When Coinbase launched less than a decade ago, there was little competition. The most significant player at the time was the infamous MtGox Bitcoin exchange. Market participants were few and far between. There were a handful of platforms on which to buy Bitcoin or other cryptocurrencies.
Fast forward to 2021, and you get a more vibrant crypto economy. There are hundreds of crypto exchanges and thousands of ways to get your hands on some virtual assets. Coinbase has not only survived, but it is also thriving. It serves more than 56 million users worldwide and more than 1,700 institutions. The exchange has more than $223 Billion of assets under management and, in Q1 2021, processed more than $335B worth of trades.
Why is Coinbase so successful? Why does it appeal to so many people? What are the features that make it a standout amongst its competition? We are answering these questions and many more in this review.
What is Coinbase?
Coinbase is a cryptocurrency exchange that was co-founded in 2012 by Brian Armstrong (CEO) and Fred Ehrsam (Board Director) as part of the 2012 YCombinator cohort (S12). We may refer to Coinbase as a crypto exchange, and it may have started as one, but over the years, it has expanded its offering to include much more than just buying, selling, and trading crypto assets.
The platform is headquartered in San Francisco, California, with over 1,700 employees distributed across the world. It has users from over 100 countries on the platform.
It offers brokerage services, a trading platform, a staking pool, a storage vault, crypto custody facilities, a stablecoin, a debit card, and a standalone wallet, among other products and services. Let’s take a closer look at the features Coinbase offers and what makes it a top-tier crypto company helping bring blockchain technology to the masses.
Buying and selling cryptocurrencies (brokerage)
Coinbase is more famous for its consumer-facing product, which is the buying and selling crypto as a brokerage platform. As opposed to a trading platform, a broker is a service that buys from and sells assets to its customers. This means that Coinbase buys from and sells crypto to its customers.
The users do not directly trade with one another, and Coinbase gets its revenue out of buying the assets at a discounted price while also selling them at a premium above the market price.
Coinbase supports close to 60 digital assets available for depositing, buying, selling, and withdrawing. Not all assets are available with all of these functions. How each user can interact with any asset largely depends on their location and, to a lesser extent, Coinbase’s infrastructure supporting the asset.
Coinbase customers can interact with the consumer interface (Coinbase.com) through the web or the mobile app. The interface is intuitive and one of the simplest to use, even for beginners.
Cryptocurrency trading (Coinbase Pro)
Coinbase launched its trading platform in 2015. Dubbed Coinbase Exchange, trading was the natural expansion to its already popular buying and selling brokerage service. The product was rebranded in 2016 to Global Digital Asset Exchange or GDAX, and later in 2018 to the current Coinbase Pro.
The main difference between the consumer-facing platform (Coinbase.com) and Coinbase Pro is that the latter provides tools only reserved to traders. These include charting software with trading indicators, a real-time updated order book, and margin trading with up to 3x leverage. Also, fees on the Pro platform are significantly lower than buying and selling on the consumer platform.
Coinbase Prime is another service that merges both consumer and Pro trading features into one package but is offered to institutional investors. The service is built for fund managers, hedge funds, family offices, endowments, and sovereign wealth funds that require access to deep liquidity pools. Additionally, Prime gives its users access to the Coinbase OTC desk for high-volume one-on-one crypto trades between buyers and sellers.
Staking is the act of participating in transaction validation and blockchain governance within a Proof of Stake (PoS) network by holding an amount of the network’s native cryptocurrency.
Cryptocurrency staking is becoming more popular as more PoS blockchains launch. Ethereum, the second most valuable blockchain network by market cap after Bitcoin, is also undergoing an upgrade to switch its consensus mechanism from ETH mining to staking. This has also contributed to the popularity of staking.
Several crypto exchanges have started offering staking services to their users interested in contributing their assets towards staking and earning passive returns. Coinbase is one of them. The exchange currently supports only six assets, with more to be added later.
