Coinbase is the second-largest cryptocurrency exchange in the world, in terms of trading volume, that stores your crypto assets while allowing you to trade them on the platform. When a user buys, receives, or stores any cryptocurrency using a Coinbase account, the digital assets are custodied for their benefit in a wallet hosted by the exchange.
The platform supports more than 260 different types of cryptocurrencies, headlined by popular coins like Bitcoin, Ethereum, and Solana. Nevertheless, Coinbase lets users trade the most popular coins, making it perfect for most crypto trading purposes.
All these claims make Coinbase an interesting option for new crypto investors to buy and sell their favorite coins. But the question is whether Coinbase is safe for use and how it handles customers’ crypto assets.
Let’s jump in and explore.
Does Coinbase control my crypto assets by holding them?
Coinbase claims to not take ownership of customers’ crypto assets. The company maintains an internal ledger system that tracks users’ account activity in real-time. As a result, there seems to never be a situation where customer funds could be mixed with corporate assets.
The exchange also does not repurpose customer assets. Neither does it lend or take any action with the assets unless the user has specifically instructed them to do so. While many banks and financial institutions use customer funds for commercial purposes like lending and trading, Coinbase always holds customer assets in a 1:1 ratio.
Is my crypto safe on Coinbase?
Coinbase employs robust measures to secure customers’ crypto assets, including strategically storing a vast majority of the coins offline in a secure, guarded cold storage facility. The company is known for adopting cutting-edge solutions to provide security and stability.
The company utilizes multiparty computation (MPC) technology for generating, storing, and utilizing cryptographic signing keys that protect customers’ assets. Private keys that are constructed and used in MPC are never stored in a single place at once. Rather, each key is generated in such a way that the result is shared amongst two or more parties without any particular party seeing more than its own share.
Transactions are signed without ever bridging the keys together, which prevents attackers from getting to some subset of the machines and extracting key material. Furthermore, having each MPC participant verify transactions, it isn’t possible to bypass protections installed to prevent any misuse of a key.
However, there have been lots of reports of Coinbase users having their accounts drained, but security experts point to SIM swapping as the main cause of these types of incidents.
Conclusion
Coinbase is an easy way for beginners to get started with buying, selling, and trading cryptocurrencies. It has an easy-to-use interface that lets people purchase and sell crypto with a few clicks. While not all crypto tokens are supported by the exchange, you will find many of the most popular ones on the platform.
Bear in mind that Coinbase charges a fee when buying coins on Coinbase, which can be up to 10% of your buy. Interestingly, this is on top of the spread markup already built into the price of the asset on the exchange.
Coinbase is a much easier and safer way to enter the crypto market as the exchange stores customers’ assets on their behalf while implementing the latest security solutions to ensure their safety.
Read More: Is It Too Late To Buy Bitcoin (BTC)?
