Coinbase is an online platform that offers merchant tools, cryptocurrency wallets and an exchange to convert your digital currency to your local currency. It is a well built and easy-to-use way to buy and sell Bitcoin, Ethereum and alt coins. However, the first question that usually comes up with the platform ends up being “is Coinbase safe?” We will try to answer that here. If you’d prefer not to read all the details, the answer is yes, Coinbase is safe.
Cryptocurrency storage safety with Coinbase
The first element of safety with Coinbase is the way that they store digital currency. Less than 2% of customer funds are actually stored online, with the other 98% housed in offline storage. This means that Coinbase is storing cryptocurrencies physically in safe deposit boxes around the world. This helps to reduce or eliminate the risk of hacking as well as seizure or theft in one specific country.
For the more technically inclined in our audience, that means that this data is disconnected from the internet, split with redundancy, run through AES-256 encryption and stored on FIPS-140 USB drives which are then taken to safe deposit boxes. For the rest of us, let’s just say it’s pretty secure.
Coinbase website security
Beyond the storage of funds, another part of the question, “is Coinbase safe?” is around personal information. There are a number of security steps that Coinbase takes to ensure that your information is not compromised, including:
- Two factor authentication on accounts: You must enter your password and a code that is sent to your mobile phone to login.
- All website traffic runs securely over https protocol (encrypted SSL)
- Private keys and wallets use AES-256 encryption for storage
- Application credentials are segregated from the database and code base, so if one gets compromised, the others should be safe.
- Passwords must be strong and are hashed using encryption for added security
Ethereum, Bitcoin and Litecoin vaults
In September, 2017, Coinbase launched vaults for Ethereum and Litecoin to match a product that already existed for Bitcoin. These vaults allow for users to implement additional layers of security to protect their own currency stored with Coinbase.
These added security features include optional 48-hour delays on withdrawals and required email confirmations for transactions. This allows you to personally safeguard against getting hacked as you will have time and additional access to approve or deny transactions.
While Coinbase has done a great job of protecting from outside threats, they have also ensured that they have taken steps to safeguard against internal threats (their employees). All employees must past a criminal background check as part of the hiring process. They also keep separate passwords for every device as opposed to per employee. Furthermore, employees have to use strong passwords, lock their computers and keep encrypted hard drives.
Coinbase insurance policy
Beyond these levels of security to keep your money and information safe, you also have the added peace of mind of the Coinbase insurance policy. Both digital and fiat currencies held with Coinbase are fully insured against a breach of physical or digital security as well as employee theft. For Fiat currencies, United States residents are insured by the FDIC up to a maximum of $250,000, which is similar to most banks. One thing to note is that these insurance policies apply to Coinbase’s security being compromised, but not your individual account. If you leave your username and password written on a napkin at a coffee shop, you are on your own.
So, is Coinbase safe?
Yes. Coinbase has done a great job of implementing security measures to match or exceed even bank-level security. By applying best practices to storage of currency, personal information, website protocols and even employee security, Coinbase has made their platform safe for users.
Personally, we are comfortable keeping funds with Coinbase, although for pure storage of value, we tend to prefer offline wallets.
Our offline wallet of choice is the Ledger Nano S. The Nano S is relatively inexpensive for the level of security it provides and very easy to use.
Are you ready?
If it sounds Coinbase is for you visit them on your phone or computer and start buying and selling Bitcoin, Ethereum or Litecoin account!