Update on the recent Bitcoin hard fork (August 2017): Both Bitcoin and Bitcoin Cash remain safely stored on Coinbase. Customers with balances of Bitcoin at the time of the fork now have an equal quantity of Bitcoin Cash stored by Coinbase. They are planning to offer support for Bitcoin Cash by January 1, 2018. Once supported, customers will be able to withdraw Bitcoin Cash. In the meantime, customer bitcoin cash will remain safely stored on Coinbase.
Founded back in 2012, Coinbase was one of the bitcoin startups which received quite a bit of press in various mainstream news outlets and crypto currency documentaries. Based in San Francisco, the company enjoys the backing of a number of high-profile venture-capital firms, and its activity covers some 33 countries. Coinbase is highly popular in the US and also gets significant traffic from the UK, Spain, France, Italy as well as other countries. It offers digital currency wallet services, as well as the possibility for retail customers to purchase and to sell virtual currencies such as Bitcoin and Ethereum.
Reviewing Coinbase is something of a rather delicate balancing act. On one hand, it is definitely a legitimate bitcoin brokerage. In fact, it may just be the largest such brokerage in the world and it doesn’t just trade in bitcoin. It supports Ethereum and Litecoin as well. On the other hand, it has a downright toxic reputation and part of the bitcoin community calls it the “biggest evil” ever to befall the virtual currency world…
The current address of the Coinbase headquarters is 548 Market Street #23008, San Francisco, CA, 94104. The company does not currently offer phone support, and they haven’t made a contact phone number public either.
In this review, we shall attempt to paint as clear a picture of the operation (the good, the bad and the ugly) as possible. Let us first take a closer look at how it all got started and how it overcame the initial funding woes.
Founded by Fred Ehrsam and Brian Armstrong, Coinbase secured several rounds of generous funding by various venture capital firms. These firms included Union Capital Ventures, Andreessen Horowitz and Ribbit Capital. The 1 million user mark was reached in 2014. Nowadays, Coinbase serves some 7.4 million clients.
In 2015, Coinbase became the first ever bitcoin startup that managed to secure the financial backing of traditional financial institutions, like the New York Stock Exchange.
Employing between 51 and 200 people, Coinbase serves customers from no fewer than 32 countries.
In 2016, the astonishing rise of Coinbase earned the company its first proper kudos when it was listed in 2nd place on the 100 Most Influential Blockchain Organizations list.
All-in-all, the exchange raised some $117 million from some of the most interesting retail and institutional investors around. That said, it’s clear that we’re dealing with a legitimate business here indeed. Yes, its website does have an About Us section, and yes, it is known to everyone who the people behind it all are. There’s not much point in seeking out whois data and checking whether the site registrant’s identity is indeed public. Therefore, we’re going to veer off our usual review blueprint now, and try to makes heads and tails of why Coinbase is so hated by some.
Here’s what Coinbase offers in a nutshell:
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- Investors can instantly buy $1,000 worth of bitcoins every week, provided they are indeed verified credit card holders.
- Coinbase users can transfer funds among them instantly.
- Bitcoin deposits are insured.
- The interface is solid and well-designed.
- A wide range of fiat currencies and deposit methods are supported.
- Wallet services feature multi-signature security.
Coinbase has been created to facilitate the buying and selling of crypto currencies like ethereum and bitcoin. The digital wallet services that it offers are focused on this activity-aspect as well. Coinbase clients can connect their debit- and credit cards as well as bank accounts to their digital wallet, to buy and sell digital currencies at the click of a button. Coinbase offers access to GDAX’s services too, which are focused on institutional and retail digital currency trading.
The Bitcoin API offered by Coinbase allows developers to generate virtual currency wallets as well as addresses, to store bitcoin and ethereum and to receive payment-related notifications. The API also allows merchants to request and to accept virtual currency payments.
Coinbase only offers a single account-type, which is geared towards the retail user. Registration only takes a couple of minutes and the account covers digital currency wallet and storage services, as well as currency conversion and trading (GDAX) services. In a word: everything a retail user of a crypto-currency may need to manage, track and transfer his/her Bitcoin and Etherum portfolio.
Two levels exist within the same account-tier and they’re solely dependent on the extent of identity-verification one is willing to complete.
Commissions and Fees
While signing up for Coinbase is free, a 1% commission is charged on every Bitcoin transaction a client makes. Given the steep current cost of Bitcoin, that 1% may actually amount to quite a substantial cut.
Operators like Coinbase are legally required to possess a money transmitter’s license. As such, Coinbase have jumped through all the required legal hoops in most of the US states, securing such licenses from the appropriate state-level authorities. In New York for instance, they’re regulated by the New York Department of Financial Services, and they possess a Money Transmitter License, MT 103755 and a Virtual Currency License, 0000003. They have similar licenses in states like Florida, Alaska, Pennsylvania, Ohio, Oregon, etc.
While everything looks great in Coinbase-land from the distance, and while it’s clear that the company has indeed poured a lot of money into making sure that the user experience it offers is as smooth as possible, all one really has to do is to take a peek at the bitcointalk.org threads that discuss the operator, to have a radically different picture painted.
