Scientists think our universe came into existence over 13 billion years ago, in a mysterious process known as The Big Bang. We are still far from understanding the exact mechanism that triggered the beginning of our universe, but fortunately, not all beginnings are that mysterious. (Felt cute, might delete if you think it’s too random or too long)
In the past decade, a whole new asset class i.e crypto assets emerged from the vast web of the internet, thanks to the collision of peer-to-peer networks and cryptology creating a new and exciting market: cryptoeconomy. But when we think of cryptoeconomy, we tend to hyperfocus on cryptocurrencies and their intricate and erratic dance with financial value: Will Bitcoin rise or fall? Is the Ether price moving up? What will become of DOGE?
Cryptocurrencies are a major component of the cryptoeconomy, but it is the cryptocurrency exchanges that set the stage for each digital asset to perform. A digital currency can only make it or break it on a crypto exchange and not all crypto exchanges are created equal. CoinMarketCap tracks around 300 crypto exchanges, and there many more out there in the wild, unregulated landscapes of the cryptosphere.
In this guide, we will explore Coinbase, a crypto exchange that is not on par with the Big Bang in its importance, but one that does guarantee a bang for your buck nonetheless.
Who Is Behind Coinbase?
Coinbase was founded in 2012 by Brian Armstrong, former AirBnb software engineer, and Fred Ehrsam, former Goldman Sachs trader.
Brian Armstrong, a self-proclaimed financial anarchist, had been interested in Bitcoin after reading the Bitcoin whitepaper back in 2010 but it was his work with AirBnb that gave him the idea to start Coinbase. AirBnb sent regular payments to landlords in South America, but the high fees and the convoluted payment system were a headache for everyone involved. Bitcoin seemed to offer a cheaper and more transparent way of making and receiving payments.
Fred Ehrsam, a former professional World of Warcraft player already familiar with in-game currencies, had been working as a foreign exchange trader at Goldman Sachs when he started trading Bitcoin. Ehrsam quickly realized the Bitcoin market lacked intermediaries that would make trading easier.
Armstrong and Ehrsam met on a Bitcoin subreddit forum. According to Ehrsam, the two of them launched Coinbase together in 2012 from an apartment in San Francisco. The venture made the co-founders billionaires.
Ehrsam left Coinbase in 2017 and went on to found the cryptocurrency investment firm Paradigm. Armstrong still serves as the CEO of Coinbase.
Coinbase: A History
In 2012, Coinbase received $150,000 capital investment from the famous Y Combinator startup program that funded many noteworthy startups, including Armstrong’s previous employer AirBnb. The initial investment led to the launch of Coinbase website, establishing the company as a gateway to Bitcoin ownership.
Armstrong and Ehrsam promoted Coinbase as the road to making Bitcoin (BTC) accessible to the public, and venture capitalists like Andreessen Horowitz decided to take a chance on the newly established bitcoin exchange. In 2013, Coinbase received almost half a billion dollars from three venture capital firms.
2014 was a big year for Coinbase. The Bitcoin exchange acquired (now defunct) blockchain explorer Blockr.io and partnered up with PayPal, as the latter company took its first steps toward Bitcoin payments. Coinbase’s customer base expanded to 1 million users, leading the cryptocurrency exchange to set up a secure vault storage system for Bitcoin, and take out insurance coverage for Bitcoin in their custody.
In 2015, Coinbase raised $75 million in a funding round. Among the Investors were USAA Bank, BBVA Ventures, and the New York Stock Exchange (NYSE).
The Bitcoin exchange started to shake things up by introducing support for buying, selling, and storing Ethereum (ETH) in 2016. ETH was the first digital asset the crypto exchange provided besides Bitcoin, but it wouldn’t be the last. Appropriately, the company name changed from Coinbase Bitcoin Exchange to Global Digital Asset Exchange (GDAX).
In 2017, the crypto exchange began listing its third supported cryptocurrency, Litecoin.
Come 2018, Coinbase started its own venture capital business Coinbase Ventures in order to start investing in other cryptocurrency and blockchain related startups. GDAX was rebranded as Coinbase Pro.
Finally, in 2021 Coinbase went public. Instead of a classic initial public offering (IPO), Coinbase stocks debuted on the Nasdaq stock exchange via direct listing. The Coinbase IPO is generally considered a huge success. The company’s initial valuation in the stock market was around $86 billion.
What Makes Coinbase Unique?
Today, Coinbase is one of the most well-known and widely-used crypto exchange services on the market. The exchange operates in more than 100 countries around the world with more than 60 million verified users. It is ranked as one of the best exchange platforms on the CoinMarketCap site, only rivaled by its chief competitor Binance. You can find reviewers all over the internet singing Coinbase’s praises, declaring the crypto exchange to be the best choice for both experienced and beginner traders. But what makes Coinbase so good?
