If you’re a crypto beginner, you probably have dozens of questions about how to store your cryptocurrency. For example, is it safe to keep crypto on Coinbase compared to any other crypto platform? Should you use a crypto wallet instead of leaving crypto on an exchange?
Coinbase is a centralised cryptocurrency exchange, meaning it operates on a centralised infrastructure run by a single entity, unlike decentralised exchanges, which use a peer-to-peer network without intermediaries.
As a centralised exchange, Coinbase provides a user-friendly interface for buying, selling, and trading over 240 listed cryptocurrencies. The platform offers security features such as two-factor (2FA), biometric authentication, and insurance protection to help protect users’ accounts and funds.
This post explores Coinbase as a centralised exchange. You will discover whether you can trust the platform to securely hold your funds, protect critical personal information, and learn the steps to increase security on the Coinbase platform.
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What is Coinbase?
Founded by Brian Armstrong and Fred Ehrsam in 2012, Coinbase is a reputable, established crypto exchange that enables users to trade, invest and exchange more than 240 different cryptocurrencies like Bitcoin (BTC), Ethereum (ETH), and Dogecoin (DOGE).
Coinbase has over 108 million users. From 2021 to 2022, Coinbase attracted 56 million new users because of its popularity as a trusted exchange with a beginner-friendly interface. The platform caters to novice and experienced crypto traders and investors.
It’s important to note that cryptocurrencies are a relatively new asset class that can be volatile and risky and may not be suitable for all investors.
Coinbase has excellent security measures to ensure its users’ funds are safe. However, we recommend moving your crypto assets off any exchange into a self-custodial hardware wallet.
For new users looking to make simple buy and sell orders, the original Coinbase platform is likely the best option. In November 2022, Coinbase began migrating more advanced accounts on their Coinbase Pro platform to a new, more sophisticated platform called “Advanced Trade.”
To find out more about Coinbase, read our in-depth, unbiased Coinbase review.
Coinbase is a Trusted Cryptocurrency Exchange (Image source: Coinbase)
Is Coinbase a Good Exchange?
Coinbase has an excellent reputation, and its loyal users consider it one of the best. Naturally, every cryptocurrency exchange has pros and cons, as the following information shows regarding Coinbase: –
Pros:
- User-friendly for beginners: Coinbase’s website and mobile app are easy to navigate and allow for quick buying, selling, and exchanging of cryptocurrencies.
- Large selection of cryptocurrencies: Coinbase offers over 240 cryptocurrencies, with new cryptos added regularly.
- Earning opportunities: Users can earn interest on eligible balances and participate in Coinbase Learning Rewards by completing crypto education courses.
Cons:
- High transaction fees: Coinbase’s main platform transaction fees are often expensive.
- Customer service issues: Coinbase has received negative feedback regarding their customer service, especially regarding security issues.
- Coinbase controls private keys: On the primary platform, Coinbase holds and controls users’ private keys, which represent ownership of their cryptocurrency. Only with the Coinbase Wallet can users have responsibility for their private keys.
The cons of Coinbase, to be fair, are comparable with most cryptocurrency exchanges. If you’re new to the cryptocurrency market, you may wonder if using Coinbase for your cryptocurrencies is safe.
Is Coinbase Safe to Use for Cryptocurrencies?
Coinbase takes user account protection seriously, but you must take essential steps to protect your account. Cybercrime is increasing, and hackers are becoming more adept at applying sophisticated protocols to identify vulnerabilities on exchange platforms.
You’ve worked hard to build your cryptocurrency assets, so take responsibility for their security.
Should You Keep Your Cryptocurrency on Coinbase?
It’s important to note that while Coinbase and other cryptocurrency platforms implement security measures, by the nature of a cryptocurrency exchange, they are all centralised entities. Therefore, the risk of a hack or cybercrime exists.
Let’s explore how to get started if you intend to store your cryptocurrency on Coinbase.
How to Store Your Cryptocurrency Safely on Coinbase
To protect your crypto assets, we advise best practices on Coinbase and other crypto exchanges, such as enabling two-factor authentication and a super strong password.
Only have your crypto assets live on Coinbase when you are actively trading. Once your session completes, transfer your cryptocurrencies to your self-custody wallet.
Security Features of Coinbase
Coinbase has implemented several robust security features to protect its users’ accounts and funds.
Some of the key security features on Coinbase include:
- Two-factor authentication: Coinbase users enable two-factor authentication (2FA), which requires a second verification step, such as a text message or an authentication app, before they can access their account.
- Biometric Authentication: Coinbase enables user biometric authentication on its mobile app, such as fingerprint or face recognition.
- SSL Encryption: Coinbase uses SSL (Secure Sockets Layer) encryption to secure all website traffic between the browser and web server. It protects users’ sensitive information by scrambling data, so it isn’t easy for hackers to intercept.
- Offline Storage: Most users’ funds on Coinbase are held in offline storage, also known as cold storage, to protect against potential hacking attacks.
- Insurance Protection: Coinbase has insurance protection for all eligible cryptocurrency holdings, including digital currency in the Coinbase Vault (see below), to protect against theft and hacking.
- Account Activity Monitoring: Coinbase monitors account activity for suspicious behaviour and alerts users if any unusual activity is detected.
