Coinbase Review
5 stars - "Coinbase Review" Coinbase Review
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Coinbase Review

Written on: May 9th, 2015 | Author: David M

wire  ACH  sepa

wire  sepa  interac  ACH  paypal

USD  EUR  GBP

BitCoin  ethereum  LiteCoin

Important info
  • Trading Fees :  Maker: 0%; Taker: 0.25-0.1%
  • Order types:  Market, Limit, Stops, Brokerage
  • venture capital:  $105 million
  • Office location :  Boston
  • Insured Accounts:  Bitcoin Accounts, Cash Accounts
  • Email This email address is being protected from spambots. You need JavaScript enabled to view it.
  • US Customers Accepted? :  Yes
  • Institutional Accounts? :  Yes
Pros and cons
  • Insured USD and bitcoin wallets
  • Liquid, low-fee exchange in multiple currencies
  • Integrated Debit Card
  • Can be a bit overzealous when it comes to perceived regulatory commitments

HP

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Summary

Coinbase’s $75m venture funding round in January 2015 dwarfs the financial backing of any competitor, and places company value at $400m. This represents the speculation, amongst a variety of financial industry heavyweights, that Coinbase is best positioned to emerge as the leading regulated bitcoin exchange both in the US and globally. 

Coinbase has been busy leveraging their deep pockets to create what is, in our opinion, the best and most complete product on the market. The Coinbase exchange, initially launched in the US, has expanded its services to 26 additional European countries, and now includes very liquid euro and pound sterling  trading markets, which are characterized with the same narrow spreads and low fees as the dollar bitcoin exchange.  

All bitcoin are insured against theft, and USD wallets are FDIC insured. As we will describe in just a moment, the Coinbase wallet sets the bar in the exchange marketplace, offering users the ability to store bitcoin in their own personal cold storage vault, with configurable multisignature capabilities. Users in the states are able to link their bank accounts to coinbase, allowing for free deposits and withdrawals. Coinbase’s European-based bank allows for SEPA transfers, while UK users are now able to deposit using 3D enabled credit and debit cards, alongside standard bank transactions.

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Coinbase is not an anonymous exchange, and this rankles many bitcoin purists. Coinbase works hand-in-hand with regulators to ensure a safe, regulated product for consumers. While this is great to encourage wider adoption and the gradual mainstreaming of bitcoin, it means that Coinbase is committed to ensuring KYC/AML standards are strictly adhered to, not to mention that the exchange is not used to facilitate activities viewed as illicit. For most, this is not a problem. If you are looking for an exchange to facilitate transactions in dark markets, or circumvent gambling regulations, or you like to send your coins to a mixer, look elsewhere (or at least, use a third-party wallet as intermediary).   

Coinbase has been quickly developing its product. We believe they are a short step from disrupting a number of different markets. It could be that, with all the talk of the need for a killer bitcoin app, one has been hiding in plain site.

The Coinbase Wallet

In our view, the Coinbase wallet provides the most robust security in the exchange marketplace.  According to Coinbase and confirmed by independent audit, over 97% of coins are held in "cold” storage, which might be compared to a bank safe.  The private keys responsible for authorizing cold storage transactions are fragmented between paper and offline hard drives, split amongst different locations, with backups should any storage points be compromised or key fragments lost.  

Coinbase provides users a robust set of security features to protect against client-side malware attacks.  Two factor authentication is is available upon login and withdrawal, and can be customized to trigger only over a predetermined maximum daily transaction limit.  Passwords are hashed and encrypted server side.  

The Vault

Individual users are offered a multisignature cold storage solution called "the vault".  One key is stored on the Coinbase server; the second is a shared key, which is generated client-side and encrypted with a user's password.  This key is stored locally by the user and encrypted with Coinbase.  The third key is a user key, which must be securely stored on the client side, preferably offline.  Any two of three keys can authorize a transaction.  Additional email approvers, like a spouse or business partner, may be added at the account holder's discretion.  After a transaction is signed, a 48 hour withdrawal delay applies to ensure the vault has not been compromised.

Gravitas

Coinbase has a solid executive team and unparalleled investment backing by some impressive mainstream financial establishments.  Coinbase’s licensing within 23 states as a money transmitter (plus a few more where money transmitter licenses are not deemed necessary) required and continues to require, among other things, audits of financial operations, fiat and bitcoin reserve management and comprehensive background checks of all executive management, at a level to which few other exchanges have submitted themselves.  Coinbase has opened the books to regulators preoccupied primarily with consumer protection, and the regulators have been satisfied to grant the licenses.

Coinbase is insured against theft or hacking on all amounts above and beyond what  is held in the hot wallets.  In the event of a hot wallet breach, Coinbase can easily absorb any loss without having to dip into their $100m plus war chest.  Should there be a cold storage breach, funds are insured.

Long and short of it is, from a security and best practice perspective, there is no better operator than Coinbase.

 [open account]

Opening an Account

Please find below the verification requirements for bitcoin trading at Coinbase.

