INTRODUCTION to COINBASE
Coinbase started life in 2011 as the brainchild of Brian Armstrong, Fred Ehrsam, and Ben Reeves as a way to buy and sell bitcoin with ease. Ben Reeves later departed the company over a disagreement with how the Coinbase wallet would operate. In 2012 the company joined the Y Combinator startup incubator program and raised more than $100 million in venture capital funding in recent years.
Coinbase's first public service debuted in 2012 with the ability to buy and sell bitcoin through bank transfers. As of November 2017, Coinbase serves more than 13 million users across 30 countries and primarily deals in the exchange of Bitcoin, Bitcoin Cash, Ethereum, and Litecoin.
Coinbase continually monitors the performance of other altcoins to determine whether or not they're worth supporting on their trading platform. The company has pioneered the widespread adoption of cryptocurrency with partnerships between companies like Overstock, Expedia, Time Inc., and Dish Network, so it's natural to wonder if this exchange is right for you.
Today I'll be taking a comprehensive look at every facet you need to consider before deciding to trade cryptocurrency using Coinbase. Let's get started with the thing that matters most: security.
COINBASE SAFETY AND PRIVACY REVIEW
It's worth mentioning up in this review front that no online wallet will be as 100% safe and secure as a cold wallet used to store your cryptocurrency. Coinbase allows you to keep multiple crypto wallets on its service, but they're all hot wallets that have a connection to the internet. That's not to say these wallets are inherently unsafe, but it does mean you shouldn't keep large sums of cryptocurrency attached to these wallets if you're planning on holding for a while.
With that said, here's a peek at what Coinbase does to secure user's digital assets. Your bank account and routing numbers are stored using AES-256 encryption. All of Coinbase's traffic is encrypted using SSL to prevent man-in-the-middle attacks. Employee access to account information is limited, and Coinbase requires all of its employees to pass a background check. The security team is headed up by Philip Martin, who was a founding member of the Palantir security team and a counter-intelligence agent in the US Army.
Coinbase also provides protection in the form of Digital Currency Insurance and FDIC insurance for US deposits. Coinbase has contracted with a third-party insurer that will reimburse users for their loss in the event a breach ever occurs. Coinbase also carries FDIC insurance for deposits made in USD, which is the same protection banks are required to have for their funds.
HOW DOES COINBASE WORK?
Just like a traditional bank, Coinbase makes the bulk of its money by charging fees for each transaction the company processes on its exchange. These fees differ depending on the country you're from, with some places having a higher fee schedule than others.
These fees are built into your transactions and appear at the time you either buy or sell your digital currency using the platform. When you purchase digital assets, you get 100% of whatever amount you specify with the fee tacked on. However, when you sell digital currency using the platform, Coinbase subtracts its cost from the selling price.
Because Coinbase is dealing with many of the same regulations that face US banks, this has been the best way for them to make a profit since 2012. In fact, this method of earning has proved so successful that the company reported $1 billion in revenue for 2017.
HOW TO USE COINBASE
- 1Sign-up - All you need to create an account with Coinbase is your name, email address, and a password you specify. It probably goes without saying, but make sure you pick a secure password that you've never used on any other website before. You're dealing with real money on the internet, after all.
- 2Account Verification - Once you've confirmed your email address, Coinbase will ask whether you want to create a personal or business account.
- 3Phone Verification - To protect your account, Coinbase offers two-factor authentication using your phone. You'll receive a text with a number you must enter to enable this security feature, and you can customize it further in settings after account creation.
- 4Payment Methods - Coinbase works with bank transfers and credit cards. With a bank transfer, you'll have to wait for three to five days for Coinbase to deposit two small sums into the account to verify it. For credit card purchases, you'll need to provide a photo of the credit card you want to use, but this process is instant. PayPal is also available as a funds withdrawal method only.
- 5Buy Currency - Once you have verified your account and made your first deposit, you can then buy any of the cryptocurrency offered on Coinbase's exchange. For more granular control over your trades, you might want to consider GDAX, which is Coinbase's platform for more advanced traders and has features like stop loss and limit orders.
COINBASE SPECIAL FEATURES
Coinbase is one of the largest cryptocurrency exchanges available, which enables them to offer a few unique features you can't find with other exchanges. Number one on the list is the Shift Debit Card, which can be used online and offline and is linked to your Coinbase account. Coinbase advertises its Shift Card as the first US bitcoin debit card for making purchases with cryptocurrency anywhere. The card has no transaction fees, but it will cost you $20 to get it into your wallet, and every ATM withdrawal you make will come with a $2.50 fee tacked on.
