Blog Crypto Coinbase Wallet: Is Your Money Safe In It?

Coinbase Wallet: Is Your Money Safe In It?

date May 17, 2022 time 6 min read 800 views

Finding an easy-to-use, dynamic wallet where you can trade your crypto and quickly convert it to fiat can be an uphill challenge. In a world where security is King, it can be hard to strike the right balance between accessibility and the need to protect your assets. Does the Coinbase wallet meet the task?

What is the Coinbase wallet?

Why you need cryptocurrency wallets

Although cryptocurrency was initially thought of as an alternative payment system to replace cash, its speculative nature and unstable value made it difficult for everyday transactions and financial planning. Alternative uses emerged, and its use case continues to evolve.

The volatile nature of cryptocurrency makes it a challenge to replace cash – for now. (Source: Unsplash)

In the early days, cryptocurrencies like bitcoin were hard to find. You could only get your hands on it by mining it yourself or buying it from people you knew had it.

Mining required some financial investment in hardware and technical know-how and buying from people who had it wasn’t easy without an open marketplace. Cryptocurrency exchanges sprung up as the ultimate solution to facilitate transactions and increase the technology’s adoption.

Today, tokens like bitcoin are a store of value and easily traded on various exchanges for profit. One such exchange is Coinbase.

Coinbase is a popular marketplace where buyers and sellers can exchange digital currencies, like bitcoin and ethereum, for fiat money or other digital currencies. It was founded in July 2011 by Brian Armstrong, a former Airbnb engineer, and Goldman Sachs trader.

As the cryptocurrency industry gained more ground in the financial landscape, investors and traders started exploring more options to safeguard and maintain complete control of their assets. Private wallets emerged as a game-changer, and Coinbase introduced the Coinbase wallet.

A brief look at cryptocurrency wallets

You need to understand the types of wallets available to choose from as a prerequisite to understanding the Coinbase wallet, its features, how it works, and if it’s secure enough to protect your asset. That way, you can take advantage of the primary function of a cryptocurrency wallet to store the wealth of its users securely.

Crypto wallets have emerged as a safe place to store digital assets. (Source: Unpslash)

If you’re looking to store, buy, and sell your cryptocurrencies, you need a wallet that holds proof of your digital cash. Your digital wallet can be a device, a program on an app or online website, or a service offered by a cryptocurrency exchange.

Most crypto investors and traders store their digital assets in one of two wallets – centralized wallets on regulated cryptocurrency exchanges or private wallets that are either software or hardware.

Centralized Exchanges

Exchanges like Coinbase (Coinbase Consumer) can store your digital currencies on your behalf. You give up an element of control over your money in exchange for the ability to store many coins in one place and trade them freely. The exchange holds your private key. That’s not so private now, is it?

You also shift a portion of the responsibility to the platform when you deposit on an exchange. Some exchanges will compensate for your losses if you get hacked, and it is not your fault.

However, you don’t own the crypto on an exchange. The exchange can convert any coins you leave to liquidity or investment for them to facilitate trades. And while some exchanges promise compensation for losses, often, this is little more than a handshake agreement.

Software wallet

A software wallet or hot wallet is a non-physical program that you can download on your computer or access on a website to store your digital currencies securely. It’s encrypted and requires a password to access the coins stored in it. Coinbase wallet is a software wallet.

It’s easily accessible and convenient for users to exchange and sell currencies, but its downside is that it’s connected to the internet and can be susceptible to hackers.

Hardware wallet

A hardware wallet or cold wallet is a device, program, or service that stores the public and private keys for cryptocurrency transactions. It also offers the functionality of encrypting and signing information. A famous example is the Ledger Nano X hardware wallet.

A hardware wallet is regarded as the most secure. (Source: Unsplash)

Generally accepted as the most secure type, a hardware wallet is a small, encrypted portable device that allows you to download and securely store your bitcoin and other cryptocurrencies. It prevents loss to hackers by providing total isolation between the private keys and your computer.

