I’ve been using Coinbase for two years now. In fact my first Bitcoin wallet was with Coinbase. The fact that I’m still using this service is testament to its usefulness. Coinbase takes a lot of flack for a few things, some imagined and some deserved, but it’s still one of the easiest and safest ways to get into the Bitcoin ecosystem. There are many services they provide that prove useful to both new users and advanced users alike. I’m going to discuss both why I think Coinbase is one of the two primary starting points for novices and how I still use their service after becoming an advanced Bitcoin user.
Coinbase makes Bitcoin easy. In fact their signup page says “The easiest on-ramp to the bitcoin world” right on it. You can sign up in seconds, connect a bank account to your account in a day or two, and be a Bitcoin owner in less than a week, all without putting on pants and leaving your house. There are lots of wallets out there and I plan to discuss a large number of them. There are a lot of services that allow you to buy Bitcoin and I plan to focus on many of those as well. But Coinbase has it all under one roof. And that’s not the only two services they provide. I’ll get to those in a bit.
First, I want to look at the online wallet. The main screen is very user friendly. You have a sidebar on the left with all of your options clearly labeled. You can buy/sell Bitcoin, you can send/request Bitcoin, you can see all your Accounts and balances, or you can open the Settings for more options.
The main screen will show activity from your default wallet. Here you’ll see buys, sells, sends, receives, and even transfers between your own wallets. It’s just like online banking in that respect. If you have more than one wallet or account you can click between them under Accounts. But unlike online banking you can create as many accounts as you want, open and close them at will, transfer money back and forth between them, and go back and see every transaction that has ever happened on any one of them. You don’t need to notify Coinbase you’re doing this. You just do it. Coinbase makes it easy to do all this.
To buy or sell Bitcoin you click on the button that says Buy/Sell Bitcoin. You go to a window with three tabs: Buy, Sell, and Limits. If you’re buying you punch in how much Bitcoin you want in the BTC box and it tells you how much it’ll cost in US Dollars. Or you put in how much you want to spend in US Dollars and it tells you how much Bitcoin you’ll receive for that amount. You then select which payment method you want to use, the account into which you want the Bitcoin deposited, and then hit Buy Bitcoin. That’s it. Your bank account is debited for the US Dollar amount you specify plus a 1% fee (minimum $0.15) and the Bitcoin is deposited into the Account you chose. There will be a wait for funds to be available and the time depends on how much you’re willing to verify. Debiting or crediting a checking or savings account takes multiple days to verify. You can add a backup credit card to allow instant access to your purchases, but your card will not be charged unless your bank transfer fails for some reason.
Sending and and receiving Bitcoin is also easy with Coinbase. To send Bitcoin you click on Send/Request. If go to a window with two tabs: Send and Request. If you’re sending you punch in the email address or Bitcoin address to which you want to send money. You then select either BTC (Bitcoin) or USD (US Dollars) from the dropdown menu and punch in the amount of either you wish to send. Next you select the account from which you want to send money. Finally you click Send Funds. That’s it. Your account will be debited and the recipient will receive notification that they are receiving funds.
The process to request money is nearly the same, but you put in the email of the person from which you’re requesting funds, how much you’re requesting, and to which account you want the funds deposited. Finally you click Request Funds and the request gets sent.
To make it even more handy Coinbase has an app for Android and iPhone. So, not only do you get the robustness of a web wallet, you also get the convenience of a mobile wallet as well. This is a good stepping stone for new users to get used to both systems. They work in nearly the same way, but on different platforms, which can aid in education.
Coinbase allows for recurring transactions so you can automate buying and selling Bitcoin on a regular basis. This is handy for people like me that used to buy a certain amount of Bitcoin every two weeks when I got paid. I do this with a different service now, and I’ll review that one at a later date.
Coinbase also offers a vault feature. This is a secure area to keep your Bitcoin where Coinbase locks them into cold storage, secured off the network, backed up in physical bank vaults and deposit boxes spread out over different geographic locations. You can set these up to be single user so withdrawals require just your own approval or multi user so withdrawals require the approval of others.