Those caveats make the Shift card not as good as a bank-issued debit card, but considering this is tied to a cryptocurrency exchange and is the first of its kind in the US, I think that makes it pretty unique.
Coinbase also operates a more professional cryptocurrency exchange interface with GDAX, which has interoperability with Coinbase. You'll have to sign up for this service separately, but once you've linked your Coinbase account, you can instantly transfer all your cryptocurrencies from your Coinbase wallets into GDAX and vice versa.
GDAX allows for professional traders to keep an eye on the market by placing limit orders, stop loss orders, and displays how the market is fluctuating down to the minute in a variety of charts. If you're familiar with trading stocks and securities, then the GDAX interface will feel right at home to you.
Coinbase calculates its fees differently depending on your home country. But for those from the US, you can expect to see these rates on your transactions:
It's worth noting that there is a 4% base rate on all transactions, but Coinbase currently waives a portion of that for everything but credit and debit card purchases. Your bank may charge you additional fees to buy cryptocurrency using a credit card since this purchase is treated as a cash advance. To avoid that fee, you can buy bitcoin with a debit or bank account.
Coinbase also has some limits in place for new accounts that can gradually raise as you provide more verification information and make more transactions using your verified payment methods. You can see which information can be added to increase your limits by visiting the Verifications page, but Coinbase customer service is unable to raise these limits by request.
COINBASE SUPPORTED COUNTRIES
Coinbase has service in more than 30 countries, click here to see if your country is supported! Coinbase is not supported in China. If you want to buy Bitcoins in China, you'll have to use LocalBitcoins.
COINBASE SUPPORTED CURRENCIES
Currently, Coinbase supports a variety of currencies. Users can buy Bitcoin (BTC), Litecoin (LTC), Ethereum (ETH) and Bitcoin Cash (BCH) on the service. Your payment method and country of origin determine which of these currencies will be available to you.
As previously mentioned in my review, a hot wallet is an objectively worse place to store large amounts of cryptocurrency compared to an offline cold wallet, but Coinbase wallets have some extra precautions built in to protect users.
All US wallets have insurance for up to $250,000, but it's worth noting that this insurance does not cover unauthorized access to your account. For that reason, it's recommended to store your assets in a cold wallet where you have complete control over them if you're not actively using the funds for trading.
COINBASE PROS AND CONS
COINBASE AFFILIATE PROGRAM
Coinbase also offers an affiliate program as part of its attempt to grow as a cryptocurrency exchange. Users can sign up for this program and each time their referral buys at least $100 of cryptocurrency within 90 days of signing up, that referral will generate $10 for the affiliate. The referral program is currently only available to countries that can buy and sell on the Coinbase exchange.
There's no limit to the number of people you can refer using this service, so it could be a great way to generate income passively if you write about your experiences while using the service. Coinbase does note that they reserve the right to adjust or change the terms of the referral program at any point in time so that things might be different a few years from now.
COINBASE CONCLUSION REVIEW
Overall, Coinbase is one of the better exchanges for beginners to get started with cryptocurrency because they make it so easy to get started. When I went through the verification process for my account, it was smooth and painless, and within a few days, I bought my first BTC back in 2013.
The added protection of insured wallets, the Shift Card, and the ability to transfer funds instantly to GDAX for a more professional trading interface sets Coinbase apart from other exchanges. The fee schedule for transactions is reasonable, and account limits are raised over time with simple verification steps like adding your phone number, providing more personal details, and making recurring purchases with your verified payment method.
Coinbase hasn't been without its share of controversy, though. In March 2018, Quartz reported that the number of complaints against the exchange has skyrocketed since January, leaping more than 100%. 400 complaints registered against the service revolved around money not being available in exchange for cryptocurrencies when promised.
That's a bit startling, considering the previous quarter was the most substantial expansion of growth to date for the exchange. In response to the flood of complaints on social media, Coinbase has confirmed that it is upping its customer support staff to deal with issues and will have round-the-clock phone support available by June 2018.
Despite these growth troubles, Coinbase's dedication to making cryptocurrency as easy to understand as possible is one reason why it continues to see massive growth from one quarter to the next. Unlike other exchanges, Coinbase has never experienced a security breach and the top-notch security professionals employed by the company work diligently to ensure that never happens.
Coinbase's expansion into professional trading with GDAX and wider availability with the Shift Card place it at the forefront of cryptocurrency becoming a major powerhouse in global economies. We're not quite there yet, but these developments pave the way for mass adoption and making cryptocurrencies more easily accessible as a way to buy goods and services.