Coinbase is a digital currency exchange platform founded in July 2011 by Brian Armstrong and Fred Ehrsam. After enrolling in the 2012 Y Combinator startup incubator program, the company launched its services in October 2012 and soon after, in May 2013, Coinbase received $5 million Series A investment from the venture capital firm Union Square Ventures which gave the company the much-needed support to become who they are today. Coinbase reached a trading volume of more than $1 million worth of Bitcoins per month in just one year after the investment from USV, and two years later, in 2015, Coinbase got approved by the U.S regulators and became the first licensed U.S. Bitcoin exchange. So let’s delve into Coinbase review without further ado.
Who they are and what they do
“Imagine if every payment in the world was as fast, cheap, and global as sending an email. Imagine if anyone who had an idea for a product could have customers all over the world from day one. Imagine if anyone with a smartphone had access to the same financial services we enjoy in the developed world. An open financial system can be a great equalizer and lift billions out of poverty while accelerating the pace of innovation around the world. This is the best way we know to change the world.”- Coinbase mission
Just five years after its inception, Coinbase became the largest platform for buying and selling cryptocurrencies in the world. With headquarters in San Francisco, California, the company has more than $50 billion in digital currency exchanges, it supports 32 countries, and serves more than 10 million customers worldwide.
As a result of the massive public exposure of cryptocurrencies in the media, the growth of Coinbase has become almost unmanageable. To give you some perspective, on December 9, 2017, the Coinbase iOS app became the most downloaded app in the Apple App Store.
Take a moment and let that sink in. It’s not a multimedia or social network app, it’s a freaking crypto exchange! That’s insane!
Today, Coinbase is a brand name; it’s the Coca-Cola of cryptocurrency exchanges. It’s the go-to place for everyone looking to buy, trade or hold cryptocurrencies, and especially so for the newbies that recently got into the game and look for a hassle-free platform with an intuitive interface.
Coinbase aims to become the easiest to use and the most trusted cryptocurrency exchange platform in the world, and making EFT payment, ACH / SWIFT / SEPA / PayPal and transfers via major credit cards possible, certainly helps them become just that.
Their 10-year plan, or rather their mission, is to create “An open financial system […] one that is not controlled by any one country or company (just like the internet did for distributing information). We think this is the highest leverage way to bring about more economic freedom, innovation, efficiency, and equality of opportunity in the world”
This is probably their most recognizable feature because they’re one of the few platforms to allow (as of October 2017) instant crypto purchases for U.S. bank account holders. Their license to operate as a crypto broker (and exchange) in the U.S covers 24 jurisdictions in addition to the 32 countries they already cover.
However, as of now, you can only buy the four aforementioned cryptocurrencies on Coinbase, so if you’re looking to purchase other altcoins, you’ll have to look elsewhere.
The second world-class product they offer is GDAX, the Global Digital Asset Exchange. GDAX is an advanced trading platform that’s intended to be used by professional traders rather than beginner buyers.
GDAX offers an intuitive interface with real-time order books, charting tools, history of trades, and a simple order process you can master in a day and start trading from the get-go. Just in case you’re getting confused, there is a difference between Coinbase and GDAX.
Coinbase is a brokerage with higher fees, but it makes buying and selling cryptocurrencies really easy, whilst GDAX is an exchange aimed at professional traders and investors with an intermediate understanding of candle charts, stop market, stop limit and other advanced limit order options.
Taker fees start at a minor 0.25%, and volume-based discounts can drop the fees down to 0.1%, which is nothing compared to Coinbase’s 1.49% transaction fee and 4% fee (if you buy with a credit card). Plus, there are no transfer fees or buy/sell fees if you do limit orders on GDAX.
The last thing to note here is that you can log into GDAX with your Coinbase account, transfer the funds from one wallet to another and start trading instantaneously.