That’s Coinbase in a nutshell. It’s a simple system, easy to learn, and it takes a lot of the uncertainty out of Bitcoin. But, as I said above, this may be where it shines for new users, but it also has other services, some of which have kept me around for two years now after becoming a much more advanced user.
Coinbase has merchant services. You can easily start accepting Bitcoin at your place of business, whether that’s online or in a brick and mortar store. You can even elect convert some of the Bitcoin you receive directly to US Dollars and only hold a portion of it in Bitcoin. This helps to take out some of the fear of volatility, if that is of concern to you.
Coinbase is a fully licensed and compliant exchange in the US. If you’re ready to start playing the commodities market that is Bitcoin, Coinbase allows an easy on ramp for that as well. Just deposit funds from your Coinbase account to the Coinbase Exchange, either Bitcoin or US Dollars. This is done in the same way I explained sending funds above. Once they’ve been deposited into your accounts on the exchange you can start trading. I’m not going to get into how that works here. I’ll save that for a Tutorial.
These services are enticing, but I don’t dabble much there. What I do use Coinbase for is mainly partner services. Coinbase partners with some very cool services like Shift Payments. I will review this service at a later date as well, but I’ll gloss over them here. Shift is one of the first, if not the first Bitcoin debit card distributed in the US. It works over the Visa network. You set up an account in Coinbase and deposit Bitcoin. You use your Shift debit card and it pulls funds from that account. It’s just like using your bank debit card, only it’s funded by Bitcoin. Partnerships like this make Coinbase more than just a web wallet.
Now I’d like to touch on what I mentioned in the first paragraph about Coinbase taking some flack and mentioning that some of it is deserved.
The first point is that, when you sign up for Coinbase, you put them in charge of your money. They are now your Bitcoin bank. Sure, you get a lot of freedom that you don’t get with banks and your fees are probably lower. But the truth is you’re still trusting someone else to hold your money. Coinbase has the ability to restrict buying and selling, close your account, or restrict your access to your Bitcoin. Part of being licensed to operate in the US is that they have to comply with court orders and the like. Bitcoin is a technology that is trying to move away from such practices, for better or worse. Bitcoin was invented to put you back in charge of your own money. This, however, takes knowledge as well as a great sense of responsibility. If you don’t hold the money it’s not really your money. In Bitcoin, if you don’t hold the private keys you don’t own the Bitcoin.
You do have the option of putting your Bitcoin into the Coinbase Vault and choosing the multisig option. This is like the Vault I talk about above except Coinbase gives you two of the three keys. This means that you are in control and Coinbase cannot access your funds without your approval. However, this also places the responsibility on you to secure and back up your keys. This would change what I wrote in the paragraph above this if you trust that Coinbase doesn’t keep a copy of your keys when they send them to you. It’s possible to say a key set was created with 3 keys and you need 2 to move funds but create the set as 4 keys and you need 2 to move funds. There’s no way to tell by the keys how many were created and how many are needed. While the recovery software is open source, the key generation software does not appear to be. To be clear: I have no reason to believe that Coinbase would do this. I’m simply stating that they could.
The second point is that Coinbase has restrictions on how you can use your money. If you get to the point where you want to start operating your business using Bitcoin and you choose to get into the business of buying and selling Bitcoin, Coinbase will not allow that directly from your Coinbase account. There are ways around this, but it’s worth noting here. It has also been reported that Coinbase will close accounts for the purchase of illegal things like drugs and weapons. Again, this doesn’t pertain to most, I’m sure, but it is worth noting. If they can monitor your account for things like that, who knows what they’ll monitor for next.
As I mentioned at the start, I still use Coinbase two years on. But what I use them for isn’t what I recommend new users use them for. Once you get past the new users stage I mainly recommend people use Coinbase as a broker: to buy Bitcoin and send them to a wallet they control, to receive Bitcoin to sell for US Dollars, and the partner services such as Shift and Lawnmower.
So, whether you plan on using Coinbase as your primary wallet, if you plan on day trading on the exchange, or if you plan on using them mainly as a broker to buy and sell Bitcoin, or if you simply want to use the services they partner with, I recommend you get a free Coinbase account. Use my referral link below to sign up. If you sign up and buy $100 worth of Bitcoin we both get $10 worth of Bitcoin for free.