanges for you instead of you having to sign up to an exchange and trading.