Here’s a rundown of the assets supported by Coinbase and their projected yearly returns (staking rewards might change over time):
- Ethereum (2.0) – 6%
- Algorand (ALGO) – 6%
- Cosmos (ATOM) – 5%
- DAI – 2%
- Tezos (XTZ) – 4.63%
- USD Coin (USDC) – 0.15%
Please note: Not every Coinbase user qualifies to stake their assets. To start staking, there are three requirements to fulfill:
#1 Location requirements
So far, Coinbase only allows residents in the following six countries to participate in staking:
- The Netherlands
- The UK
- The US
#2 Account requirements
Only individuals with verified accounts can participate in staking.
#3 Asset requirements
Participants need to hold at least $1 of the supported assets listed above.
Staking with Coinbase isn’t just limited to retail accounts. Institutional investors using the Coinbase Custody platform also have access to staking with one extra asset – MakerDAO (MKR) available for staking.
The Coinbase wallet is a standalone application offered by Coinbase. You do not need to have a Coinbase account to access the wallet, but it provides more convenience. It is also important to differentiate between the Coinbase app and the Coinbase wallet. These two are not the same.
The Coinbase app is the mobile interface used to access one’s Coinbase.com account. You can buy and sell your crypto within your Coinbase app just as you can using the web interface. However, the Coinbase wallet application is a mobile wallet primarily used to store your crypto.
You can also send and receive digital assets, including dApps (decentralized applications), ERC-721 NFT tokens, and ERC-21 fungible tokens. The wallet gives you access to thousands of tokens and coins not supported by the Coinbase app or Coinbase consumer or trading platforms.
Coinbase wallet is a self-custodial storage solution. This means that the safety and security of the user’s funds is solely their responsibility. Coinbase has no access to the funds and therefore cannot guarantee nor insure their safety.
A standout feature that the wallet offers that other crypto wallets don’t is the use of Wallet usernames. These are human-friendly wallet addresses to which anyone can send funds or make payments instead of using the alphanumeric characters used by most blockchain networks. Anyone with a Coinbase Wallet has the option to create a unique username they can share with anyone wishing to send them funds.
Coinbase debit card
The Coinbase Card is a contactless Chip & Pin plastic debit card offered in partnership with Visa. The card was first launched in the UK, then later expanded to the EU region and, most recently, the US.
Being a Visa card, users can use it in millions of places where Visa cards are accepted, including ATMs and merchant POS machines worldwide. The card is powered by the customer’s Coinbase account and draws funds available in their wallets.
The card can be managed using the complementary Coinbase Card app through which users can control which wallets can be used to make payments, get notifications on payments through the card and freeze or unfreeze the card. The app can also be used to get instant receipts and transaction summaries, and expenditure statements. It is available on iOS and Android.
Coinbase Custody and Vault
Coinbase Custody is a storage solution for institutional customers. Talk about asset managers, hedge funds, family offices, other cryptocurrency exchanges, and endowments, and others. These institutions require solid storage facilities that guarantee the safety and security of their digital assets.
Coinbase launched Custody in 2018 in partnership with Electronic Transaction Clearing (ETC), an SEC-regulated broker-dealer and FINRA member. The solution offers institutional-grade features including:
- On-chain segregation of crypto assets
- Multi-layered security through the multi-signature function
- Regular security and financial audits
- Support for several assets accounting for 90% of digital asset market cap
- Staking and governance participation in PoS (staking) networks
Watch the video: Coinbase’s Custody explained
Coinbase also offers a similarly robust storage solution for its retail investors called Coinbase Vault. Launched in 2014, the Vault is a cold storage facility for anyone seeking to store their assets long-term.
With Vault, users get access to features such as:
- Delayed withdrawals with update notifications on the pending withdrawals. This is a security feature. The withdrawal can be canceled anytime within 48 hours.
- Multi-signature feature for layered security
- Up to 97% of assets stored in the Vault are kept offline in cold storage facilities.
The Coinbase Vault is free, and transactions attract no fees.
If you have been looking for a PayPal alternative to accepting online payments, Coinbase Commerce may be the solution you need. It is a free Checkout solution that allows merchants to accept Bitcoin, Bitcoin Cash, Ethereum, Litecoin, and stablecoins DAI and USD Coin (USDC).
