How Does Coinbase Work? All the Important Details
One of the first things you’ll need to decide when you want to start trading cryptocurrencies, is which exchange you’ll use. Typically, you’ll have to consider the exchange’s pricing structure, how easy it is to open an account, and what assets it offers to trade.
The problem is that there are so many exchanges that this decision can be somewhat complicated. Fortunately, we’re here to help and, in this post, we’ll look at Coinbase, the largest exchange in the US, in more detail.
So, how does Coinbase work? Is Coinbase safe? Read on, and we’ll answer these questions and more in more detail.
Start trading cryptocurrencies right now with Coinbase!What Is Coinbase?
Coinbase Global Inc., otherwise simply known as Coinbase, is a cryptocurrency exchange operating globally. The company was founded in 2012 in the US by former Airbnb engineer, Brian Armstrong who was later joined by Fred Ehrsam, a former Goldman Sachs trader.
Since its founding in 2012, the company has grown significantly and has received various investments, most notably in 2013 and 2015 in the amounts of $5 million and $75 million respectively. As a result of its continued growth, the company now has over 73 million verified users, supports more than 100 countries, and its quarterly traded volume stands at $327 billion.
Considering this, by trading volume, Coinbase is currently the largest cryptocurrency exchange in the United States. Interestingly, despite the company’s size, it doesn’t have physical headquarters and is a remote-first company.
Is Coinbase Safe?
Now, one of the questions many people ask when considering using Coinbase to trade cryptocurrencies is whether Coinbase is safe. Fortunately, the good news is that it is. In fact, Coinbase promises to be the most trusted cryptocurrency platform.
It bases this on a few reasons, including:
Secure storage
98% of Coinbase’s customers’ crypto assets are stored offline. In other words, sensitive information relating to these assets are not stored on servers that are connected to the internet. This is an important security measure against possible loss or theft.
In addition, data is also AES-256 encrypted and backed up, with backups stored is various safe deposit boxes and vaults around the world and all accounts are secured with 2-step authentication. Keep in mind, though, that, although these measures are effective, you can still be at risk of exposing your account credentials to third parties through phishing or scams. This means that, despite these measures, you should still keep your account information safe.
Insurance
Coinbase has crime insurance that protects customers’ crypto assets against the risk of theft or loss. For customers in the US, their cash deposits are held in custodial accounts, investments in US Treasuries, or US$ denominated money market funds and these funds are insured by the FDIC. This means US customers are covered up to $250,000 per individual. For customers outside the US, cash deposits are held in dedicated custodial accounts separate from Coinbase funds.
Best practices
In addition to the measures mentioned above, Coinbase also follows payment industry best practices. This means all website traffic is transmitted through secure, encrypted SSL and all wallets and private keys are stored using AES-256 encryption.
Another contributor to Coinbase’s safety is the fact that it recently listed on the Nasdaq stock exchange. This means it has to comply with continued listing and reporting requirements and meet high standards of corporate governance.
Are Coinbase and Coinbase Pro the Same Exchanges?
Although both Coinbase and Coinbase Pro are operated by Coinbase Global Inc., they’re different exchanges. Coinbase is a simpler platform that’s easy to use for beginners and offers trading in fewer cryptocurrencies.
In contrast, Coinbase Pro is a trading platform for more advanced traders and cryptocurrency enthusiasts. As such, the platform offers access to a wider range of trading instruments, more advanced charting options, and other features.
The differences don’t stop there, though. Coinbase Pro also offers a larger variety of transactions that traders can execute, and its fees are lower compared to Coinbase. Apart from this, both platforms offer the same security features which includes insurance and safe storage as mentioned above.
How To Open a Coinbase Account?
To open a Coinbase account in order to invest in, trade with, and store cryptocurrencies, the platform does have certain requirements.
These requirements are:
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You’ll need to be over 18 years old, and you’ll need a government-issued photo ID as proof to register an account.
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You’ll need to reside in one of the supported countries. Fortunately, as mentioned earlier, Coinbase supports over 100 countries. You can find a complete list of the supported countries here.
In addition to these requirements, you’ll need to have a computer or smartphone that’s connected to the internet and a phone number where you’ll be able to receive a verification SMS during the sign-up process.
