Is Coinbase Safe to Use?
The Coinbase cryptocurrency exchange wallet is a reputable trading platform with a solid trading volume and high capitalization.
The crypto exchange allows authorized users to earn money from conducting exchange or trading operations.
In addition, an online Coinbase wallet is available for everyone, using which you can safely store cryptocurrencies, observing all the rules and conditions of the service.
But is Coinbase safe to use?
Read the previous article about Binance security here.
What is Coinbase?
Coinbase is a popular online cryptocurrency exchange. The company provides customers with opportunities to buy/sell crypts, transfer funds, convert, and even the opportunity to mine for a “small” fee.
First of all, it is known for being the first public cryptocurrency exchange. Nowadays, it occupies a dominant position in the market and is actively developing.
Coinbase’s path to IPO was difficult. The company was founded in 2012 as a startup in one of the apartments in San Francisco. Coinbase experienced a crypto boom in 2013 and 2017 and withstood the so-called “crypto winter”, which lasted from 2018 to 2020.
During this time, the platform has become one of the most convenient on the market and is currently trying to be an “Amazon in the cryptocurrency market”, offering access to more than 142 different crypto assets.
The main source of Coinbase earnings is an extensive network of its users, or more precisely, commissions from their transactions. They account for 95% of all income. The remaining 5% is accounted for by various additional services, including a credit card and a storage fee.
In the future, the management plans to seriously diversify its sources of profit through the development of additional services, such as crypto-cybersecurity, crypto-credit and deposit accounts, and other services.
However, in the coming years, almost all the company’s revenue depends solely on trading volumes and, as a result, on the popularity of the cryptocurrency topic in the world.
Separately, we note the structure of income from transactions. Even though institutional investors are responsible for 69% of trades, their contribution to transaction revenue is only 5%. The remaining 95% of transaction income falls on retail investors, which once again shows the strongest dependence on the popularity of the crypt among private investors.
Coinbase supports 23 types of digital coins, including: Bitcoin (BTC); Ethereum (THE); Ripple (XRP); Litecoin (LTC); Bitcoin Cash (BCH); EOS (EOS); Stellar Lumens (XLM); Cosmos (Atom); Dash (DASH); Chainlink (LINK). Work with fiat is also available on the site: dollar, euro, and pound.
What is the best no KYC crypto exchange? Learn more here.
What helps Coinbase grows further?
- The growing popularity of cryptocurrencies. The main fuel of the Coinbase rocket is the general hype on the topic of cryptocurrencies. And this is the main plus and minus of this promotion. The more hype and talk around cryptocurrency, the better the exchange.
If you believe that Bitcoin and other crypto assets will continue to grow, then you can guarantee that Coinbase will grow on this.
- Growth in the number of users. At the moment, the majority of Coinbase users are concentrated in America (~81%), which leaves ample opportunities for growth outside the United States, especially in Asia, where cryptocurrencies are especially popular.
It is most likely that the company will continue to buy up small competitors and thus gradually spread around the world.
What can hinder the company’s growth?
- Cooling of interest in the cryptocurrency market. The cryptocurrency market tends to grow rapidly and also fall rapidly, sometimes for several years. In turn, fewer users — fewer transactions — will worsen the financial performance of Coinbase.
- The growth of competition. New exchanges and new offers from payment operators (Visa, Mastercard, PayPal) are entering the market. Traditional banks also want to go there, which have recently assessed the prospects of cryptocurrency.
All this will force the company to reduce its commission. In turn, this will kill the high margin, because the company does not have any special competitive advantages.
A good example would be the trends of commission changes in the market of conventional brokers. For better clarity, take a look at the graph below. We may soon see the same with crypto exchanges.
- New prohibitions and restrictions. The regulatory framework of cryptocurrencies has not yet been formed, which often leads to new restrictions, and sometimes bans of cryptocurrencies in some countries, such as China. Less demand means fewer transactions.
Is Coinbase safe to use?
As for the security system, Coinbase uses extensive security measures to protect your privacy and your crypto assets. 98% of customer funds are stored in offline cold storage, and the company maintains insurance to protect against losses.
In addition, the official website of the exchange says that in the event of serious hacking or if your account is compromised in any way, Coinbase is ready to return to your account all the funds that you lost during the hacking.
However, the protection of user privacy on the site is very low. Some experts claim that it is worse than PayPal. Thus, not only the user who sent the money suffers but also the one who receives the money, because both of them have no privacy and their names are known.
Many participants in the cryptocurrency market say that if you want to work with coins in a place you can trust, Coinbase is not the best option, since it is possible to track the history of entries and exits to the account by IP address. Here are some more points:
- Terrible support service. An adequate answer can only be obtained to a standard question, but it will take from 2 to 3 days. It is better not to count on the telephone operator and his help.
- Many partner rewards. Coinbase offers a referral program but does not always pay.
- Lack of user control over their funds. When a person opens a Coinbase account, he does not have direct access to the coins, and he does not receive any private key. Coinbase stores coins for you, which is equivalent to putting money in the bank.
In addition, there are high commissions on Coinbase. You have to pay for the convenience and ease of use of Coinbase: when buying bitcoins, the commission ranges from 1.49% to 3.99%.
How to buy Bitcoin anonymously and without commissions? Learn more here.
All the disadvantages of the wallet in question are related to the rules of use of the system and its insecurity. Besides, all the advantages (high-speed transactions, meager commissions, lightning-fast cryptocurrency exchange) can only be used by residents of the United States.
This creates an ambiguous opinion about this service. Somewhat discriminates against all other users who do not have American citizenship.