Many bitcoin related websites have come and gone since the introduction of the most popular crypto-currency back in 2009. As a result, you have to ask yourself, “how secure is an online bitcoin wallet?” and “which online bitcoin exchange should I trust?”. This Coinbase review, will outline the reasons I recommend the service as the most secure way for non-technical folks to get started with bitcoin, and enter the brave new world of math-based currencies.
As you may or may not be aware, there are many other online exchanges where you can convert traditional fiat currency into Bitcoin. What makes Coinbase unique? Having signed up for several other exchange services, I found Coinbase to be the best choice for anyone looking to buy bitcoin in the US for the following reasons:
1. Implementation of ‘Best Practice’ Security Methods
The folks at Coinbase realize that handling large volumes of currency (whether fiat or crypto) brings with it the very real risk of theft and transaction fraud. Accordingly, they have adopted some excellent security measures that go above and beyond most banks’ practices, to put your mind at ease if you choose to do business with them. Here are just a few that differentiates them from many other bitcoin trading platforms:
- 2-factor authentication: This essentially requires you to use your smartphone as the second ‘factor’ in addition to your username/password combination to gain access to your account. You can learn more about 2-factor authentication in this Wikipedia article. I would highly recommend it for your other online accounts as well.
- Offline Storage for 90% of Bitcoins: This is where Coinbase really takes security seriously. The majority (ie 90%) of Bitcoins they hold at any given time aren’t even accessible to online users, preventing a massive theft, even in the unlikely event of a successful hacking attempt.
- Forced secure passwords and hashed passwords: While 2-factor authentication isn’t a requirement to use Coinbase, they do check for strong passwords and hash all passwords using bcrypt, an industry standard.
- Background Checks on all Employees: Similar to bank employees, this is a requirement for employment at Coinbase. Which leads us to our next reason to choose Bitcoin.
2. A US Based Company
Based out of Seattle, WA, home of stalwart tech companies like Amazon and Microsoft, Coinbase has to comply with all the rules governing money exchanging and any new requirements the US federal government adopts, to protect consumers in the use of crypto-currencies.
3. Payment Processing with 0% Transaction Fees
What you may not know is, besides exchanging USD for Bitcoin, Coinbase is also a merchant payment processor. Essentially, this they are a ‘Paypal’ for Bitcoin. So, if you have a shop on Etsy, for example, and want to accept Bitcoin as a payment method, Coinbase enables this. Best of all? The first 1 million dollars of transactions are completely free! No more Paypal or credit card fees.
4. Coinbase Pays You When You Share Their Service With Friends
Full disclosure, if you decide to sign up with Coinbase through the links on this website, Coinbase sends a small fraction of a bitcoin to me as a way of saying ‘Thank You’. Once you have an account, a simple referral link from your Coinbase account allows you to do the same when you refer friends and family. What’s not to like?
5. The ‘Mom Test’
Working in IT, I come across new technologies and online services every day. I only recommend the best of these technologies and services to my mom. You know, services like Gmail, Facebook, Amazon Prime or Skype? Coinbase slides neatly into that category and I’ve recommended it to my own mom as a way to acquire a few Bitcoins of her own and maybe even set up payment processing with Etsy if it takes off as a popular payment method. If a service passes the ‘mom test’, you know it is probably worth looking into.
5. Drawbacks – An Honest Coinbase Review
An honest coinbase review would not be complete without examining the risks and drawbacks. So, are there any caveats or reasons NOT to use Coinbase? I could only think of a few:
- No FDIC insurance: Unlike your bank account, and this applies to any crypto-currency exchange, the US Federal Reserve doesn’t insure your deposits. When you enter the world of Bitcoin, you become your own bank, and that includes securing your Bitcoins to the best of your knowledge and ability. Here’s some additional information on Bitcoin security.
- No Limit Orders: A limit order allows you to purchase x amount of a currency, stock or commodity at a set price limit. For example, if I see that the 24 hour low for USD to Bitcoin exchange is $144 and the current price is $154, I could set a limit to only buy 10 bitcoin at the limit price of $145 or cheaper. Unlike most stock brokerages, Coinbase doesn’t allow you to set a limit order. Maybe they’ll read this article and add this feature? One can hope.
- Deposit and Withdrawal Times: This is actually a limitation of the ACH system if you use this method of purchasing Bitcoins. Any buy or sell transaction will take 3-5 days to clear before you can access the currency you’ve traded into; whether USD in your bank account or Bitcoin in your Coinbase account.
As a very satisfied customer of both the exchange and merchant payment processing services for several months now, I would recommend Coinbase as an excellent and proven way of transacting business in the world of Bitcoin. And, since you’ve read this far, if you sign up through that link, Coinbase will give you $5 worth of Bitcoin to get you started. Not bad, right?
Feel free to share your opinion of the service, as well as any other Bitcoin exchanges you have had a good experience with in the comments below.