Coinbase is perhaps the most popular method for people to exchange their fiat currency into cryptocurrencies and vice versa. It has been around for many years and is very straightforward to use, which means that it is friendly for beginners.
Coinbase is also a wallet platform that allows people to purchase and sell the likes of Bitcoin, Ethereum, Litecoin and Bitcoin Cash.
They are based in San Francisco, California and they have more than 7.4 million users on their platform. This number is rising by the day as cryptocurrency becomes more and more popular. Coinbase underpin the market after having been in business for the past five years.
If you are interested in participating in cryptocurrency trading, the first step is to identify what platform you are going to use in order to do so. While the likes of Bitcoin are decentralized, you still need to use an intermediary for the most part when you are dealing with communication between you and the network.
As a lot of people starting off in the space do not have much of a technical background, the likes of Coinbase offer a convenient solution.
What exactly does Coinbase offer?
Coinbase is categorized as being a global digital asset exchange firm which offers an environment where you are able to both purchase and sell your digital assets as you see fit. When these transactions are made, the platform will send this info to the network so that the transactions can be verified.
Coinbase can also be used as a wallet where users can store their cryptocurrency holdings. However, storing significant sums of funds in this kind of wallet is not recommended as there are safer alternatives.
If there is an attack on the platform, you could very easily lose all of your funds from your account. Generally, the safest way in which you can store your crypto funds is by investing in a crypto hardware wallet.
A hardware wallet is a physical device somewhat similar to a USB stick and is completely disconnected from the internet. This means that nobody will be able to hack into your device and steal your funds. They are also resistant against malware so they cannot be infected if they are plugged into an infected device.
In addition to the likes of Bitcoin, Bitcoin Cash, Ethereum and Litecoin that Coinbase caters for, they also allow you to purchase these digital currencies by using fiat currencies from about 32 countries, as well as facilitating the process transferring Bitcoin in many more nations.
Coinbase are growing their customer base by the day and easily have more than 10 million users, as well as being the medium of exchange for over $6 billion worth of crypto-related funds.
If you are interested in the process of trading digital currencies but are not interested in taking the time to get to know the intricate details of the underlying technology, the likes of Coinbase are a great way for you to get started in the market. This opens up a new avenue to you in the form of currency investing and speculation.
There are some drawbacks to using the likes of Coinbase compared to making your trades directly through the blockchain. With Coinbase, you will have your name linked to your account, as you need to upload some form of government-issued identity in order to open an account.
You will often also have a bank account attached to your Coinbase account, which means that there is a paper trail and you are not going to be able to remain very anonymous.
You also have to place your trust in the intermediary and rely on them to properly verify transactions and prevent any issues from occurring along the way.
How to buy and sell digital currencies when using Coinbase
If you are interested in the process of buying digital currencies with Coinbase, you will have to add funds by linking a bank account, debit card or credit card. If you link a bank account, you will be able to have higher limits than if you were using a credit card to add funds.
There is a downside to using a bank account to add funds as it will take longer to have transactions verified and it will take more time to have your funds processed into your Coinbase account.
Depending on the situation with your specific bank, you could be waiting anywhere between two and four days for these funds to be added into your account. The same goes for when you have sold the cryptocurrencies and you have withdrawn the resulting funds to your bank account—it will take a few days for it to show up in your bank account balance.
The limits for debit cards and credit cards are lower but you will have the ability to enjoy much simpler and faster times when it comes to making transactions. Credit and debit cards will be processed almost instantaneously so you are able to start buying straight away.
There is even an option to cash out by using your PayPal account whereby the digital currency will automatically be exchanged for your local fiat currency. While the technology behind cryptocurrencies as a whole is complex, the process of speculating and investing has been made very straightforward thanks to the likes of Coinbase.
The process itself is even more straightforward than buying and selling traditional stocks. You will be shown real-time prices for the relevant digital currencies that you are able to buy and sell for.
The process of buying and selling digital currencies on Coinbase is very straightforward: you simply select how much you wish to buy or sell and complete the transaction. It’s as simple as clicking a few buttons.
There are of course going to be transaction fees charged by Coinbase, both when you are buying and selling digital currencies. The rates will vary depending on which country you are located in, with the transaction fees for Canadian residents currently being around 3.99%. There may be some additional fees added on depending on what sort of payment method is used.
