With the interest and investment in cryptocurrencies having surged this year, the requirement for safe and secure exchanges to facilitate the purchase of crypto has become increasingly important. One of the most popular exchanges that is currently available in Coinbase.
Launched in San Francisco in 2012, Coinbase operates in 32 countries and has served over 12 million customers to exchange over $40 billion in digital currencies. By 2013, Coinbase was the highest funded Bitcoin startup as well as the largest exchange of cryptocurrency in the world. Unlike other exchanges that require users to trade on a market, Coinbase allows users to trade their cryptocurrency at a set price that is based on their market value, which allows users to purchase their cryptocurrencies faster than other exchanges. Coinbase is also one of the few cryptocurrency exchanges that accepts credit cards (in addition to bank transfers).
Coinbase charge fees ranging from roughly 1.49% to 3.99%, depending on your payment method, with credit card transactions resulting in fees at the higher end of the scale. Coinbase fees are generally lower than other competitors who operate a similar business model, such as Coinmama or CEX.
Currently, Coinbase only allows users to buy Bitcoin, Ethereum and Litecoin, although it does have plans to add more currencies to the platform. In respect of ‘hard forks’ of cryptocurrencies such as Bitcoin Cash and Bitcoin Gold, Coinbase have stated that they will only offer trading in these once there is guarantees in respect of security. Coinbase have stated that it will support Bitcoin Cash from 1 January 2018, although there are no current plans in place in respect of Bitcoin Gold.
In addition, Coinbase operates the GDAX exchange, which is intended to focus on professional traders.
Setting up a Coinbase Account
By following the below step by step guide, you will be able to buy cryptocurrency through Coinbase.
- Signing up – To create an account on Coinbase, all you need is your name, email address and password.
- Account Type – Upon request, you will be asked to confirm your email address. Once completed, you will be redirected to the startup page, where you will be first requested to confirm whether you want to create an individual or business account.
- Verify your Phone Number – The next step is verifying your phone number. The reason for this is to create a form of 2-factor identification in order to ensure that your account remains secure. Other 2-factor identification methods are also available, as set out below.
- Set up Payment Method – As stated above, Coinbase allows customers to choose from two payment methods – bank transfer and credit card. For bank transfers, Coinbase will often set up one or two small transactions to and from your account, in order to verify your account. For credit cards, a screenshot of the credit card is necessary. Bank transfers in the US can take up to 4 to 5 days to complete, or 1-3 days by SEPA transfers in the EU, while credit and debit card transactions are instant. Coinbase also allows for users to link their Paypal account to the platform, but this can be used for proceeds made from selling cryptocurrency only.
- Buy Cryptocurrency – Once you have funds in your account you can buy currency. It’s important to make sure that you are on the right tab of your account to purchase the correct currency. Before confirming the transaction, Coinbase provides you with details of the service fee and the amount of cryptocurrency being purchased in the transaction. Once confirmed, the amount of cryptocurrency that you have purchased will be credited to the relevant Coinbase wallet.
Security of Coinbase
One of the perceptions of cryptocurrency among newcomers to the platform is that it is still risky to invest in. And although it is correct that there have been issues around cryptocurrency exchanges in the past (such as Mt. Gox), Coinbase is considered to be one of the most secure platforms currently available. First of all, Coinbase is US based and is therefore required to comply with US State and Federal law. This can be contrasted with some of their competitors that operate in countries that may have lighter regulations when it comes to such platforms. Coinbase has actively pursued discussions with regulators in order to ensure that they were providing an open and innovative financial system and the regulation of Coinbase is considered by some to have restored confidence in cryptocurrencies following the Mt Gox collapsed (although other commentators have complained that Coinbase operates more like a bank, which, within the community, is against the fundamental nature of a decentralised cryptocurrency). In addition, Coinbase has received investment from a number of high-profile backers, including the Bank of Tokyo and BBVA, which boosts its legitimacy
When it comes to storage of funds, Coinbase is transparent about its methods. Coinbase segregates customer funds from company operational funds, with Coinbase stating on their website that any funds held on behalf of customers are stored in custodial bank accounts and, in the event of insolvency, neither Coinbase nor its creditors would have any rights or entitlements to such customer funds. In terms of its cryptocurrency storage, Coinbase states that 98% of customers’ cryptocurrency funds and stored offline, through hardware wallets and paper wallets that are stored in vaults and safety deposit boxes worldwide. In addition, Coinbase states that the remaining portion of cryptocurrency that is stored online is insured, and that in the event of a hack, customers will be entitled to receive any funds lost through this insurance policy.