  Tier 1  Tier 2 
Verification requirements Email, phone verification, bank verification Address, last four digits of social security number, complete a purchase and wait at least 30 days, finish identity questionaire
USD $3,000 $10,000 daily and instant buy privileges
EURO Wallet Only €2,000, €30,000
GBP Wallet Only £2,000, £30,000

Once your account has been verified, Coinbase offers the following deposit options to users:

    USD  EUR GBP   CAD
Payment  Speed Deposit Withdraw Deposit Withdraw Deposit  Withdraw  Deposit Withdraw
Bank Wire One day No Fee $30 No Fee €30 No Fee £30 No Fee $30
ACH  3-5  days Free  Free            
SEPA 1-2 days     €5 €0.15        
Debit / Credit Instant         3%      

Coinbase offers US traders an instant trade option meant to compensate for the slow ACH transfer time.  Coinbase will advance up to $1,000 a week in bitcoin against pending ACH transactions.  To activate this option, users must input their credit card details, which protects Coinbase against users reversing the transfer after claiming the instant advance.  At this time, only Visa and Mastercards associated with a US-based address are eligible for the program.  

Residents of the UK and Spain are now offered an instant Credit and Debit card deposit option.  We assume this will be rolled out to additional European countries in due course as well.  Cards must be 3D enabled, or the transactions will be declined.

USD, EUR and GBP wallets

Coinbase offers dollar, , euro, and pound sterling wallets.  While all the fiat wallets allow access to the Coinbase Exchange, only the USD funds are FDIC insured.    

The GDAX Exchange and Brokerage 

The standard Coinbase broker service offers an extremely simple and intuitive interface.  Bitcoins can be purchased directly from a users fiat wallets and deposited directly into a user's vault or hot wallet.  Bitcoin sales pay out directly to fiat wallets.

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As of August 2015, the GDAX exchange is offered in 29 US states, shown below in light blue, and 26 European Countries, shown in green:

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The trading platform is well put together, with a growing number of order types available.   The order slip sits to the left of a price chart, complete with line and candle charting and variable time frame .  Both the order book and trading history are displayed to the charts left and bottom, and a separate accounts tab offers order history.

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In the approximate six months since launch, the GDAX Exchange has grown into one of the highest-volumed bitcoin exchanges in the market.  It has invested much resource in expanding services and features, integrating market and time in force orders, as well as btc/cad, btc/eur and btc/gbp markets.  We expect additional improvements in the coming months.

Coinbase Fees

Transaction Type  Fee
Brokerage  1% 
Exchange - Maker 
Exchange - Taker  0.25% 

Merchant Instant Exchange, in which bitcoin sales are instantly converted to fiat, are charged the 1% brokerage fee.  Maker fees are those which are not instantly filled - namely, a sell order higher than the best offer or a buy order lower than the best offer.  Taker fees are always charged to market orders.

Coinbase recently introduced a rebate program which returns a percentage of taker fees collected based on a users monthly trading activity.  The rebate is determined by the percentage of the exchange's total volume contributed by the user, according to the following table:

Percentage of 30 day trading volume contributed  total fee paid 
.25% 
>1%  .24% 
>2.5%  .22% 
>5% .19%
>10% .15%
>20% .10%

Rebates are distributed directly to a trader's account each day at 24:00 UTC, with the percentage of fees determined according to the previous 30 days trading activity.

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Coinbase IOS and Android

Coinbase has a fantastic mobile product, with arguably the best apps appearing in both the IOS and Google Play stores.  The apps allow all the functionality available on the web-based brokerage client.  Initial sign up requires two-factor authentication and email verification.  There is a pin locking and app disable feature to protect users if the device is lost or stolen.  

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Coinbase API

The Coinbase API allows for full access and functionality of an exchange account through a third party app, product or service.

Apps: Coinbase offers developers the ability to integrate the full suite of Coinbase services directly in support of their products.  A number of innovative apps have been set up using the API, including the popular Gliph, which offers secure group messaging and bitcoin transfers, and Changetip, an app allowing internet "tipping" through a number of different methods including facebook, twitter, email and SMS.
Merchants:  For merchants, API integration allows acceptance of bitcoin at the point of sale, which are routed directly to a coinbase merchant wallet and can be converted, at a 1% fee, directly to fiat.
Traders: Traders can generate an API key and secret from settings-API access from the main navigation window.  The key can be used to allow trading directly through the coinbase account on third party trading programs, or to utilize "trading bots", which automatically buy and sell according to a (hopefully genius) trading algorithm.

Coinbase Support

Support is professional as one would expect from Coinbase, with a 24 hour response SLA on email queries, usually much quicker during the week.  There is instant chat available that seems to operate according to US business hours.  You may post a public question -  I’m not entirely sure of the value in this, perhaps the answers to these questions inform their FAQ section which is meant to alleviate the need for direct contact.  

Bottom Line

Coinbase is an incredible product, backed by professional management and infrastructure.  It represents the mainstreaming of bitcoin, to the delight of some and the dismay of others.   Coinbase’s ascendence in the US conjures images of Wall Street trading, of winklevoss twins launching ETFs, of hedge funds investing and bitcoin growing in value and importance.

From a security standpoint, there is no safer place to hold and trade funds.  The financial clout, reserve management and cold storage insurance insures that, in the unlikely event of a breach, Coinbase will have no problem compensating customers.  The vault services also protect users from the much more likely client-side malware attacks that could result in lost coin.

As we mentioned in the summary, Coinbase sits very firmly in the bitcoin establishment camp.  They work closely with regulators, and have been criticized in the past for being a bit overzealous.  For instance, users have reported having their accounts closed for transferring funds to gambling site.  While some might take issue with the policy, they cannot claim ignorance - the policy has not been kept secret and is publicly described.

After reading through our review, we hope  you will agree with our wholehearted recommendation of Coinbase.  As far as we are concerned, this is the best product in the market.

Visit Coinbase

 

Bitcoin Price (USD): 853.48