- Whitelisting: Users can set up a whitelist of approved addresses to ensure that withdrawals get sent to trusted addresses.
As you can see, Coinbase has an excellent range of security features, and we would advise using as many of them as possible. Coinbase Vault is a popular cold storage feature to protect your digital assets, which we will cover below.
The Coinbase Wallet has Many Security Features (Image source: Coinbase)
Coinbase Vault
Coinbase Vault is a helpful feature offered by Coinbase for users to store their cryptocurrency, such as Bitcoin (BTC) in a secure offline location called cold storage (offline storage). It’s an additional security layer that helps protect your assets from potential hacking attacks.
With Coinbase Vault, users can create multiple sub-accounts with different permission levels, allowing them to give other trusted people access to their funds for specific purposes.
“Coinbase Wallet supports hundreds of thousands of coins and a whole world of decentralized apps. It’s your crypto – use it how and where you’d like.” (source: Coinbase)
Storing Crypto Safely
Keeping your crypto on an exchange isn’t recommended, regardless of the level of security. No matter the platform’s trustworthiness, we recommend storing your crypto assets in a self-custody wallet.
If you don’t wish to use Coinbase Vault, the following is a brief list of recommended self-custody wallets: –
- Ledger Nano S: The Ledger is a popular hardware wallet supporting multiple cryptocurrencies, such as Ethereum (ETH), Bitcoin (BTC), and Litecoin (LTC). It offers high-security features like PIN protection, seed backup, and passphrase support.
- Trezor Model T: A hardware wallet that supports over 1,000 cryptocurrencies, including Bitcoin (BTC), Ethereum (ETH), and Ripple (XRP). It has a touch screen, passphrase support, and a strong emphasis on security.
- Exodus: A desktop and mobile wallet that supports multiple cryptocurrencies, including Bitcoin (BTC), Ethereum (ETH), and Litecoin (LTC). It offers a user-friendly interface and built-in exchange but lacks advanced security features like passphrase support.
- MyEtherWallet: A web-based wallet that supports Ethereum (ETH) and other ERC-20 tokens. It allows users to generate and manage their private keys and integrates with popular hardware wallets for added security.
- Trust Wallet: Another popular mobile wallet that supports multiple cryptocurrencies, including Ethereum (ETH), Bitcoin (BTC), and Binance Coin (WBNB). It has a user-friendly interface allowing users to control their private keys but lacks advanced security features like passphrase support.
By definition, a self-custody wallet means you have responsibility for managing the private keys instead of a centralised entity having control of your digital assets.
Enable 2FA, use super strong password protection and keep backup copies of your seed phrase in a safe place to protect your funds.
Read Crypto Safety 101: How to Protect Your Crypto to learn more about protecting your crypto assets.
“Store all of your NFTs: Safely store and easily view all of your Ethereum and Polygon NFTs right in your Wallet.” (source: Coinbase)
Coinbase is Suitable for Beginners & Experienced Crypro Investors and Traders (Image source: Coinbase)
Is it Safe to Keep Crypto on Coinbase: Conclusion
Coinbase is GDPR compliant and a safe exchange trusted by millions of crypto users. Compared to many other cryptocurrency exchanges, Coinbase is one of the safest as the platform prioritises security to protect user assets.
Coinbase is registered with FinCEN (Financial Crimes Enforcement Network) as a money services business. It has a KYC policy (know your customer: mandatory verification) to prevent fraudulent activity and complies with anti-money laundering (AML) regulations. Even though Coinbase is considered one of the safest exchanges in the industry, most crypto veterans, including us here at the Coin Bureau do not recommend keeping crypto on any exchange for long-term storage and highly encourage self-custody.
Read our in-depth Coinbase review.
Coinbase Security: FAQs
Is Coinbase Trustworthy?
Coinbase is a reputable and well-established cryptocurrency exchange established in 2012. It has an exceptional range of security measures and complies with financial regulations and compliance requirements to ensure they operate as a legitimate financial services company.
Remember that cryptocurrency investing and trading can be risky, volatile, and unsuitable for all investors. If you decide to use Coinbase, practice sensible security measures such as using a strong and unique password, enabling two-factor authentication, and keeping your account information confidential.
Has Coinbase Ever Been Hacked?
In 2019, Coinbase reported that over 6,000 of its users’ accounts got hacked. However, Coinbase said that, despite the breach, the hackers did not get away with users’ funds.
Since then, Coinbase upped its security measures by adding two-factor authentication and biometric authentication options for users.
Who Should Use Coinbase?
Coinbase is great for beginners and experienced crypto enthusiasts interested in buying, selling, and trading cryptocurrency. Coinbase has one of the most user-friendly interfaces that is super easy for beginners to navigate. Coinbase also provides a wide range of cryptocurrencies for trading and has multiple security measures to protect its users’ funds.
Coinbase is also a superb platform for experienced cryptocurrency investors. However, other exchanges may offer more advanced features and trading options. Coinbase Pro, for instance, is a more advanced platform for traders.
What is Coinbase Vault?
The Vault is Coinbase’s secure storage option for storing your cryptocurrency offline. It requires multiple approvals for withdrawals, which helps further protects your crypto assets by adding a security layer to protect your crypto from cybercriminals.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.
Source: https://www.coinbureau.com/analysis/is-it-safe-to-keep-crypto-on-coinbase/
