Coinbase Review: Find out If Coinbase a Safe Bitcoin Exchange
If you are a huge fan of cryptocurrency, I bet you have heard about Coinbase. Is Coinbase a safe Bitcoin exchange? Is Coinbase insured? Is Coinbase safe to link bank account for transactions? If you have these questions in mind, read this Coinbase review and find out if it is a reliable cryptocurrency exchange.
Coinbase Review: Is Coinbase a Safe Bitcoin Exchange?
What is Coinbase?
Coinbase is the world’s largest Bitcoin broker, and also offers an exchange, a wallet, and developer API. In other words, it is a web-based digital wallet that allows you to send and receive Bitcoins. At the time of writing, you can also buy and see Ethereum (Cryptocurrency 2.0) and Litecoin through Coinbase.
Coinbase is one of the world’s largest Bitcoin exchange based in San Francisco. Created in 2012 by Brian Armstrong and Fred Ehrsam, Coinbase’s reputation lies with its presence in 32 countries across the world – especially in the USA, UK, and Brazil, which represent their largest customer base. As per day, there are 45% of visits to Coinbase are from the USA, with Brazil second at 9% of total traffic, and the UK at 4%.
The company is backed by several large venture capital firms and claims to hold 617,000 consumer wallets, 16,000 merchants, as well as integration with U.S. banks.
Coinbase comes in English, Spanish, French, German, Italian, Portuguese and Dutch. That makes it a 7 language platform and it is really convenient. Now, when it comes to the number of countries where Coinbase is supported, a total of 32 countries are available for you to turn to. Among them, we find the United States of America and the United Kingdom, Austria and Belgium, Cyprus and Malta, Greece and France.
According to the latest statistics, Coinbase has over 6 million users, which is a significant milestone. Albeit not all of these users are still active on the platform, getting 6 million people to sign up for a bitcoin exchange is no easy feat.
On 29 March 2016, Coinbase was listed by UK-based company Richtopia at number 2 in the list of 100 Most Influential Blockchain Organisations.
How Does Coinbase Work?
What I like about Coinbase is their user-friendly interface that aims to make it easy for first-time buyers to purchase Bitcoin. Once you sign up an account with Coinbase, you will notice the following features on the dashboard.
Price Charts: They provide live price and transaction charts for basic investment and merchant services.
Buy and Sell Bitcoins: They provide exchange services directly from the wallet, but users buy and sell from them since they are not an exchange. Their prices are very competitive and in line with market prices.
Link Bank Account: This is one of Coinbase’s key services that makes it so convenient especially to start exploring the Bitcoin market. Depending on which country you are residing, most users can link their bank accounts to their wallets so it’s easy to move money between their Bitcoin wallets and their bank accounts. The most popular payment methods for Coinbase customers are buying with a credit card or debit card, and also using a bank transfer.
Mobile App: They provide both Android and iPhone apps. All wallet services are included and they are synchronized with the web application meaning whatever you do in the app is immediately reflected on the website.
Is Coinbase Safe?
Coinbase uses the cold storage and hot storage model. Cold storage just means that they private keys used to access the Bitcoin is kept offline — that is the private key NEVER touches the internet. Physical security is a relatively easy problem to solve compared to digital security. Whilst, hot storage is where the private keys used to access the Bitcoin is kept online. These Bitcoins are at high risk of being stolen because it is relatively easy for hackers to get access to these — computer security is really hard.
Coinbase keeps 98% of customer funds stored offline, on encrypted drives that are geographically distributed around the world. The drives utilize secret sharing (also called secret splitting) to ensure both redundancy of data and no single point of failure.
Data is then split with redundancy, AES-256 encrypted, and copied to FIPS-140 USB drives and paper backups. Drives and paper backups are distributed geographically in safe deposit boxes and vaults around the world.
TIPS: As for storing Bitcoin, paper wallets are still the safest, followed by an offline wallet with encryption with multiple physical backups.
If you are wondering why Coinbase needs your ID, it is part of the security measures that verifying your identity helps Coinbase to prevent fraud from occurring on their exchange platform. Because Coinbase has buy/sell features, it must follow all Know Your Customer (KYC) laws. The objective of KYC guidelines is to prevent Coinbase from being used, intentionally or unintentionally, by criminal elements for money laundering activities.
There are four verification levels on Coinbase, and first three levels take only a couple of minutes. The fourth level can take a bit longer, usually a few days. Completion of each level increases user’s weekly buy/sell limits. Here’s a short overview of the Coinbase verification levels:
Level 1 – verification of email address and phone number.
Level 2 – completion of personal details such as full name, date of birth and address of residence.
Level 3 – input of bank account details as well as credit and debit card details.
Level 4 – identity verification which involves:
- Government-issued identification document
- Taxpayer identification number
- Identity verification by answering a few questions
Is Coinbase Insured?
Coinbase has been insured against the theft or loss of bitcoin since November 2013, stressing that its users are not being charged for the cover. The company said its policy provides sufficient insurance to cover the company’s average online holdings at any time and protects against a variety of potential causes of loss.
All digital currency that Coinbase holds online is fully insured. This means that if Coinbase were to suffer a breach of its online storage, the insurance policy would pay out to cover any customer funds lost as a result. The insurance policy covers any losses resulting from a breach of Coinbase’s physical security, cyber security, or by employee theft. The policy is provided by a syndicate of insurers through Lloyd’s of London.
It is important to note that this insurance policy does not cover any losses resulting from the compromise of your individual Coinbase account. It is your responsibility to use a strong password and maintain control of all login credentials you use to access Coinbase and GDAX.
Coinbase doesn’t have separate deposit and withdrawal fees, and the exchange charges percentage fees instead of fixed amounts. Bank transfers in the US carry a fee of 1.49 percent, and the funds are available in 5 to 7 days. US customers can add a credit card as a backup payment method, which will enable Coinbase instant BTC buy for up to $1,000 per week.
Credit or Debit Card payments in the US, Europe, Canada and the UK cost 3.99 percent of the sum transferred, and the money is available right away.
European SEPA transfer fee is 1.49 percent, and the money is available within three days of the transfer. Xfers transfers in Singapore carry a fee of 1.49 percent as well, but the money is available immediately. Cryptocurrency deposits and withdrawals are free of charge.
You can check their pricing and fees disclosures at their website.
Coinbase Special Feature – Bitcoin Vault
Coinbase has two places where you can store your Bitcoin: the wallet and the vault. Funds stored in your Bitcoin wallet are available for immediate withdrawal. You can use the funds to make purchases. Because these funds are available for immediate use they are somewhat less secure, so it is not recommended that you store large amounts of Bitcoin in your wallet.
When creating new ‘wallets’ within Coinbase, you can choose either a standard ‘wallet’ or a ‘vault’ account which provides additional security. A vault can receive funds like a normal wallet, but in addition, it prevents funds stored there from being immediately withdrawn by adding additional security steps depending on the security settings you choose. You can also choose to split up ownership between multiple users and email accounts and require a subset of these users to approve a transaction before it can be created or completed.
CoinBase has advantages in terms of ease of use, legitimacy through high-profile backers, and security. You link a bank account to the San Francisco-based start-up, and then send them money to buy Bitcoin at the currently offered price. It’s user-friendly and easy to navigate.
Coinbase is often recommended to newcomers as one of the easiest ways to acquire their first bitcoins. Their extensive banking partnerships allow transactions to be made via EFT payment, ACH / SWIFT / SEPA transfer and, as a recent introduction, major credit cards and PayPal.
If you’re wary of leaving substantial sums of fiat or crypto on an exchange, Coinbase is probably one of the more secure options.