Coinbase Review: Guide to The Top Crypto Exchange 202312 min read
With the interest and investment in cryptocurrencies having surged over the past few years, 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 is Coinbase.
Launched in San Francisco in 2012, operates in 102 countries from Africa, Asia, South & North Americas, Australia, and Europe. You can use it to exchange bitcoin, ether, litecoin, bitcoin cash, XRP, and ten other popular cryptocurrencies. It’s quick and easy to use, secure, and comes with reasonable exchange fees (although not the lowest). .
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 one of the easiest exchanges to use to purchase Bitcoin & other cryptocurrencies with fiat via Bank Transfer, Credit Card, Debit Card & Even PayPal. In addition, Coinbase operates the Coinbase Pro exchange, which is intended to focus on more advanced traders.
Platform gained mainstream attention in 2021 when it became the first crypto exchange to go public on the Nasdaq. Today, more than 56 million users are trading over $300 billion worth of cryptocurrency on Coinbase each quarter.
One of Coinbase’s biggest drawbacks compared to other exchanges is its pricey fee schedule.
When you make a cryptocurrency transaction on Coinbase — like buying Bitcoin, or exchanging your Ethereum back into U.S. dollars — you’ll be charged both a spread and a Coinbase fee.
The spread is the difference (or margin) between the market price and the price you actually pay for a purchase or receive for a sale. You can compare it to the commission or trading fee you might pay when you invest using a brokerage account.
Coinbase’s spread is equal to about 0.50% of your crypto sales and purchases, though it can fluctuate based on the market. For cryptocurrency conversions — trading Bitcoin for Ethereum, for example — you may be charged a spread of up to 2.00%, based on market fluctuations. However, there’s no Coinbase Fee for converting your crypto coins to other cryptocurrencies.
The Coinbase Fee can also vary, depending on your payment method, location and other factors. It may be either a flat fee or a percentage of your transaction, but will always be the greater between the two.
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.
Is Coinbase Safe?
One of the perceptions of cryptocurrency among newcomers to the platform is that it is still risky to invest in.
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 decentralized 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.
Speaking of the platform’s security, Coinbase takes the following measures to increase the safety of its operations:
- 98% of customer funds stored offline.
- Coinbase is FDIC insured exchange, meaning that all the funds that are kept online (remaining 2%) are protected against theft. However, the insurance policy does not cover funds stolen from individual accounts due to the account owners fault.
- Bitcoin and altcoins are distributed geographically in a variety of cold storage vaults around the world.
- All website traffic is encrypted.
- Customer wallets and keys are all encrypted (AES-256 encryption).
- Coinbase employees undergo criminal checks and must encrypt their hard drives.
- Coinbase runs a bug bounty program, incentivizing coders to alert them to any bugs.
Coinbase Customer Support
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.
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 users 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 vs Coinbase Pro
In 2015, Coinbase rebranded the exchange element of the company as GDAX and then again in 2018 to “Coinbase Pro”, to separate the ‘trading’ element of the exchange from the more casual consumer platform.
You will find that you can avoid Coinbase fees by using Cooinbase Pro as your buying / trading platform by sending a bank transfer to Coinbase and then using Coinbase Pro for purchasing.
All Coinbase customers automatically have an account on Coinbase Pro, you login with the same credentials as you would on the Coinbase website.
There are real-time orderbooks, trade histories, and charting tools. At the same time, the interface on Coinbase Pro is highly intuitive, making it possible for traders to start using the platform right away.
Coinbase offers various options when it comes to storing cryptocurrencies.
You can save your crypto on Coinbase. This is the easiest option – just log in, buy a cryptocurrency and leave it in your account. This way, you will not have access to your private keys; instead, the security of your coins will depend on Coinbase’s security measures (and the protection of your own account).
You can also choose to move your holdings onto Coinbase’s separate hot wallet software, Coinbase Wallet. This is a separate app that you would download, and unlike keeping your coins on Coinbase, does give you control over your private keys. That control means you can do more with your crypto, like move coins between wallets and participate in other decentralized finance activities that require crypto transfers and payments outside the exchange. But if you’re just looking to buy and hold Bitcoin or another crypto for its value as an asset, it’s not necessary.
How to use the Coinbase Wallet App
- Download either the iOS or Android app
- Connect your Coinbase.com account by clicking “Connect Now” in the notification, or by selecting “Connect to Coinbase” from the Settings menu.