Coinbase wallet

Coinbase wallet is a software cryptocurrency wallet where you can securely store your digital assets. It’s a self-custody wallet where you are in total control of your private keys and are solely responsible for the security of your wallet. If you lose your private keys, your assets are gone for good.

You need a private wallet to participate in the broader universe of decentralized finance actively – peer-to-peer lending, earning, staking, voting, bidding, swapping, buying NFTs, or trading specific tokens freely.

Note that Coinbase wallet is not confused with Coinbase (Coinbase Consumer). The web-based cryptocurrency exchange platform is where users can buy, sell, and trade cryptocurrencies.

How to use your Coinbase wallet?

One of the reasons Coinbase wallet is amongst the most loved and popular cryptocurrency wallets is its intuitive and user-friendly mobile app easily understood by beginners.

Getting started

Getting started with Coinbase wallet is as simple as:

  1. Signing up: Provide your details, like names, email addresses, and phone numbers, and create a secure password for your wallet account.
  2. Selecting your account type: Choosing between an individual and a business account. Whether you are a high-volume crypto user or a small fish in the game, your preference depends on your needs.
  3. Verifying your identity and wallet security: You confirm your identity with two-factor authentication. This phone-based verification is the most vital point of access to the wallet.
  4. Set up a payment method: This helps you decide how you will buy the crypto assets you intend to store or trade.

Remember to store your 12-word wallet recovery phrase that helps you retrieve your wallet if you ever lose your password. It would be best to write it down on paper and back it up to the cloud for an extra layer of security.

Supported coins

The list of cryptocurrencies supported by Coinbase wallet includes:

  • Bitcoin (BTC)
  • Ethereum (ETH)
  • Bitcoin Cash (BCH)
  • Litecoin (LTC)
  • Ethereum Classic (ETC)
  • Ethereum 0x Protocol token (ZRX)
  • US-dollar Ethereum (USDC)
  • Basic Attention Token (BAT)
  • Chainlink (LINK)
  • Zcash (ZEC)
  • Augur (REP)
  • Ripple (XRP)
  • Stellar Lumens (XLM)
  • Electro-Optical System token (EOS)
  • Dai (DAI)

Coinbase wallet also supports the fiat currency of several countries, such as USD, CAD, AUD, and EUR.

Fees

There are no transaction fees charged for Bitcoin Cash transactions between Coinbase wallets, but fees apply to transactions with other cryptocurrency wallets. 

Coinbase wallet users get charged variable fees ranging between 1.49 and 3.99%.for trading on the Coinbase exchange. These fees depend on the payment method, location, order mode, and transaction preference.

Coinbase wallet features

In addition to Coinbase wallet’s ease of use and security, you can also:

  • Pick a username to let you easily receive crypto from other Coinbase users.
  • Choose your privacy settings. You can choose a public profile to be searchable or private to remain anonymous.
  • Choose between biometric and passcode security options.
  • Link your Coinbase wallet to Coinbase Consumer exchange so you can quickly transfer your cryptocurrencies. You can still transfer crypto from another exchange or wallet by sending it to your Coinbase wallet address.
  • Back your wallet recovery phrase to the cloud for an extra layer of security.

These features make Coinbase wallet the most trusted exchange globally by its users.

Is Coinbase safe?

The safety of any wallet depends on how it protects your private keys. Private keys are used in cryptocurrency transactions to show ownership of a blockchain address. Your private key is required for spending, trading, or doing anything else with your wallet.

Coinbase is protected by Secure Enclave Technology – a technology that uses authentication options like 2FA to control the access. The wallet also uses Google Authenticator and a four-digit security PIN to keep your private keys safe. Despite being a hot wallet, this focus on security is the biggest reason people trust Coinbase wallet.

Simply put, yes, Coinbase wallet is safe. And if Coinbase’s server gets wiped off the face of the planet, your digital assets are safe as long as you have your private keys.

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George Schooling

George Schooling

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