Some people claim Coinbase is a scam, others accuse the organization of being “evil.” Let us break down the complaints and try to pinpoint a few reasons why the reputation of Coinbase is so foul.
Closed and frozen accounts represent the number one reason behind the complaints. The issue here though is that legislative compliance is in fact the main reason behind these account closures. Coinbase are indeed very keen on such compliance, and thus forcibly closing some user accounts becomes inevitable for them. Like any bank, Coinbase are bound by elaborate AML (Anti Money-Laundering) and KYC (Know Your Customer) policies, as a result of which, the operation became the first one ever to be approved by US financial regulators. Also as a result of this focus on compliance, Coinbase users are required to provide a LOT of personal identification information – another issue resented by scores of users. This personal information issue is all the more irritating to bitcoiners, many of whom value privacy, and consider it one of the main advantages of the crypto currency.
Furthermore: Coinbase will actually track how its users spend their bitcoins, and they summarily close the accounts of users who are found to have used their digital currency to purchase adult services, gambling and poker services and darknet contraband. Reselling bitcoins through other exchanges is apparently a major offense in Coinbase’s eyes. There are other reasons why accounts may end up being closed, arbitrary ones, spat out by the Coinbase compliance algorithm.
The good news is that with most summary account closings, customers are fully refunded. Still, the ordeal is definitely an irksome and possibly costly one.
Another reason why Coinbase get lots of complaints may reside in the sheer number of clients they serve. With more than 7 million people wheeling and dealing with them, some are bound to be left with a sour taste, and at such a sample-size, this – most likely vocal – minority may indeed leave a disproportionately large complaint-footprint.
Another reason for the seemingly undeserved toxic reputation is a previously generous affiliate deal, which had Coinbase hand out some $75 to affiliates who referred someone who then went on to purchase at least $100 worth of bitcoins. This deal was discontinued without a warning or any kind of explanations, leaving a lot of the operator’s formerly loyal partners out in the cold.
Perhaps the most obvious reason why Coinbase is often proclaimed to be bad for the crypto currency industry, is the fact that they filed 9 patents for various digital currency innovations. These patents included “Bitcoin exchange,” “tips button” and other, similarly egregious ones.
Support is offered through email ([email protected]) and live chat. There’s no phone support and the live chat feature is often overwhelmed and not particularly useful.
Coinbase clients can link a variety of bank accounts to their virtual currency wallets. Credit- and debit cards are accepted for deposits, as well as bank wire. PayPal is supported for withdrawals, together with bank wire.
While Coinbase seems legit, the user feedback regarding their services is often downright vitriolic. We found many complaints, such as the following:
“Terrible service. I told them to expect poor reviews and here it is. I waited 15 days to hear about a payment that was being returned to my address due to an intermittent issue on the receiver’s side. Due to their hot wallet system, the address that I sent from was assigned to a new customer and therefore the funds were not recoverable. They weren’t even able to connect me to the individual who had received the funds to ask them if they would be honest enough to give me the money that was rightfully mine. It was absolutely the weakest, most pathetic, useless customer service I have ever had the disgust of dealing with. It’s safe to say that I will NEVER be using this platform again. Don’t ever use an exchange or their wallet system. User wallets and ultimately user-level cryptography are the only way to utilize bitcoin in the way it was meant. Get an address that’s yours and only yours with keys that only YOU hold. Better yet, get a hardware wallet. Take my advice, and don’t use the worthless exchange wallet systems. They’re more useless than the banks themselves. Nice work Goldman and company. Here’s to continuing the tradition of inefficient financial services! (raises cup sarcastically). Bitcoin addresses were never built to be send only or receive only. By doing this, you essentially downgrade the protocol. Summed up in three words – DO NOT USE!”
There are many reports of people unable to withdraw their funds. Like this one person who writes that he “Tried to withdraw £260 from bitcoin atm. Never got bitcoin from atm and never got refund either. Now £260 out of pocket and coinbase are difficult to contact and seem incompetent when it comes to solving a problem. Stay well away from this wallet! I have since removed every penny from this wallet and recommend you do the same.”
Many people complain about Coinbase’s support. See for example: “I’m very unhappy with this company and app. They don’t make you aware of strict daily buy and sell limits, which are very low. If you ever want to be able to get out of bitcoin in a hurry, be warned that you can only buy or sell a modest amount of bitcoin in any given day, regardless of what the market is doing. Their support simply sucks. They will not make a phone number available to call in, my emails have been ignored and the ‘live chat’ usually isn’t available.”
Coinbase Review Conclusion
At the end of the day, should you make use of Coinbase’s services? Indeed, at various points along its evolutionary path, Coinbase and the people behind it seemed more involved with attracting investors and pushing various PR agendas, to the detriment of actual bitcoin development and the proper serving of the bitcoin community.
According to some, Coinbase’s services are geared towards bitcoin beginners rather than seasoned bitcoiners.
That said, the operation is indeed legitimate, very compliant and – under normal circumstances – it offers a smooth user experience. Whether its principles are indeed aligned with the core principles of decentralized virtual currencies though, is another question.
We use Coinbase to hold most of our Bitcoin, are very happy with the service and would recommend them to anyone looking to open a Bitcoin wallet.