This product allows merchants to become their own banks and avoid conventional online payment challenges such as chargebacks and costly services. Given that merchants can accept payments in stablecoins, it also solves the problem of crypto volatility.
According to Coinbase, the platform already supports more than 8,000 merchants worldwide. Signing up is easy, and there is no paperwork needed whatsoever.
Merchants running e-commerce stores can connect to their Shopify or Woocommerce plugins or a custom-developer solution through the available API.
Learn & Earn
Coinbase maintains a learning section on its website that provides a slew of learning resources. There are articles detailing anything from the basics of blockchain, crypto guides, tips and tricks to trading and investing in crypto and market updates.
It is easy to start learning about the new digital marketplace, and all anyone needs is the motivation to consume all the information available.
The learning section is not just for beginners. Even industry experts and everyone in between can get something of value. There are deep dives in specific projects and networks, guides on more advanced topics such as DeFi, NFTs, and staking.
Anyone can access this information without having to create an account with Coinbase.
Closely tied to Coinbase Learn is the Earning program, which rewards beginners for taking the time to learn about specific crypto projects. The rewards are as high as $12, and they are not just an incentive to participate in the program. They are a tidy sum if one opts to learn about every possible coin included in the program. So far, that is at least $80 in total from twenty assets.
The process is simple: watch the videos and answer the questions based on the concepts presented in the videos. Reward coins or tokens will be deposited to your Earn account once you correctly answer the questions.
Watch the video: Coinbase’s Earn feature explained
USDC stands for USD Coin. It is a cryptocurrency token hosted on the Ethereum network that is pegged to the value of the US Dollar currency. The biggest problem with most cryptocurrencies, including Bitcoin and Ethereum, is that their market value is highly volatile, making them less suitable as payment modes.
Stablecoins, such as USDC and USDT (Tether), were created to merge desirable qualities of cryptocurrencies and conventional/fiat currencies. On the one hand, crypto assets are more dynamic and cost-effective to use across borders. On the other hand, fiat currencies such as the US Dollar have a less volatile market value.
Coinbase partnered with Circle to form the CENTRE Consortium, which is the creator of the USD Coin. USDC was launched in 2018 and has gained support from multiple trading platforms, including Binance, Kraken, and Coinbase Pro. Wallets in which you can store the stablecoin include Coinbase Wallet, Binance’s Trust Wallet, MetaMask, Ledger, among several others.
Watch the video: USDC stablecoin founded by Coinbase
How to open a Coinbase account
Starting your journey with Coinbase is very simple. The exchange has invested a lot in an intuitive and beginner-friendly interface. This applies to both the mobile and the web interface.
There are three steps to getting started with Coinbase:
- Creating an account
- Verifying your identity
- Funding your account
Let’s look at each in greater detail.
1. Create a Coinbase account
This guide is only relevant if you are trying to access the Coinbase retail features, which are the consumer and pro trading interfaces. Other complementary platforms such as Prime or Custody will have different procedures to create an account.
There are three requirements you need to fulfill to qualify for a retail account:
- You need to be at least 18 years old.
- You need to reside in one of the 100 countries supported by Coinbase
- You need to have the documents to support the above
The last part will be covered in greater detail in the following subsection.
As for the supported countries, Coinbase supports regions almost evenly across the world. However, the services offered to each supported region may vary. For instance, if you reside in one of the 13 African countries supported by Coinbase, the only feature you will have access to is converting between coins. If, on the other hand, you reside in the US, you have access to all features that we highlighted in the ‘Features.’
To check whether you reside in a supported country, check this page.
The next stage in this step is to create the account.
- Visit Coinbase.com or pro.coinbase.com to signup. Click on the ‘Sign Up’ button on the top right. Alternatively, you can use the Coinbase app to create an account. Download it on the iOS App Store or the Google Play store.
- The Sign-Up form above will appear. Fill in a valid email address, your name as shown in your identification document, and create a strong password.
- Verify your email. Coinbase will send an activation link to your email. Click it.
- Login to your new account. As soon as you log in, Coinbase will require you to verify your phone number. Provide the number and your country of residence. Coinbase will send a seven-digit code to your phone as an SMS for verification.
