One of the most controversial exchanges in the cryptosphere is undoubtedly Coinbase. They're the worlds biggest crypto exchange and many people view them as the "Goldman Sachs" of crypto, but others view them in a much more positive light.
Coinbase is the largest crypto exchange in the world and at several points, they were the number app in the iTunes app store. Which is unheard of for a financial investment platform.
It's pretty clear that these guys are going to shape the way Crypto comes to the masses so let's dive deeper into their technology, team, security, and finally how difficult the registration process is with them.
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Coinbase started with Brian Armstrong (current CEO) and Fred Ehrsam exchanging a few emails after one VC told Brian that he should get a co-founder. It's rumoured that Brian posted his vision for Coinbase on Reddit and Fred was intrigued enough to reach out.
Coinbase is a graduate of famous Y Combinator incubator run by Paul Graham and raised $5 million from Union Squares Ventures right at the beginning - another big VC.
So just from that, you can kinda see why some people may not like the idea of an exchange being heavily invested into by venture funds, no matter how successful those funds have been in picking future visionaries.
Early investments are often needed for that starting push and there are many signs that say Ethereum has succeeded greatly because of them being in Coinbase, and we all know what Ethereum helped popularize... The ICO!
As far as trading pairs go in Coinbase, you've got 4 and they all denominate in FIAT currencies. Coinbase is largely considered the gateway into Crypto so their entire ethos is to trade purely fiat to crypto trading pairs.
For now, you can purchase (for now) Bitcoin, Ethereum, Bitcoin Cash, & Litecoin through Coinbase. There's plenty of speculation for which coin they'll be adding next and here's our thoughts on that.
In 2017, Coinbase announced their user accounts have grown to 13 million and at that point surpassed Charles Schwab in accounts. So you can see why their user base is hungry for more pairs to trade.
Although Coinbase has a ton of liquidity, the worst thing about their platform is the lack trade execution choices. Everything is a market order so you're buying at whatever price is there - which is very risky. Most trading platforms have limit orders available, but this simple "mistake" really shows you their focus on being a purely retail focused exchange.
That's a picture of Coinbase's fees and as you can tell - they're pretty high. A whopping 4% for nearly every buy and sell is definitely a negative.
Note: As a sidenote, Coinbase also runs another trading platform called GDax which has lower fees and a better order system (limit orders, stops, etc.) so if you want to transfer out of Coinbase - try transferring over to GDax first since it's free and then take your funds out through there.
This is the biggest thing for any exchange, period. Nobody in the crypto space wants another Mt. Gox or Coincheck hack.
For any exchange, you want to be mindful of previous hacks, two-factor authentication, and how centralized the trading accounts are.
Coinbase hasn't been hacked (as of this date) and they do allow for two-factor authentication as well. You've got options for SMS (least safest), the Authy App or Authenticator (most secure).
Unfortunately, exchanges right now are mostly centralized. Coinbase has mentioned being extremely against centralization as part of their currency evaluations, but on the other hand - they themselves are a centralized exchange.
This is for good reason though. Without being a centralized organization, they can't raise capital and also can't be an easy gateway for fiat-to-crypto exchanges. It's impossibly actually.
Although Coinbase is doing their best to backup accounts through paper wallets - it's actually not as safe as transferring funds into your own offline wallet. If you're looking for a good hardware wallet, we recommend the Ledger Nano S. Here is our review of it.
Coinbase also adds a bug bounty program as well and this gives white hat hackers the opportunity to gain financially for finding discrepancies in their cybersecurity system.
Here's a look at the rewards they're offering:
To provide some more value to you guys, we reached out Dmytro Budorin of Hacken.io for their thoughts of on Coinbase's security:
The service is positioned as the world’s largest Bitcoin exchange broker. Public reputation is high, it officially reports to IRS all users who have bought, sold, sent, or received more than $20000 through their accounts in a single year. On December 09, 2017 the Coinbase app became the most downloaded application in the Apple App Store.