The third product they offer is, of course, the Coinbase cryptocurrency wallet available in 190 countries worldwide. The Coinbase digital wallet is a hosted wallet; that means that Coinbase holds the private keys to your wallet, which in turn enables them to take advantage of their secure cold-storage technology to protect your funds.
This is a very important aspect of the Coinbase wallet that you need to be aware of because this essentially means that you have to trust them to secure your funds, whilst you have zero control over your wallet since you’re not in possession of the private key.
If you want to have greater control over your funds, you can store your crypto into what Coinbase calls a “vault” account.
The vault can receive funds like a regular wallet, but can also prevent stored funds from being immediately withdrawn by adding optional security steps such as a 48h transaction delay which gives the user some spare time to cancel the withdrawal after the approval.
The vault also gives users the option to create a “multiple e-mail account wallet for a single user,” and additionally it allows for the creation of a “group vault” which is essentially a split ownership wallet which requires multiple users to approve a transaction before it can be completed.
The last (but not least) product Coinbase offers to their American customers is the Shift cryptocurrency debit card. Coinbase advertises the Shift debit card as “the first US Bitcoin debit card.”
The company supplies a VISA debit card that’s connected to your Coinbase account, and comes with a handy app for iOS or Android, allowing you to track and manage your balance and transactions anytime, anywhere.
The Shift Card is one of the most popular cryptocurrency debit cards available because they’re the only provider in the USA (45 out of 50 states up until now) and they have relatively low fees. The biggest impediments of the Shift debit card are the withdrawal limits.
Shift sets the load limit at $1000, and the ATM withdrawal limits at $500 if you’re spending from Dwolla account and $200 a day from your Coinbase account.
Because the Shift debit card is essentially a VISA debit card funded with cryptocurrencies, it can be used anywhere in the world; however, Coinbase offers their debit card only to American citizens living in the states listed here.
Is Coinbase safe?
One of the first questions anyone asks themselves when considering an online wallet or an exchange is: is it safe? With the numerous security breaches and outright scams in the crypto world, safety has become a real hot-topic for crypto enthusiasts.
Besides, the fact that the crypto world is a comparatively “unregulated” industry with many newbie adopters that are unfamiliar with the technology, safety has become that much more crucial.
As a general rule, in the crypto world, you’re solely responsible for your funds, and you should always do your research before you choose to entrust them to a wallet provider, exchange platform or any other third party. So what should that research consist of?
First, you need to check if the company is legitimate; this means that you have to check their history, their corporate structure, transparency, founding, when and where are they registered, how good is their customer support (very, VERY important), how good are their security, their general reputation, and many other aspects of their business conduct.
Yes, we know this sounds like a lot, but fortunately, we’re here to help and do all of this for you. So, is Coinbase safe?The answer is “yes.” As the first licensed U.S. Bitcoin exchange, Coinbase has to comply with the strict U.S laws and regulations, both at the federal and the state level.
First, they need to be registered as a Money Services Business with FinCEN, which means that they need to comply with the Bank Secrecy Act, the USA Patriot Act, and other state money transmission laws, rules and regulations.
Additionally, their corporate structure is fully transparent, plus they’re backed by many trustworthy investors such as Bank Of Tokyo, Blockchain Capital, and Digital Currency Group. All of this makes them one of the most legitimate and reputable cryptocurrency exchange platforms in the world.
Are my funds secure with Coinbase?
Theoretically, yes. Coinbase goes to great lengths to secure customer funds. The first and most important thing you want to know is that if you’re a U.S resident, the funds in your Coinbase USD wallet (up to $250.000) is FDIC insured.
Of course, this means that if Coinbase gets hacked or does something stupid with your funds, you’re covered; however, if you get hacked or do something stupid with your funds, you’re on your own.
Subsequently, it must be noted that Coinbase segregates the customer funds from company operational funds and holds them in custodial bank accounts around the world. They claim that “even if Coinbase were to fail as a business, the funds held in the custodial bank accounts could not be claimed by Coinbase or its creditors.