Coinbase offers customers a 2-factor authentication method, which can be through SMS to your phone, or through third party apps such as Google Authenticator or Duo. In addition, Coinbase notifies users if a new device or IP address attempts to access your customer account. However, despite this, if customer accounts are compromised, Coinbase does not accept any liability for funds being lost. For that reason, it is typically recommended that once you have purchased any cryptocurrency on the Coinbase exchange, you store this cryptocurrency offline in a wallet that you control.
Coinbase offers customer support through email, as well as having a Knowledge Base and FAQs page available for customers. Wait times for customer support may vary, with the huge increase in demand for the service in recent months resulting in some delays. However, typical response times tend to be within 24-72 hours. Some users have expressed frustration with receiving “canned responses” that don’t entirely address the issue raised.
Coinbase serves customers in the following countries:
Australia, Austria, Belgium, Bulgaria, Canada, Croatia, Cyprus, Czech Republic, Denmark, Finland, Greece, Hungary, Ireland, Italy, Jersey, Latvia, Liechtenstein, Malta, Monaco, Netherlands, Norway, Poland, Portugal, San Marino, Singapore, Slovakia, Slovenia, Spain, Sweden, Switzerland, United Kingdom and the United States.
Transaction limits vary from country to country, as well as variations as a result of payment methods and verification status. You can view your limits through a link on the account’s limits page. Coinbase also allows users to apply for higher limits, although these applications are not generally applicable to credit card transactions. To apply for higher limits you will need to verify your identity and fully verified US residents can transaction up to $50,000 per week, while verified European customers may have a maximum of $30,000 in their account at any time. Users can check their limits through their account.
Transactions Using Cryptocurrency
It is easy to store, send and receive cryptocurrency through Coinbase:
- To send or store crypto all you need to do is navigate to the Send tab of your account, choose the wallet you wish to send coins from, enter the amount and the public key of the recipient address and click send.
- To receive cryptocurrency, you need to navigate to the Accounts tab, click on the wallet where you want funds to go and click Receive. Once you’ve clicked receive you will be provided with your account’s wallet address which can be used by the sender to transfer the cryptocurrency to you.
Coinbase Shift Card
The Shift Card is a VISA debit card that is available to Coinbase users. Shift Cards allow Coinbase users in certain US States and Territories to spend the Bitcoin in their account in any place where VISA is accepted. Shift Cards cost an initial $10 but there are no transaction fees on domestic transaction nor any fees associated with the exchange of Bitcoin to USD.
In 2015, Coinbase rebranded the exchange element of the company as GDAX, to separate the ‘trading’ element of the exchange from the more casual consumer platform.
Monitoring of Accounts
One of the criticisms from the online community about Coinbase is that has been known to track where its customers send their cryptocurrency, and may ban users from making certain transfers (for example for transactions with gambling sites or darknet purchases). Coinbase is also involved in a running dispute with the IRS where they are fighting requests to hand over all customer’s financial data under a “John Doe” summons.
Although it’s not perfect, Coinbase offers customers (and especially newcomers to cryptocurrency) a practical and easy-to-use service for buying and selling cryptocurrency. However, as with any online exchange, despite the security levels outlined above, the recommendation will always be that any cryptocurrency purchased through Coinbase should be transferred to personal wallets allowing you to have full access to the private key to your cryptocurrency.
Overall, it is a good introduction to the world of cryptocurrency and allows users to dip their toe into the world of cryptocurrency without it feeling like it’s a strange new world.