But there is no direct description of quotation policy publicly revealed on the service`s website. We can just make an assumption that all transaction are executed through the GDAX exchange because Coinbase quotes are very close to GDAX`s ones, so we can come to a conclusion that all transaction supposed to be performed at this exchange and Coinbase adds some variable broker spread and charge 1% transaction fee. From the other side, GDAX also does not have clear quotation policy revealed. This, definitely, not transparent quotation process leave the possibility for quotes manipulation which can harm investors and traders deposits.
Besides, the full order book view is not available at GDAX, which raises liquidity concerns. It is a very important issue, without continuously provided high liquidity investors and traders will not be able to buy and sell coins at the target price and volume. Adding the fact that all the digital assets are stored at Coinbase or GDAX accounts not direct clients` ones we can hardly check the real liquidity level of the service. All this creates risks of the possible fraudulent behavior of these related parties which consists a single service system.
Cybersecurity level of the service seems to be high to the extent which can be assessed by the external IT infrastructure test. But it is not a notion due to the well-known fact that Coinbase actively uses its Bug Bounty Program and pay pretty generous rewards from $100 to $50000. This program allows the service to discover and resolve bugs before the general public is aware of them, preventing incidents of widespread abuse.
Coinbase likely takes the crown for this one. Especially for newbies entering into space. I'd say to get setup on Coinbase takes about 10-15 mins and it's one of the few exchanges that allows for credit card transactions.
Their Know Your Customer and Anti Money Laundering process is very straightforward. If you've signed up for a stock trading account before, it's very similar but in most cases a lot less info is needed.
Some people are against KYC and AML because it leads to less anonymity but unfortunately, exchanges dealing with fiat are bound by the laws of the government. This isn't necessarily a bad thing, it's just how it is right now.
Support for Coinbase is slow, but they're their user count is growing quickly so this is expected. However, they continue to raise capital and hopefully, that capital is being balanced with security investment and also customer service.
32 countries are being supported by Coinbase right now, but unfortunately, if you're in Canada or Australia - you'll only be able to purchase from there. Not sell.
But Canada and Australia have plenty of exchanges beyond Coinbase so it's not impossible to exchange back to fiat and is probably easier to get done than most countries.
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Beyond the founding team, Coinbase's management team size is unclear. Not that it really matters as we know they're making quite a bit of money from fees and fundraising, and that's enough to hire some bright people.
AngelList mentions a total of 43 people working there, but we know that list is old because they still have Charlie Lee (Litecoin's creator) still on there.
Asiff Hirji and Brian Armstrong are probably the most significant leaders of the company. Brian being a founder is important to their overall vision and PR, while Asiff is the former COO of TD Ameritrade.
At the beginning of 2018, Coinbase added Tina Bhatnagar who's claim to fame is from Twitter and she plans to double the size of Coinbase's support team by the middle of the year. Also, plans for 24/7 phone support is in the works. So we'll see if she can accomplish these milestones.
The management team's experience is one thing, but how they handle their public relations is also very important.
Armstrong is quite active on Medium (considering his position) and recently Coinbase ran an internal investigation for insider trading because of their recent addition of Bitcoin Cash - which jumped up from $630 to over $4000. This gives you an idea of how powerful a trading position prior to Coinbases new crypto additions can be.
To evaluate a teams PR, you need to look at their handling of negative news, openness, awareness, and the management's reputation. With Coinbase's size right now, it's pretty hard for them not to attract news very easily. So far, they've done a fair job in all this. I'd say their openness is good enough considering all things.
How To Sign Up To Coinbase
If you haven't signed up with them yet, let's walkthrough quickly how you can do it in a few minutes. I've opened tons of trading accounts and this was by the quickest.
1) Create your account and wait for the verification:
2) Add your credit card, verify a small deposit on your card from Coinbase, then make your first purchase:
Final Thoughts on Coinbase
Coinbase is a solid way to kick off your crypto investing. Although the fees are extremely high, their ease of use makes it easy for someone to quickly get setup and into the crypto world in 10 minutes. At the moment of writing this, Coinbase hasn't been hacked and their security measures are top notch. Not to mention their funds insured as well so it's a good choice for beginners and experts.