The funds held in those accounts would be returnable to Coinbase’s customers.” However, as with anything in the crypto world, you should take the security of your funds into your own hands and use two-factor authentications on your Coinbase wallet.
How do I set up a Coinbase account?
Setting up a Coinbase account is fairly easy and intuitive. All you have to do is read our step by step guide and go for it!
- Signing up — To create an account on Coinbase, you need to provide them with your name, e-mail address, state and you’ll need to set up a password. After you’ve done this, you’ll receive a verification e-mail; so you’ll need to go to your mailbox, open the Coinbase verification e-mail and click “Verify Email Address.”
- Set up your account — After you’ve completed the first step successfully, you’ll be asked to choose whether you want to create an individual or a business account. Click on the “Individual” Account.” To create your account you will have to provide a phone number as a part of the two-step verification process.
- Set up your Payment method — Coinbase allows customers to choose from two payment methods: bank account transfers and Credit/Debit card payments. Decide which one is best for you and click on it. Also, keep in mind that bank account transfers usually have a much higher weekly buy limit than Credit/Debit card payments.
- Set up Payment Method — As stated above, Coinbase allows customers to choose from two payment methods: bank transfer and credit card. For bank transfers, Coinbase will often set up one or two small transactions to and from your account, in order to verify your account.When you choose a payment method, Coinbase will ask you to provide identification documents (because they have to conduct their business under strict KYC and AML regulations) such as a passport or driver’s license and a photo ID. For credit cards, a screenshot of the credit card is necessary. Once you upload the required documents, you will be redirected to a page where you can choose your preferred payment method.
Sidenote: Keep in mind that bank transfers are slow and can take anywhere from 2 to 10 days, SEPA transfers in EU take 1-3 days while credit/debit card transactions are instant.
- Step 4. Buy Cryptocurrency — Finally! The hassle is over, and now you can safely buy Bitcoin, Bitcoin Cash, Litecoin, and Ethereum. Once you fund your account (keep in mind that Coinbase needs to verify your identity, and that might take a few days), all you have to do is to click on the “Buy/Sell” button located at the top left-hand corner of the dashboard, choose the cryptocurrency you want to buy, select the desired amount to purchase and click “Confirm Buy.”
That’s it! Simple as that!
Coinbase has competitive fees, slightly lower than Coinmama or CEX exchanges, ranging from 1.49% for standard buy/sell to 3.99% for Debit/Credit buys.
However, you should keep in mind that the aforementioned fees charged by Coinbase are not the only fees you have to pay. Bitcoin transaction fees (the fees that go to miners) have grown relatively high in the past 6 months and you should keep them in mind before you do any transactions.
The Dark side of Coinbase
Natheless, something is rotten in the state of Denmark. Over the past couple of years, Coinbase has received a lot of flak. Whether it be on Reddit or Bitcointalk, forums are filled with complaints day in, day out. Sometimes they are related to user accounts being frozen and the other times acting like banks.
It’s not that we don’t give credit where credit is due. For years Coinbase has served the market more reliably and faithfully than many exchanges, which failed. Regardless, Coinbase has been having its fair share of controversies:
1. Lost payments, double charges, unexplained transactions…
A quick scroll on r/CoinBase/ and you will find yourself in a sea of angry, disappointed, and even scared Coinbase users that have had their run-ins with unresponsive customer support after having their accounts frozen, overcharged, or even emptied out of the blue.
For example, Reddit user nesher269 had $3000 sent to his Coinbase account in two payments, $1500 each. However, due to a “name mismatch,” the funds weren’t delivered to his account — but they weren’t returned to the senders either. “Is there another explanation than a robbery in this case.”, the user asks.
Another Redditor by the name of poego has received partial transaction fees refunds and is yet to be refunded for 11 other double charges adding up to $1000. Needless to say, $1000 is no pocket money by any stretch of the imagination, especially not so when charged for fees.