- The final step to creating your account will be providing your personal details. This includes any PII (personally identifiable information) such as date of birth, address, employment details, and social security number (SSN) for US residents.
- Submit the form and wait for an email response from Coinbase.
2. Verify your identity
If you receive a positive response from Coinbase, you will have to verify your identity to unlock your account. Here are the documents you will need for this step:
- In the US:
- State-issued identification documents. It could be a valid driver’s license or an ID card.
- Outside the US:
- International passport
- National ID card
- Photo ID issued by the government
For proof of residence verification, you are required to provide either a bank statement or a utility bill in your name issued within the last three months.
Here’s a short video by Coinbase on how to verify your ID:
Identity verification is a mandatory requirement for Coinbase to comply with the current KYC (Know Your Customer/Client) and AML (Anti Money Laundering) financial regulations. Additionally, it also increases the account’s security.
3. Funding your account
To use your new Coinbase account, you are going to have to deposit some funds. This can be done using either crypto or conventional fiat currencies such as the US Dollar. The method of funding available to you will largely depend on your location. Different regions have different payment options. There may be some overlap, but some options are more common with residents in one region over another.
- For US residents, there are 4 ways to deposit to and or withdraw from Coinbase accounts:
- Bank Deposits and withdrawals (through ACH) – takes 4-5 business days
- Wire transfer – takes 1-3 business days
- PayPal – instant
- Debit Cards – instant
- For UK residents, there are 5 payment options:
- Faster Payments (FPS) – takes 1-3 business days
- SEPA transfers – take 1-3 business days
- PayPal (withdrawals only) – 1 business day
- 3D Secure Card – instant
- Instant Card Payments (Withdrawals only) – instant
For other regions, check out this page for a conclusive list of all payment methods to withdraw and deposit funds.
Crypto deposits and withdrawals are unrestricted globally, and anyone can deposit or withdraw any supported asset on the platform to any external wallet address.
Coinbase Fees and Pricing
When it comes to fees and pricing, it is not clear-cut with Coinbase. This is because the exchange offers several different services and products to its customers, and each has a custom pricing model.
Let’s highlight the fees for some of the more popular services offered by Coinbase:
- Brokerage fees (buying and selling crypto)
- It is not cheap to use Coinbase’s consumer platform where you can buy and sell crypto. Fees in this platform vary depending on the payment method and location of the user.
- Fees range from $0.99 for transactions valued below $10 to $2.99 for transactions not exceeding $200 or an equivalent in any other currency.
- Transactions above $200 are charged at a percentage fee of 1.49% for standard payment methods and 3.99% for payment cards.
- For crypto conversions, Coinbase charges up to 2% in spread margins
- ACH transfers are free
- Crypto transfers are free between Coinbase accounts. External transfers only attract a network fee.
- Wire transfers are $10 incoming and $25 outgoing
- PayPal fees are 2.5%
Remember that these fees vary according to the payment method. The ones highlighted above only apply to US residents. Visit Coinbase’s fees and pricing page for a more conclusive schedule.
- Trading (Coinbase Pro)
- Fees on the Coinbase Pro trading platform are more competitive and significantly lower compared to the consumer platform. The image below shows the trading fees schedule. The pricing tier is determined by adding up the prior 30-day volume—the higher the trade volume, the lower the fees.
You’ll notice that Makers have more favorable terms than Takers. Makers add liquidity to the marketplace by placing orders on the order book, while takers take away liquidity by fulfilling the open orders.
- Staking fees
- Coinbase charges a 25% staking fee
- Coinbase card fees
- The issuance fee is £4.95 / €4.95 / $4.95
- Payments attract a 2.49% fee except for payments made in USDC
Overall, depending on which service you use, your location, and the payment method, the fees could be more favorable or costly than other competing platforms.
Coinbase is one of the safest and most secure cryptocurrency investment platforms in the market. It takes a proactive approach to security, and its track record is a testament to the effectiveness of its strategy. Since its launch in 2012, Coinbase has never reported any security incidents, which is no minor feat in the blockchain industry.
