Going into 2018 the cryptocurrency market is finally starting to get the recognition it deserves as a technology as revolutionary as the internet itself. People are scrambling to get setup with the right services to buy and store their cryptocurrency. For most people Coinbase is the easiest way to convert paper money into digital currency. Coinbase is a company founded in 2012 and based in San Fransisco, CA. According to Wikipedia they’re a digital asset broker which allows users to buy, sell, send, receive, and store four of the largest cryptocurrencies:
- Bitcoin (BTC)
- Bitcoin Cash (BCH)
- Ethereum (ETH)
- Litecoin (LTC)
If you’re here, chances are you’re already interested in investing in cryptocurrencies like Bitcoin, Ethereum, or Litecoin. The next step is to bridge the gap and learn how to actually get in the market (and stay in the market by safety storing your crypto). Coinbase is the most accessible platform for users in the United States and most other western nations as far as what it allows users to do: buy, sell, send and receive BTC, BCH, ETH, and LTC. You can purchase the cryptocurrencies with credit card, debit card, or with a bank account. This makes it really attractive especially for first time cryptocurrency investors because it’s so easy to get into the market. It’s so easy that it’d honestly be a challenge to screw up on Coinbase by user error.
But accessibility isn’t what you’re here for, the big question is:
Is Coinbase Safe?
There are three points when it comes to the safety and security of Coinbase:
- Digital currency insurance
- FDIC insurance
Security Team at Coinbase
Coinbase invests heavily in cybersecurity to prevent hacks on their system. The Director of Security at Coinbase, Philip Martin, was a founding member of the Palantir security team, a Counterintelligence Agent in the US Army, and a whole host of other impressive accomplishments. Philip built and oversees an elite team of cybersecurity experts from Silicon Valley and all around the world to monitor and protect your investments 24/7/365.
Imagine if hundreds of the smartest people in cybersecurity were watching your investment in real time, keeping an eye out for suspicious activity.. pretty comforting right?
Digital Currency Insurance
When you store your digital cryptocurrency on Coinbase, it’s protected by a third-party insurer against theft and hacking. In the event that Coinbase’s elite security team isn’t able to stop a hacking attempt, the third-party insurer will step in and reimburse users for their loss. This is an entirely separate insurance policy from the FDIC insurance for USD deposits.
FDIC Insurance for USD Deposits
With Coinbase it’s possible to deposit and store US Dollars, not just cryptocurrency. When you do that, you’ll be fully insured just like with the digital currency insurance above. But we aren’t just talking any insurance, we’re talking full FDIC backing by the United States Government. This means if your account gets hacked, you aren’t going to rely on some insurance company to put up a stink about why they shouldn’t pay out the claim.
You’ll literally have the same FDIC on the dollars you’re storing in Coinbase as you do on your savings account dollars. It’s pretty hard to find fault with that!
So really though, is Coinbase Safe?
Yes. Overall Coinbase is extremely safe. But don’t leave yet, there is a bit of a caveat. They’ve been vetted the same as other giant US Financial institutions – so if you trust your money sitting in your bank account, then I’d say you’re fine with using Coinbase for general purposes. I wouldn’t necessarily recommend you store your cryptocurrency on Coinbase, but it’s a fantastic place to convert USD to bitcoin. For storing crypto, there’s really no other option other than to get a hardware wallet like the Ledger Nano S (because of the insane demand these sell out really fast and are out of stock for months, I’d recommend getting one ASAP!)
The Ultimate Secure Crypto Starter Pack
Are you looking for a starter pack to get into not just bitcoin but the other disruptive technologies that blockchain is unleashing? If I was starting over from scratch, I’d get these four things and be set:
- A free Coinbase account to convert dollars, euros, pounds, etc into the big cryptocurrencies. (We both get $10 of free bitcoin with my referral link below)
- A hardware wallet like the Ledger Nano S (so popular they’re often sold out for months, stock up while you can) – this is the only thing on the list you’ll have to pay for, and it’s the absolute most important. Before I had a hardware wallet I was constantly stressed out storing coins on exchanges and keeping track of private keys and seed words for wallets. It’s insanity, and I wouldn’t wish that on my worst enemy. Just suck it up and get one, it’s the only thing you need to buy to have your own bank at home. Best investment ever :). (only buy one of these off the official Ledger site that I’ve linked to, there are many stories of scammers on Amazon, eBay and other places online selling compromised Ledger’s as new, including a guy who lost $35k. These things are in such high demand, Ledger has no reason to be selling them for a discount through other channels)
- A free Binance account – you can send the cryptocurrencies you buy on Coinbase to Binance and exchange them into all the best altcoins. If your plan is to find undervalued coins from promising companies then this is mandatory. Coinbase is great for getting fiat currency into crypto, but because it’s so accessible most of the coins on the platform have already seen insane growth, not to mention they only offer 4 coins.
- The free Google Authenticator app – two-factor authentication (2FA) dramatically reduces the ability to have someone hijack your accounts. This is the biggest thing you can do to keep online accounts from being hacked, and not only cryptocurrency accounts. Are you aware if a hacker gets your email password from a keystroke logger they can then go in and reset all your passwords around the web by using the “Forgot Password” link on websites? Give up access to your main email account and all of a sudden your bank, credit card, brokerage accounts, and all the other things you’ve signed up for are compromised. Start using 2FA on all your important online accounts today!
Coinbase Security FAQ’s
Is Coinbase the MOST Secure Bitcoin Wallet?
Ehh that’s tricky. For storing your US dollars yes. I don’t think I have to explain how secure FDIC is, or that the US Government wouldn’t offer FDIC to an unsecure partner to begin with.
For cryptocurrency it’s a bit of a different story though. The most secure way to store your Bitcoin or Ethereum will definitely be with a hardware wallet, such as my favorite, the Ledger Nano S which is currently coming with free shipping from France. If you’d like a full review of the different wallets that are available, check out our ultimate guide to cryptocurrency wallets.
Should I set up Two-Factor-Authentication 2FA?
YES. This is so easy to do. Please do yourself a favor, download the Google Authenticator App and just do it!! The fastest way to get hacked and lose all of your investment is to not double protect your account. This will make it so you and only you have the code to access your account. Don’t test it!!
What if someone hacks into Coinbase and steals the USD I have deposited there?
You will be covered by FDIC for up to $250,000 of deposits, just like your bank does.
What if someone hacks Coinbase and steals all of the Bitcoin, Ethereum, or Litecoin that I have stored there?
Coinbase also has a separate insurance policy to protect against the theft of your digital currencies. It is NOT the FDIC program because FDIC is only valid for US Dollar deposits, which it will no longer be once you purchase bitcoin. So far Coinbase hasn’t had any major hacks to test it’s cryptocurrency insurance, regardless I’d recommend buying your cryptocurrency with Coinbase and then storing it on a Ledger Wallet.
What if I give someone my password and they steal my money from Coinbase?
You will most likely NOT be covered. Before you freak out, this is the same as it is with your bank account. You NEED to be careful with your passwords no matter what financial institution we’re talking about. Many people aren’t anywhere near as responsible with creating strong passwords as they should be. The good news is, generally people take this a lot more seriously when they get involved with cryptocurrency.
If you currently use online banking, then you’re not really taking on any additional risk in this manner. In fact, Coinbase will probably be safer for this because they strongly push for you to set up two-factor-authentication (2FA) with a service like Google’s Authenticator App.
Can I create a bitcoin address with Coinbase?
Yes! Coinbase makes it really easy to generate addresses with one click of a button. No messing around with complicated software or algorithms. For more information about cryptocurrency addresses check out this post.
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