What makes the problem even more appalling is that the issue of double charging has come up before. Namely, back in May, 2016, one particular batch of transactions made on the platform was affected. Back then customer support representatives went AWOL and didn’t address the issue or give any specific details as if nothing had happened.
A Reddit thread was opened earlier this month by Coinbase staff, saying that the recent occurrences of double charging may be linked to a recent change to credit card classification for Coinbase transactions, although they are “not yet certain whether this is connected to that change”. Well, at least this time they tried, right?
Perhaps even more unexplainable is the problem that Reddit user IamAbc encountered; he took out his LTC, only to find two $400 withdrawals made from his account a week after the original transaction.
“I immediately checked my Coinbase account and I have no transactions since I withdrew. What the hell is going on?”
All of these complaints have been posted on the subreddit in the last 24 hours of writing this article.
Banks won’t issue refunds and kick the ball to Coinbase’s court, Coinbase customer support is either nowhere to be found or responds in the form of automatic e-mail messages, and users are left hopelessly waiting for the situation to magically resolve.
Some members of the community go so far as to recommend class action lawsuits or contacting the authorities.
The very Reddit homepage of the largest digital currency exchange is flooded with complaints, and a simple search in the subreddit using the terms “account”, “frozen”, “suspended” etc. reveals many similar issues that seem to outnumber the positive experiences that people have had with the platform.
Alas, it’s an issue of quality over quantity; it’s not so much about the number of users that have experienced these types of issues — it’s expected of people to be more vocal about their negative experience rather than about their positive ones. Rather, it’s more about the impact these issues have on the financial safety of the users.
Having their Coinbase account suspended, overcharged, or emptied leaves many people worrying about their day-to-day living; some users have complained that because of said problems with their Coinbase account they can’t pay their rent for the month.
2. Too many complaints to handle
Even though the company offers no official numbers, a statistical reconstruction showing the staggering growth rate can be made using Wayback Machine, a digital archive of the World Wide Web:
At the time of writing, Coinbase claims to have to have served over 10 million customers with over $50 billion exchanged. Inevitably, a question poses: has Coinbase successfully adjusted to its rapidly growing community, and does this changing number in any way affect the quality, accuracy or speed at which they deliver their services?
According to a January interview with Dan Romero, Vice President and General Manager of Coinbase, over the past year the company has “increased their support capability 887% by hiring hundreds of support agents […] as a result of significant investments in our infrastructure, staffing and types of support offered”.
Namely, they introduced 24-hour support to customers across multiple time zones and locations, 24-hour, 5 days weekday phone support for customers with trust, safety, ID verification, and limit request issues, an improved knowledge base, and a chatbot to help with general inquiries.
“However, despite scaling our support capability 887%, we are still not consistently meeting customer expectations for response times given unprecedented volume growth.”
It’s humbling to see Romero address the company’s faults so honestly. The percentage that initially falls nothing short of astonishing, and the efforts to offer around-the-clock help sound like enough is being done on Coinbase’s end.
Almost enough to make you want to cut them some slack. That is until you read some of the testimonies of Coinbase users that, in a desperate attempt to get the attention of customer support, ended up opening threads and reaching out to Coinbase staff using Reddit.
One example of the truly dreadful response time you get from Coinbase is the one of Redditor dylonbest: “First attempt to call: 58 minutes Second attempt worked after 83 minutes Total coming to 141 minutes.”
Reddit user munk104 advises people not to waste time calling the customer support line at all, because “all it will tell you is that ‘all representatives are currently unavailable’. Going on three weeks now and have still not been able to make contact with a representative”.
Unfortunately, these stories aren’t simply exceptions to the rule. It seems to be the case that Coinbase customer support has a habit of telling its customers that their issues “have been escalated for further review”, when in reality they aren’t being paid attention to for weeks, sometimes even months to come.
Another Redditor by the name of Shaveandahaircut2b supposedly had his issue “escalated” too; after 15 business days or 24 calendar days, he is still waiting for his funds to transfer.
