Post Menu and Details.
- Can you store cryptocurrencies on Coinbase?
- How does Coinbase's wallet app work?
- Why you should use Coinbase wallet
- Let's take a look at them:
- Some Considerations
- Closing Thoughts
Reading time: ~4 minutes
If you have even just a passing interest in cryptocurrencies, then you’ve probably heard of Coinbase.
Founded in 2012 by former Airbnb engineers; Brian Armstrong and Goldman-Sachs banker Fred Ehrsam, Coinbase is an American cryptocurrency exchange.
The company operates 100% remotely and does not have an official headquarters. It also has the distinction of being the largest cryptocurrency exchange in the United States by trading volume.
Currently, Coinbase features more than 3,000 types of crypto assets and according to this link, they are one of the top 10 crypto wallets. From Bitcoin to Ethereum and Terra to Solana, if it’s crypto, then chances are it’s already on Coinbase.
Besides cryptocurrencies, the company also has plans to trade NFTs or non-fungible tokens on its sister website Coinbase NFT. Coinbase NFT is a peer-to-peer marketplace that allows users to mint, showcase, and trade digital art.
Can you store cryptocurrencies on Coinbase?
As a cryptocurrency exchange, Coinbase allows users to store their holdings of assets on its website – hence providing them with quick and easy access to their cryptocurrencies.
Better yet, there is also a Coinbase app available on iOS and Android. That way, you can also manage your crypto assets with a mobile device. Storing your cryptocurrencies on Coinbase also means you won’t have to worry about managing private keys.
Simply put, private keys are extremely large numbers used to generate digital signatures – this allows ownership of cryptocurrencies to be verified without revealing vital private details. Private keys are also used in cryptocurrency transactions to provide proof of ownership.
How does Coinbase’s wallet app work?
While Coinbase’s app is a perfectly secure way of storing cryptos, the company also provides users with a dedicated wallet app for storing cryptocurrencies. Coinbase wallet is separate from the company’s website, and your cryptos are stored in another location.
It operates as a hot wallet that provides you with easy access to your crypto assets. Hot wallets are 100% online crypto wallets that provide users with easy access to their crypto holdings.
Why you should use Coinbase wallet
Although Coinbase is a solid crypto platform, there are several benefits to storing your assets on Coinbase’s in-house wallet.
Let’s take a look at them:
Your coins are yours
Storing your cryptocurrencies on Coinbase’s wallet means that your assets are indeed yours.
But, what is this supposed to mean? And why does it matter?
Simply put, when you store your coins in a Coinbase wallet, your cryptocurrencies are not kept within Coinbase’s holdings. Instead, your assets are stored separately in another holding.
And this is especially important because it protects you from a number of risks.
First of all, if Coinbase were to get in trouble with the authorities, cryptos stored within the company’s holdings could be seized or frozen. And if your cryptos happened to be a part of those holdings, you could find yourself out of pocket with no access to your crypto assets.
But if your assets are stored in a Coinbase wallet, your crypto assets cannot be seized by the authorities. That’s because the assets are indeed yours.
Secondly, as Coinbase is one of the largest crypto exchanges in the world, it’s a favorite target of cybercriminals and thieves. Thus, storing your cryptos on Coinbase’s website can be pretty risky.
Coinbase wallet is a dedicated hot wallet
While using Coinbase Pro as temporary storage is fine and dandy, it’s always better to use a dedicated hot wallet. And even though Coinbase has a solid track record, don’t forget that there are plenty of crypto exchanges that have bitten the dust and left their clients with nothing.
Rather than relying on a crypto exchange to store your assets, it is more prudent to rely on a dedicated hot wallet like that from Coinbase to secure your cryptos.
As an added plus, the Coinbase wallet can interface with your bank account for greater convenience. That way, you can use fiat currencies such as the USD to purchase cryptos or other assets.
It has a Secure Enclave feature
Given the decentralized nature of cryptocurrencies, security should always be at the forefront of everything you do. With the Coinbase wallet app’s Secure Enclave feature, users can rest assured that their holdings are well taken care of.
Secure Enclave safeguards your crypto’s private keys and prevents unauthorized access. All of this is made possible thanks to the device’s range of security features such as SMS authentication and two-factor authentication (2FA).
Finally, the Coinbase wallet markets itself as a “user-controlled, non-custodial product,” meaning that the Coinbase wallet will never have access to your password and recovery phrase. That way, you minimize the risks of third-parties getting access to your cryptocurrencies.
And if you lose access to your wallet, Coinbase wallet provides users with a recovery phrase that allows only you to transfer any received funds.
Hot wallets such as the Coinbase wallet app are a safe and secure way to keep your cryptocurrencies safe. However, it would be best to keep in mind that these methods are not infallible. Instead, spread out your holdings as much as possible and not rely on a single storage platform.
If you have substantial crypto holdings, consider investing in a cold wallet. Rather than online storage, cold wallets store your crypto keys offline on an external drive. Hence, making it impossible for hackers to gain access to your crypto encryption keys.
As an added plus, you can also physically secure your cold wallet in a lockbox, safe, or safe deposit box.
A word of warning, though: if you lose your cold wallet or damage it, you cannot recover any of the data on it. So instead, always make sure to have backups available and stored in different locations.
While cryptocurrencies are one of the most exciting assets in recent times, they are also extremely risky.
Hence, if you intend to invest in them, be prepared to take steps to keep your assets safe. Besides storing your cryptos on a hot wallet, you should also consider using hardware wallets.
Thank you for reading!