Coinbase has one of the most valuable assets a crypto exchange can have in an industry where bad news like hackers stealing millions of dollars from supposedly safe crypto-wallets, and whole exchanges disappearing overnight along with the funds entrusted to their custody, regularly wreak havoc: a spotless reputation.
Coinbase boasts insurance coverage for the funds in their custody as well as a good relationship with regulating authorities around the world. Unlike many exchanges that carefully straddle the still murky line between legal and illegal crypto related financial services, Coinbase has a strict policy of complying with local laws and regulations wherever it operates. That, beyond anything else, gives the exchange a solid reputation that is hard to beat in the current crypto climate.
Even Coinbase’s few disadvantages, like the limited number of cryptocurrencies listed at the exchange, provide a distinct advantage to the platform when it comes to security. Coinbase conducts a thorough investigation before listing a digital asset on its order book in order to make sure that the listed digital currency is not a scam or a pump-and-dump scheme.
All these policies make Coinbase a trusted and reputable cryptocurrency exchange. The icing on the cake? Coinbase has other good features that make the platform easy and profitable to use. Let’s go over them one by one in the following sections.
Which Cryptocurrencies Does Coinbase Offer Beside Bitcoin?
Coinbase started out as a Bitcoin exchange but developed into a full-fledged cryptocurrency exchange in its later years. As we said before, Coinbase offers a limited number of digital assets on its exchange platform, listing only 51 major digital currencies and around 300 trading pairs. For comparison, Coinbase’s fiercest rival Binance lists around 500 cryptocurrencies and more than a thousand crypto trading pairs.
Still, Coinbase users can buy, sell, and store some of the biggest crypto-assets on the market. Available cryptocurrencies include: Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), Bitcoin Cash (BCH), Dogecoin (DOGE), Ripple (XRP), Cardano (ADA) and stablecoins Tether (USDT) and USD Coin (USDC).
Coinbase often lists trending coins, so you don’t have to worry about the market leaving you in the dust. Since Coinbase lists more than 300 trading pairs, you can still trade an altcoin that is not listed by Coinbase if it is paired with another asset, usually BTC or ETH. That means you can cash out altcoins through Coinbase easily, even if the cryptocurrency is not offered on the trading platform.
Admittedly, Coinbase is notorious for having a convoluted and expensive fee scheme. However, there is no need to panic as we will simplify how Coinbase fees work for you so that you know how much you are paying for Coinbase services. There is also a way of paying less transaction fees, but more on that later on.
Coinbase service fees are calculated by combining a spread fee with a Coinbase transaction fee. The spread fee is the margin between the price of the cryptocurrency on the market, and the price that the trading platform charges. This is like a brokerage fee you pay for using the trading platform’s services. The spread fee is calculated as 0.50% of your purchase, up until 10k. For purchases of more than 10k, you get a discounted rate.
“Coinbase transaction fee” is where it gets complicated. The fee adjusts depending on the purchased amount as well as the payment method and the region you are buying from. You either pay a flat fee or a percentage fee, whichever is higher.
If you are in the US, the flat fee depends on your trading volume. For example, for purchases less than or equal to 10 USD, the fee is 0.99 USD. But if your transaction is less than or equal to 25 USD, you are charged 1.49 USD. For transactions equal to or less than 50 USD, the fee is 1.99 USD and for a transaction equal to or less than 200 USD, you pay 2.99 USD.
Payment method and region also matters. If you are based in Australia or Canada, you pay a 3.99% percentage fee, based on your total transaction amount. Debit cards and PayPal cost a 3.99% fee, and bank transfers cost a 1.49% fee.
Deposit and withdrawal fees also apply. Depositing cash through a bank transfer will cost you 10 USD, and withdrawing to a bank account costs 25 USD per transaction.
If you are based in Europe, you can use SEPA to buy cryptocurrency without paying any fees.
Keep in mind that Coinbase no longer supports credit card purchases. If you are using a credit card to make cryptocurrency purchases at Coinbase, you might have to pay extra fees to your bank.
Why Are Coinbase Fees Higher?
Coinbase is a safe, secure, high liquidity platform that is easy to use and navigate. The trading platform promotes itself as the most convenient way of buying and selling digital assets and there is definitely truth in that. Standard Coinbase site is so beginner-friendly that anyone can start trading within a few minutes of signing up without having to learn much about the platform. That makes Coinbase especially attractive to newcomers who don’t know much about the finer details of trading.
That said, Coinbase fees tend to be higher than other crypto exchanges, partly because of that convenience. Newcomers may not realize it at first but high fees tend to rack up after a while, increasing the cost of using Coinbase.
Here is some good news: you don’t have to stop using Coinbase because there is actually a better (and cheaper) fee system available i.e. Coinbase Pro. Let’s look at Coinbase Pro and see how it works.
What Is Coinbase Pro?
Remember how we said there is a way of paying less fees on Coinbase? Well, the answer is Coinbase Pro. While Coinbase Pro is marketed towards professional traders and institutional investors, it is absolutely free to use and anyone with a Coinbase account can take advantage of its advanced trading tools.