His example, amazingly, pales in comparison to the one that benbreen posted on Hacker News; benbreen has had to wait for five months (yes, you read that right) for Coinbase to unlock his account so he can access his funds.
Five months in which he repeatedly contacted customer support, and even tried e-mailing and tweeting at the CEO and some of the Coinbase executives. It all fell on deaf ears, however, and he was given the same answer time and time again:
“We’re expanding fast and adding to our customer service team. Your case has been escalated for further review. Please bear with us.”
Sometime after his story reached the front page of Hacker News, a certain “Kyle” from Coinbase reached out to him, saying “I’m so sorry for the delay in our response. We were able to clear your account.”
One can’t help but wonder: if it weren’t for all the negative publicity, was “Kyle” ever going to show up? A simple glance at r/CoinBase/ leads us to believe the answer to that question is “no”.
3. Tracking how users spend their Bitcoins
One of the creepiest things about Coinbase is that it tracks how users spend their Bitcoins.
This is especially problematic if we take into account that the blockchain is immutable and transparent, and as soon as one connects your wallet ID with your real ID, all of the transactions connected with that wallet can be traced back to the very inception of Bitcoin.
To make things worse, Coinbase may freeze or close your account if it finds out you’re dealing with shady stuff like using crypto to pay for stuff on the darknet or you use them on illegal gambling sites.
One of the most recent development closely tied with this issue is the court case before the California federal court in which Coinbase was ordered to report anyone moving more than $20,000 between 2013 and 2015 on the platform, which is estimated to be more than 14,355 users.
For each account, the company has been asked to provide the IRS with the user’s name, birth date, address, and taxpayer ID, along with records of all account activity and any associated account statements.
Coinbase, however, had a different view on the case, stating the following on their blog:
“We are pleased to say Coinbase won a partial victory in court today. Although the Court did not completely quash the government summons compelling disclosure of certain customers’ records from the period 2013–2015 as we requested, we were proud to accomplish two important victories for our customers.
Although we are disappointed not to be able to entirely defeat the summons, we are proud to fight for our customers, and in the result, we were able to achieve as a small company against a large government agency.”
4. Filing for Blockchain patents
Honorable mention of another flagrant transgression: Coinbase’s 11 patent filings for “innovations” related to cryptocurrency, such as: “Bitcoin exchange”, “Send Bitcoin to e-mail address”, “Hot wallet for holding Bitcoin”, and 8 more patent applications filed for in the last two years up until October 26, 2017.
Needless to say, coining such “innovations” is in direct juxtaposition with the open source nature of Bitcoin and the blockchain, it’s an absolute contrast to the philosophy behind the technology and, frankly, just shows poor taste.
The great dilemma
Having read our elaborative guide and you got to know both the good and the bad side of Coinbase, you’re now probably pondering whether you should start using the Coinbase platform. That’s a legitimate dilemma, and the answer to your dilemma is not unequivocal.
We, as the responsible writers and critical thinkers at Unblock, insist on providing you with the full scope of information available at the moment, without swaying your judgment one way or the other.
Keeping that in mind, if you’re already determined that you want to buy some cryptocurrency, you’re going to have to use some brokerage or an exchange platform anyway; so the question is not whether you should use Coinbase, but rather, what other alternatives do you have?
And when we put it this way, the answer is much simpler, when you start researching the other platforms, you’re going to find just as much, if not more bad reviews and customer complaints as with Coinbase, but none of the other platforms can boast about achieving what Coinbase has achieved.
Yes, Coinbase may be dealing with some problems with their products, but so are the other platforms. Everybody in any business is dealing with problems and setbacks, and especially if you’re scaling at the rate Coinbase is.
The important thing to note here is that Coinbase is growing and improving at an exponential rate and they are already the biggest and easiest to use and the most trusted cryptocurrency exchange platform in the crypto industry.
Hope this Coinbase review gave you a clear idea about the digital currency exchange, Coinbase. Let us know what you think in the comment box below.