For the most part, there is no fee charged by Coinbase when it comes to their wallet service. If you are transferring digital currency towards an address that is not hosted on the Coinbase platform then there will be transaction fees, such as those for Bitcoin miners.
When you are making a transaction, you will see exactly how much fees you need to pay before you confirm the transaction.
The exchange rate that determines what price you will get for your fiat currency and vice versa depends on the current market rate of the given currency on the Coinbase platform, with a spread of 0 to 200 basis points also being added depending on a number of factors.
These factors include how large the transaction may be, how long you have been using the Coinbase platform and how volatile the markets may be. On very rare occasions, there may be an outage or some form of maintenance on the network which means that there will be no given market rate. This will then lead to the market rate being taken from other digital exchanges that are not affiliated with Coinbase.
If this is the case, the spread will be around 100 basis points. Depending on where you are located and what payment method you are using there may be different conversion fees.
How do you sell your digital currency as a Canadian resident on Coinbase?
You can sell your Bitcoin or other forms of digital currency that are catered for on Coinbase through Canadian Dollars and through an approved withdrawal method, such as bank transfer.
To do this through a web browser, you need to go to the “Sells” page. Here you need to enter the exact amount you want to sell and then you can click on the wallet that you want to sell it from (such as your Bitcoin wallet).
You then need to select where you want to deposit these funds to (your bank account if you want to withdraw these funds). If you want to withdraw everything, the easiest way to do so is to simply select the “Sell Max” button. You then should double-check that all of the details are in line with what you want to do before confirming the transaction.
You can also conduct this process through the Coinbase smart phone app, which is available for Android and iOS. You should open the Coinbase app and then click on the menu icon which can be found towards the top-left corner of the screen. This will cause the Navbar to open.
You should then choose the “Sell” button on the Navbar. Enter the exact amount you want to sell and then decide which wallet you are going to sell this amount from.
The next step is to decide where you want to send these resulting funds to, such as your bank account. Finally, you should review the details of this sell order before submitting the transaction. At the moment, there is no way for you to withdraw funds to your debit card or credit card.
Coinbase has recently moved to stop people from linking new credit cards and some of the main card issuers have even decided to block purchases of digital currencies even if the credit cards are already linked to an account.
This is why customers usually are encouraged by the platform to use their debit cards instead. There were a lot of people getting into serious credit card debt by using their cards to purchase digital currencies which did not end too well for a lot of parties. There may also be much bigger fees associated with the use of a credit card when compared to the other options.
Insurance and security on Coinbase
To help you keep your digital currencies safe on the Coinbase platform, they keep 98% of all user funds offline. This cold storage means that hackers cannot get access to these funds, which helps protect users’ assets.
Coinbase outlines on their site their mission to ensure that sensitive data is kept completely disconnected from the internet. All data will be encrypted, transferred onto a USB drive or a paper backup and then spread out in various safety deposit vaults all across the globe.
The remaining 2% of customer funds left over will be kept online and there is insurance cover in place in case the storage of these funds is ever compromised in some way.
Coinbase ensures that they have significant sums of fiat currency kept in bank accounts across the world also for their customers. Therefore, if you are storing some fiat currency on the Coinbase platform, there will be FDIC insurance in excess of $250,000. This means that in the case of Coinbase turning insolvent, your funds up to this amount will be guaranteed.
However, if you are storing significant sums on Coinbase, you should think about safer alternatives to keep your funds safe. There is a Coinbase vault service where there are time-delayed withdrawals in place which means you are able to cancel a withdrawal within 48 hours of it being made.
You are also given an option of allowing there to be multiple approvers for a transaction, which means that it is a lot harder for hackers to steal your funds. There is a multisig vault which needs several keys in order to access it.
As mentioned previously, while all these security features are well and good, you should try to avoid keeping significant sums in the safe keeping of third parties. A better option is to have your own form of cold storage that you can keep safe and sound and have the peace of mind that hackers can’t reach it.
Small point to remember
As a result of blockchains operating by having the transaction history verified, which is a process that can be slow and intensive, there can often be clogs in the network which results in limited transactions being verified a certain period of time.
If you try to sell your Bitcoin on Coinbase but the blockchain network has yet to confirm the transaction and you notice that the currency price changes during this time, there is no way that this sale will then be processed. The Bitcoin will need to be sold at the new rate.
Just like with any form of speculation or investing, you need to be very careful and be fully aware of all the different variables and risks that are present.