Coinbase Security, Exchange, Vault, Wallet, and Fees
Coinbase is a well-known and reputable site for both holding and purchasing or selling Bitcoin. It was founded in 2012, has over 30 employees, and raised $106 million in investments from big backers, such as Y Combinator and Andreessen Horowitz, among many others. It’s also headquartered in the United States, in San Francisco, California, making it a very publicly-accessible company.
Securing Wallets through Insurance and a Vault
While Coinbase is extremely secure in how it handles user accounts (allowing things like 2-factor authentication), where it really starts to shine is in its insurance. Accounts are insured against non-user errors, such as the company itself being hacked or some other malicious attack. As long as users are keeping secure accounts (using strong passwords and 2FA), this covers the vast majority of other failure points, helping give more confidence in knowing that the coins that are held by Coinbase are safe and secure at all times.
To take things a step further, Coinbase also implemented a “Vault” system, which is essentially a paper wallet. The vault system is even more secure than a normal wallet, in that you can set it up to utilize a n-of-m system for handling withdrawals. For example, an individual can have it set to where it only requires their permission. A business or friendship, on the other hand, can require that a specific number of people (out of a select group) are required to successfully withdraw funds. This adds an additional layer of security in that a single person can not maliciously decide they are going to wipe an account – if the other parties don’t agree to it, nothing will happen.
Unlimited Wallets and Addresses
Normal use of Coinbase as a wallet goes through its “account” system. In Coinbase’s terms, an account is simply a wallet, and you are able to make as many of these as you wish, giving them each descriptive names if desired (for example, “fun money” or “long-term savings”). This allows for separation of funds in secluded wallets as a whole, akin to using a desktop program like MultiBit. It’s also worth noting that vaults are considered as accounts, so multiple vaults can be set up as well, each with their own withdrawal requirements.
When it comes to addresses, a single one is generated with each new account set up. More can be created manually (and are able to be custom tagged to better organize where people are sending their payments to), and with each transaction that’s sent out, a new change address is created that you then have access to. Along with this, addresses are logged based on their age, so it’s easy to see which ones have been used and which haven’t, as well as when each address was originally created.
The Ease of Buying Bitcoin on Coinbase
Getting up and running with Coinbase is very, very simple. When an account is set up, you are given basic access to the wallet system, to send and receive Bitcoin. From here, you can then go through a quick verification to unlock the ability to both buy and sell Bitcoin via linked bank accounts (which can be quickly verified through the site’s secure verification system). While personal information is needed for this process, that’s due to Coinbase being a licensed bitcoin exchange, thereby giving the security of knowing that they aren’t just going to run off with funds, and that they aren’t going to be shut down by the government while holding your money or coins.
For members in the United States, after attaching a credit card to your account and verifying all information needed to make purchases, it’s possible to do an “Instant Buy.” In this case, the coins are instantly transferred to your account, without waiting for the ACH to complete. It’s worth noting that this does not charge the credit card – this is simply as a backup in case the ACH fails for some reason. The reason why this is such a great feature is because normally, an ACH transfer to Coinbase can take up to 4 business days, making the purchase of Bitcoin take just as long. The same goes for transferring back out (selling Bitcoin), which can be a hassle if you’re attempting to do any sort of timing of the market.
Luckily, for those that plan to buy and sell somewhat frequently (in an attempt to profit), Coinbase offers a “USD Wallet,” which lets you store cash in the account instead of always having it transferred back to your bank. Buys and sells using this system are also instant, and are not reliant upon having a credit card or worrying about bank transfers.
Fees for Using Coinbase
Sending Bitcoin to another user or merchant is free in most cases (any transaction above 0.001 BTC). In these cases, the site itself will cover any miner’s fees, so if you have Bitcoin in your account, you always know you’re free to send it without having to worry about how much you’ll truly have after paying. To make things even better, Coinbase employs an email address identity system that allows users of the service to transfer Bitcoin (of any amount) to one another instantly, off the blockchain, absolutely free (including transfers of less than 0.001 BTC).
For exchanging Bitcoin to cash or cash to Bitcoin, there is a 1% fee, and a minimum conversion of $1 in your local currency. This is a small price to pay, and there are no flat fees on top of it, so if you are trying to convert $10, the fee is $0.10. If you want to convert $100, the fee is $1.00. It’s quick and easy to calculate, and ensures that you don’t need to keep saving up large amounts in order to help combat fees that would otherwise dilute your new holdings. As for the maximum that can be purchased or sold at a time, it’s $3,000 per day by default, though it is possible to go through more verification and apply for a higher limit if needed.