To create your Coinbase account, you’ll go to its homepage or download an open the app on your phone. Here, it’s important to note that Coinbase recommends that you don’t use the browser on your phone or tablet to create an account. Once on the homepage, you’ll click on Get Started.
How to Get Started on Coinbase
On the next page, you’ll need to provide your full legal name, email address, password, and, if you’re in the United States, your State. You’ll also need to agree that you’ve read and agree to the User Agreement and Privacy Policy. When all the information is completed, you can click on Create account.
How to Open Account on Coinbase
During the next step, you’ll receive a confirmation email to verify your email address. When you click on the link in this email, you’ll be taken back to the Coinbase platform where you’ll be able to log in using the email and password you chose when you created the account.
Once you’ve logged in again, you’ll be asked to provide a telephone number where you’ll be able to receive an SMS. Here, you’ll select your country, enter your phone number, and then click on Send Code.
Two-Step Verification on Coinbase
Once you’ve clicked on Send Code, you’ll receive a verification code that you’ll need to enter. Once this is done, you’ll need to complete your personal information including your first name, last name, date of birth, and address. It’s important to remember that this information should match your government-issued ID exactly as you’ll need to complete an ID verification process.
In addition to the above, you’ll also need to answer the following questions:
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What do you use Coinbase for?
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What is the source of your funds?
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What your current occupation is?
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Who your employer is?
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The last four digits of your Social Security Number.
Once you’ve completed the above, you can click on Complete to finish the process. However, before you can start to trade, you’ll also need to link a payment card to your profile.
Coinbase Deposit and Withdrawal
Before you’ll be able to deposit or withdraw funds, you’ll need to add a payment method as described above. Keep in mind, though, that depending on your specific location, these payment methods and functionality could differ.
How Do You Fund a Coinbase Account?
Once you’ve linked an account, you’ll be able to fund your account. For example, if you’re located in the US, you’ll be able to link your bank account, use a debit card, perform wire transfers, or use PayPal. Here, the functionality of each payment method differs.
For instance, when you link your bank account in the US, you’ll be able to fund your account, buy, and sell cryptocurrencies. In contrast, with a debit card, you’ll be able to buy cryptocurrencies and make withdrawals, but you won’t be able to deposit funds into your Coinbase account or sell cryptocurrencies.
Conversely, if you open an account from Canada, you’ll be able to buy cryptocurrencies by using your debit card but won’t be able to deposit or withdraw funds from Coinbase. The best solution here is to look at the specific page for your region or country to determine which payment methods and functionality is available to you on the platform.
How Do You Withdraw Money From Coinbase?
As is the case with deposits and buying cryptocurrencies, you also have a variety of options when it comes to withdrawing funds from the platform. These include everything from withdrawals to your bank account, debit card, PayPal, instant cash-outs, and instant card withdrawals.
Also, as is the case with deposit and buying, the functionality depends on which country you’re in. So, here it’s also a good idea to have a look at the relevant page to find out which payment and withdrawal methods are available for your country.
Coinbase Fees
Generally, Coinbase’s fees vary, once again, based on what country you’re in, the payment method you’re using, and what asset you’re buying. This means you’ll either pay a flat fee or a variable fee as a percentage of the transaction amount.
When it comes to trading fees, Coinbase charges:
| Pricing Tier | Taker Fee | Maker Fee |
|---|---|---|
Under $10K |
0.50% |
0.50% |
$10K - $50K |
0.35% |
0.35% |
$50K - $100K |
0.25% |
0.15% |
$100K - $1M |
0.20% |
0.10% |
$1M - $20M |
0.18% |
0.08% |
$20M - $100M |
0.15% |
0.08% |
$100M - $500M |
0.10% |
0.02% |
$500M - $1B |
0.06% |
0.00% |
$1B - $2B |
0.05% |
0.00% |
$2B+ |
0.04% |
0.00% |
In contrast, if you’re located in the US, you’ll pay a variable fee as follows:
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1.49% for purchases or withdrawals using your bank account.
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1.49% for purchases or withdrawals using your Coinbase US$ wallet.
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3.99% for purchases or withdrawals using your debit card.