Once your account is linked, you can transfer funds from the Setting menu at any time, and you can also use the Settings menu to unlink your account whenever necessary.
Coinbase also offer custody for cryptocurrency assets for institutions in the form of their custody program, which charges a setup fee of $100,000 and a minimum holding of $10million so you can see it is aimed at banks, hedge funds and other finance institutions who would require such a service.
Custody services are a way for large financial organizations to securely store their assets in a way that is insured. Client assets are held in separate repositories and Coinbase Custody operates its own nodes and validators and operates first-class institutional-level security and infrastructure standards. The custody service also allows asset holders to stake their tokens and earn for their clients.
- Security – Coinbase Custody uses 100% offline, segregated storage for all client funds, and posts all bond requirements for its stakers.
- Compliant – Coinbase Custody is a fiduciary and qualified custodian and offers staking services as a non-discretionary fiduciary activity to its clients.
- Simplicity – Clients can enjoy simple deposit, withdrawal, reporting and consensus features across all assets on Coinbase Custody.
The platform has also set up Coinbase Prime management services for institutions, an integrated solution that provides secure storage, an advanced business platform and world-class services so institutions can manage their crypto assets in one place.
Coinbase Custody is also integrated with Coinbase’s OTC desk and the vertically-integrated custody service provides clients with access to instant and anonymous liquidity.
With Coinbase acting as an intermediary, the anonymity of the involved counterparties is preserved whilst guaranteeing settlement.
Custody clients can leverage the OTC desk to price and confirm trades before moving funds, and the OTC and Custody client service teams work together to simplify the entire process. Any clients initiating positions can buy OTC and settle assets directly into Custody.
- Quick trading for offline funds
- Agency-only OTC desk provides anonymous access to trusted counterparties
- The OTC and Custody client service teams provide a seamless process from pricing risk through to trade settlement
The USDC Stablecoin
Coinbase also supports the USDC currency (USD Coin), an ERC-20 token and “stablecoin” with a price pegged to the price of the US Dollar. As a result, holders of the coin will always be able to redeem 1 USD Coin for US$1.00 and protect themselves from the volatility of holding digital assets such as Bitcoin and Ethereum.
USDC is minted by Centre, a consortium that collectively holds US$1.00 for every single USDC with the funds being held in a consistently monitored and audited bank account. The stablecoins are issued by regulated and licensed financial institutions that maintain full reserves of the equivalent fiat currency, and these issuers are required to report their USD reserve holdings on a regular basis with Grant Thornton LLP producing monthly reports on these holdings.
As a result, USDC is fully transparent and the project works within US money transmission laws, and the CENTRE open source technology project received early stage financial contributions from Circle and Coinbase, helping it to develop and it remains responsible for governing the currency and connecting its growing body of users and network of various stakeholders.
In addition to being supported by Coinbase and Coinbase Pro, USDC is also tradable on leading exchanges such as Binance, Bitfinex, Kucoin, OKEx, and Poloniex. As an ERC-20 token is also integrates with a variety of wallets, and can be used on decentralized platforms such as Bitpay, BlockFi, Dharma, Nexo, Melonport, and Loom.
How to earn free crypto with Coinbase
As part of its mission to create an open financial system, and make blockchain technology more accessible, the exchange operates the Coinbase Earn learning portal which allows users to earn cryptocurrencies, while learning about them at the same time.
Coinbase Earn aims to incentivize users to develop a deeper understanding of a digital asset, as well as its underlying technology, and does this by making easy to consume, educational content readily available.
Verified users are able to earn crypto by completing a series of educational tasks such as watching videos, and filling out quizzes, and the initiative is open to eligible individuals located across the globe.
In addition to watching tutorials and answering quiz questions, users are also rewarded for sharing their unique referral links, and inviting other eligible friends to complete the lessons.
Pros and Cons
- Simple, easy to use interface
- Decent selection of vetted projects
- Secure 24/7 customer support
- Regulated exchange
- Relatively high fees
- No trading charts
- Service availability varies per different countries
Coinbase offers customers (and especially newcomers to cryptocurrency) a practical and easy-to-use service for buying and selling 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. They continue to go from strength to strength and remain the safest and easiest way for newcomers to get involved in cryptocurrency. They have rightly earned their position as a leader in the field.
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