Its security measures have been segmented to cover its entire product and service portfolio. Publicly shared security measures include:
- Safe asset storage – Coinbase stores 98% of all customer crypto assets offline in cold storage wallets and goes a step further to distribute those wallets across the world.
- Wallet encryption – wallet addresses and their private keys are securely encrypted using the robust AES-256 encryption standard.
- Data management – all personally identifiable information (PII) and other sensitive account information is, first of all, stored offline. Then the data is encrypted using AES-256 encryption and split into multiple copies held in FIPS-140 USB drives and paper backups for redundancy. These copies are kept in various secure locations.
- The website and mobile apps are SSL encrypted to facilitate safe payments.
- Account passwords are hashed using bcrypt before storage.
Internally, Coinbase has implemented several security precautions to ensure that its systems are safe and less prone to human errors and vulnerabilities. These preventive measures include:
- All employee devices using unique passwords and 2FA authentication
- All employees have to pass criminal record tests
- Employee workstation hard drives have to be encrypted and access restricted through solid passwords.
Additionally, all users are encouraged to use second-factor authentication (2FA). There are three 2FA methods available to account users:
- SMS/Phone – this is the least secure, but it is still better than single-factor authentication. Every time the user logs into their account, a one-time passcode is sent to their registered phone number.
- 2FA apps – the apps provide random codes that are time-sensitive to be used during login. Popular 2FA apps include Twillio’s Authy, Google Authenticator, Duo, or Microsoft Authenticator.
- Hardware keys – these are physical token devices similar to flash drives that can be used to provide additional authentication when logging in. This is the safest 2FA method you can use.
Even the most secure system in the world is not immune to human vulnerabilities. Therefore, all users are encouraged to be vigilant and never outsource the security of their assets.
Additionally, Coinbase has insured its customers’ deposits to the tune of $250,000 per account through FDIC insurance. However, this coverage only applies to US customers holding US Dollar deposits. Crypto assets are not covered under this insurance.
Coinbase Pros and Cons
- Beginner-friendly interface.
- Easy sign-up process.
- High liquidity for supported digital assets.
- Highly regulated.
- Strong security.
- FDIC insured.
- Mobile app for convenience.
- Accessible in 100 countries worldwide.
- Pro platform provides competitive trading fees.
- Coinbase offers several products and services all under ”one roof.”
- Other than the Pro trading platform, most of its other products and services are expensive.
- High levels of compliance with regulations have led to privacy concerns.
- Regular downtimes, especially whenever Bitcoin experiences price action spikes.
- Debit cards only available to limited countries.
- Only six coins are available for staking (so far), and the fees are extremely high.
Coinbase is one of the largest cryptocurrency investment platforms, and for a good reason. It offers a host of services and products that appeal to the market, and it has a proven secure platform. Additionally, it keeps expanding its coverage to more users.
However, whether Coinbase is right or wrong for you is up to you to decide. Hopefully, this detailed review has made that decision a little easier.
Coinbase review 2021 | FAQ’s
Is Coinbase FDIC Insured?
Yes, Coinbase insures all US Dollar deposits from its US customers through FDIC to the tune of $250,000 per account. This insurance covers any losses resulting from system compromise, employee theft, or anything that can be considered Coinbase’s negligence. Customer errors and faults are not covered.
Is Coinbase safe?
Yes, Coinbase is one of the safest cryptocurrency exchanges. Since its launch in 2012, the exchange has yet to suffer a security incident. It takes proactive measures to safeguard against internal and external attacks on its systems. It also provides its users the necessary tools to participate in securing their assets.
What payment methods are supported on Coinbase?
There are a variety of methods available to make deposits and withdrawals from Coinbase. Their availability, however, depends on the user’s location. The more popular options include bank transfers (ACH), wire transfers, FPS (the UK), SEPA (Europe), PayPal, debit cards, and Instant Card Payments.
Does Coinbase offer a debit card?
Yes, Coinbase offers a Visa debit card allowing its users to spend funds available in their accounts in millions of places worldwide. The card can be managed through a complementary mobile app where the user can manage all features, including tracking expenditures, freezing/unfreezing the card, and assigning which funds in the account can be used to make payments.