Coinbase Pro provides extensive charts to monitor price volatility and price changes across crypto pairs. Coinbase Pro interface may not be as cute and clean as the usual Coinbase interface, but once you learn to look past the brooding colors, you discover a far more lucrative way of trading.
Coinbase Pro fees are calculated according to your 30-day trading volume. You either pay a maker or taker fee based on your market order, starting with a 0.50% fee rate for purchases under 10k. You can also make fee-free debit card purchases with Coinbase Pro.
Coinbase users may find Coinbase Pro a bit hard to figure out in the beginning but spending a few hours to figure out how to use the platform is a great investment and you will not regret it in the long run.
As we said before, part of what makes Coinbase unique is its reputation as a safe and regulation-compliant crypto exchange. That means Coinbase requires customers to verify their identities as per Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations.
Account verification is relatively easy and fast. You need to provide personal information, including your full name and address, along with a government-issued ID, such as a driver’s license, passport, or ID card. The process is automatic and can be completed within a few minutes after you sign up for the service.
Coinbase employs security measures to protect your private data and doesn’t share it with third parties unless required by legal authorities.
Supported Payment Methods
The available payment methods depend on where you are based. Some accepted methods are Visa and Mastercard debit cards, wire transfers, bank transfers, PayPal, and Apple Pay. You can find out more about accepted payment methods for various countries here.
Coinbase has multiple security measures to keep your cryptocurrency funds safe. The company claims that 98% of all cryptocurrency on the platform is kept in offline storage, safe against hackers. All the sensitive data is offline as well, kept in encrypted form in USB drives and paper backups in safe deposit boxes and vaults around the globe.
Coinbase promises to refund users if their digital assets are compromised due to a platform hack. However, the platform doesn’t take responsibility if an account gets compromised due to individual security practices (losing or sharing your password, phishing attacks and so on).
Coinbase also guarantees your cash safety up to 250,000 US dollars with insurance from the Federal Deposit Insurance Corporation (FDIC).
All accounts are protected by two-factor authentication (2FA) and users can employ extra security measures as advised by Coinbase.
Coinbase Learn and Coinbase Earn
Coinbase aims to bring cryptocurrencies to the mainstream and employs a learn and earn program to incentivize users to learn more about the crypto economy. There are several educational resources on the trading platform users can study in order to discover the basics of investing in and trading digital currencies.
Users can watch educational videos about digital assets and take quizzes to test their knowledge on the Coinbase Earn section. If they manage to answer quiz questions correctly, they get a modest reward in the form of the cryptocurrency they studied, and so they earn by learning!
There is an official Coinbase app (available on iOS and Android) for mobile devices that makes trading on the go simple and easy. All you have to do is to download the Coinbase app to your mobile device. Beware that scammers sometimes upload unofficial mobile apps to pass off as the Coinbase app, so make sure you use the official mobile app.
You can track price changes, monitor your balances, and trade easily through the mobile app’s user-friendly interface.
Coinbase has its own Coinbase wallet connected to the crypto exchange. The Coinbase wallet is integrated to the Coinbase exchange which means your cryptocurrency will be forwarded to the Coinbase wallet once you make a transaction.
The Coinbase wallet is a custodial wallet meaning that Coinbase is in charge of your private keys. This is usually considered a big no-no in the crypto ecosystem (aka not your keys, not your coins), simply because a crypto exchange can take away your funds if you don’t have complete control over your keys. However, Coinbase is the exception to the rule as it is the most trusted crypto exchange on the market. The crypto exchange has a secure vault system and has insurance in case of hacking-related crypto loss.
That said, you can always move your cryptocurrency to another wallet if you want to. It is a good idea to keep larger sums of cryptocurrency in a cold wallet, like a hardware wallet or a paper wallet.
You should always use two-factor authentication (2FA) to log into Coinbase wallet in order to make sure your cryptocurrency is safe. If you want to take additional security measures, you can take advantage of Coinbase vaults.
Coinbase vaults are special cryptocurrency wallets with additional security. You can store your crypto assets in a Coinbase vault like a normal wallet but the stored assets can’t be withdrawn without additional security steps. In order to make a withdrawal from the vault, you have to make a request and confirm your withdrawal from two separate email addresses. There is also a 48-hour waiting period before the withdrawal commences.
Using a vault is a good idea if you want to keep some of your crypto assets online with extra security.
A Few Words Before You Go…
Coinbase was launched in 2012 by co-founders Brian Armstrong and Fred Ehrsam in order to make trading Bitcoin easier and more practical. The venture took off successfully and grew its customer base quickly in the following years. The first crypto exchange to be listed publicly on the stock exchange, Coinbase is an industry leader in many ways. Coinbase’s willingness to work with authorities and comply with regulations helped the exchange with its reputation, establishing it as one of the best crypto exchanges to trade on.