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Up to 1.5% of the transaction value with a minimum of $0.55 when purchasing or making withdrawals with Instant Card Withdrawals.
What Cryptocurrencies Can You Trade on Coinbase?
The next question is, now that you’ve seen how to create an account and what you’ll pay when you buy and sell cryptocurrencies, what cryptocurrencies can you trade on Coinbase?
Here, you’re spoiled for choice as you can trade any one of the following digital assets:
Keep in mind, that the above currencies are available to trade on Coinbase. On Coinbase Pro, you'll have a larger variety of currencies to choose from. In fact, Coinbase Pro now offers trading in more than 350 currencies.
How To Buy Bitcoin on Coinbase?
The final thing to look at is how to trade on Coinbase. Here, we’ll look at how you can buy Bitcoin. To do this, your first step will be to sign in to the platform.
Once you’ve signed in, you’ll click on Buy/Sell in the upper right-hand corner. In the pop-up that appears, you’ll select Bitcoin in the Buy field. You’ll then enter the amount you want to buy for. So, if you want to buy Bitcoin for $50, you’ll enter that here.
The next step is to select your payment method from the dropdown list. Here, you’ll be able to choose one of the payment methods you’ve added before. You can then click on Preview Buy to check if all the details are correct and to confirm your purchase.
Once you’re satisfied, you can click on Buy to complete your purchase.
Summary
There you go, now you know what Coinbase is all about. Now you’ll be able to create an account, verify your details, link a payment method, and start trading. Hopefully, this post helped illustrate that Coinbase is a reputable exchange and that it’s safe to use.
To learn more about cryptocurrency trading, trading strategies, broker and exchange, and more, why not register on Traders Union today.
FAQs
We’ve also compiled a list of frequently asked question traders often have.
Is Coinbase safe?
Yes, Coinbase is reputable and completely safe. The platform implements all the necessary safety measures and carries crime insurance that protects you against theft or loss.
What is the minimum amount I can buy for?
On Coinbase, you can buy or sell as little as 2.00 of cryptocurrency in your local currency. For instance, you can buy or sell $2.00 worth of cryptocurrency.
Where is Coinbase located?
The company was founded in the United States and is currently listed on the Nasdaq stock exchange.
Why must I verify my identity?
Coinbase verifies every user’s identity in order to prevent fraud.
Team that worked on the article
Glory is a professional writer for the Traders Union website with over 5 years of experience in creating content in the areas of NFT, Crypto, Metaverse, Blockchain, or Web3 in general. Over the last couple of years, Glory has also traded on different cryptocurrency and NFT platforms including Binance, Coinbase, Opensea, and others. “I understand a lot about this space, being familiar with CEX, DeFi, and DEX, as well as operating across the Ethereum, Binance, and Polygon networks. Also, I know the intricacies and subtleties of NFTs and crypto, thus I am able to bring to table the best content and help connect with the audience better.”
Knows about
NFT, crypto, metaverse, blockchain, Web3
Alumnus of
Brooklyn College
Olga Shendetskaya has been a part of the Traders Union team as an author, editor and proofreader since 2017. Since 2020, Shendetskaya has been the assistant chief editor of the website of Traders Union, an international association of traders. She has over 10 years of experience of working with economic and financial texts. In the period of 2017-2020, Olga has worked as a journalist and editor of laftNews news agency, economic and financial news sections. At the moment, Olga is a part of the team of top industry experts involved in creation of educational articles in finance and investment, overseeing their writing and publication on the Traders Union website.
Olga has extensive experience in writing and editing articles about the specifics of working in the Forex market, cryptocurrency market, stock exchanges and also in the segment of financial investment in general. This level of expertise allows Olga to create unique and comprehensive articles, describing complex investment mechanisms in a simple and accessible way for traders of any level.
Olga’s motto: Do well and you’ll be well!
Mirjan Hipolito is a journalist and news editor at Traders Union. She is an expert crypto writer with five years of experience in the financial markets. Her specialties are daily market news, price predictions, and Initial Coin Offerings (ICO). Mirjan is a cryptocurrency and stock trader. This deep understanding of the finance sector allows her to create informative and engaging content that helps readers easily navigate the complexities of the crypto world.