ShapeShift has just announced that they have added 27 new assets to their existing Prism portfolio diversification tool. The additions include a mix of crypto favorites and underdogs like Aragon, Komodo, PIVX, and Zclassic just to name a few. The service is still on an invite-only beta, but that will likely change soon as the platform seems to be maturing.
What is Prism?
Prism is a new diversification platform launched by the instant exchange ShapeShift. The idea behind the platform is to allow for cryptocurrency holders to quickly and easily diversify their holdings (or at least their exposure to certain assets) without the need for making actual trades for keeping track of private keys and wallets.
Here’s the basic concept. First you’ll set up a new portfolio called a Prism. You then fund your Prism entirely with Ether. Then, once your funds are secured into a smart contract (meaning ShapeShift itself never holds your funds), you can decide how you want your portfolio allocated.
For example, you could choose to divide here holdings equally among three or four coins or tokens of your choosing, or you could divided evenly and equally across all the assets supported on the platform.
What’s happening here is you are not actually buying or holding the assets you choose. As long as your Prism is open, you still hold your Ether. Prism refers to this Ether as your collateral. Now let’s say that after a few months, the assets you chose for your portfolio are up a combined average of 20%. You could then choose to close your Prism and receive 120% of your collateral back (12 ETH on a 10 ETH deposit, etc).
In other words, if you made a Prism invested entirely into Aragon, Bitcoin Gold, and 0x, and your portfolio did well, when you close the portfolio you will receive only Ether and no other assets. You never actually hold the assets that your portfolio represents.
Read also: Changelly VS ShapeShift
Defining the Attraction
So who is this attractive to, exactly?
Our best guess is that it’s for those that want to get portfolio exposure to a variety of other assets without needing to directly buy and sell them. Further, there are potentially some tax implications that can be avoided by using a service like Prism.
Specifically, since you are not actually buying or selling assets, these are not individual taxable events. Instead, there will only be one taxable event when you close the Prism, and if there is a gain or loss.
This type of system could also apply to security fanatics who do not want to trust an exchange. As collateral is held in a smart contract, it never completely leaves your possession. It is also largely immune to external hacking forces that would want to target ShapeShift or Prism directly. In other words, there is no central honeypot of funds to attract the attention of a hacker.
With today’s announcement, the Prism platform now supports 61% more choices for users to choose from. What’s particularly surprising about the newly supported assets is that a number of them are not available on ShapeShift itself, such as PIVX and several others. The full list is as follows:
- Aragon – ANT
- Ark – ARK
- Basic Attention Token – BAT
- Bitcoin Gold – BTG
- Cardano – ADA
- Civic – CVC
- Decentraland – MANA
- District0x – DNT
- Edgeless – EDG
- Gas – GAS
- Komodo – KMD
- MonaCoin – MONA
- NEO – NEO
- OmiseGO – OMG
- Pivx – PIVX
- PowerLedger – POWR
- Qtum – QTUM
- ReddCoin – RDD
- Ripio Credit Network – RCN
- Salt – SALT
- Stellar Lumens – XLM
- Storj – STORJ
- TRON – TRX
- Verge – XVG
- ZCoin – XZC
- ZClassic – ZCL
- 0x – ZRX
This suggests that either these unsupported assets could be on their way to ShapeShift itself, or that the company is not actually buying and selling these particular assets and is instead simply offering them as a kind of reference index based on market data. At this point, we have no official data to confirm either of these suspicions.
Beware of Fees
Currently, prism is in a closed beta and no one here at Blockonomi has access to it directly. However, according to reports, Prism has some hefty fees that need to be considered. For those lucky enough to get in on the beta, they won’t have to pay any fees for as long as the platform is in beta.
Fees aside, for advanced traders that want access to dozens or more assets, and also want to keep the taxman up-to-date on everything they’re doing, a service like Prism could save high-powered investors from some serious headaches. Famed bitcoin commentator and author Andreas Antonopoulos said that his tax return is often 300 pages due to the complexity of keeping accurate track of digital assets.
This step will make accountants richer than the IRS itself. You know there is a problem when you need to do a 300 page filing for a $35 capital gain.
It’s a safe bet that there are many other high net worth individuals that would gladly pay the fee just to be able to submit a slimmer tax return each year.