What is Coinbase Vault?
When you manage your cryptocurrency at a broker or exchange, you hand over the management of your cryptocurrency. When a hack takes place or your account is broken into, it can happen that some or all of your coins have disappeared. Andreas Antonopoulos once said, "not your keys not your bitcoin". If you do not owe the private keys of your cryptocurrency, you do not owe the cryptocurrency. Yes exactly, you are not the owner of your coins.
This is where Coinbase flies in with the Coinbase vault solution. Coinbase vault gives you the option to store your cryptocurrency in cold storage. This should give the user of the platform more security when a hack occurs on the platform. Coinbase indicates that 98% of your funds are stored offline in geographically dispersed safes and physical safes. However, you do not owe your private keys. The Coinbase vault service is available to give users a piece of mind for the storage of their cryptocurrency. Be aware, there are other safe ways to store your cryptocurrency. Read further to find out more.
How does it work?
Once logged in you are able to navigate to account in the menu. Here you have the option to create a vault at the bottom of the page on the left side. (see image below)
Currently, you have the possibility to store every cryptocurrency offered at the Coinbase platform in the vault. The use of the vault is completely free.
When creating a vault, you have the option to give a name, the next step is the settings of the vault. You get 2 options: Approve the deposit and withdrawal of cryptocurrency yourself or have it approved by a group of people you trust. The persons who must approve your transaction must be another Coinbase users. The more signatories, the better the security of the safe. This allows you to provide extra security for the vault, for every transaction 2/3 or 3/5 people must give an approval to execute a vault transaction.
When you choose to approve your own withdrawals, Coinbase asks for a 2nd e-mail address to approve withdrawals from the vault. Once you have created a vault you cannot change the settings, you would have to create a new vault. Withdrawals from your vault can be canceled within 48 hours. It is not possible to send transactions faster than 48 hours, this could be a disadvantage. If you are going to initiate transaction more often, we do not recommend Coinbase Vault. In this case, we recommend a hardware wallet. A Hardware wallet gives you control over your own private keys. When you are in possession of your private keys, transactions will be no longer than 10 minutes.
Should I store cryptocurrency in the Coinbase vault?
The most secure way to store your cryptocurrency is a hardware wallet. Therefore we could refer you to our wallet page. If you aren’t in possession of your private keys, you’re not in possession of your cryptocurrency. Saving your cryptocurrency at Coinbase always comes with a risk. The management of your cryptocurrency is in the hands of someone else, a hack of your funds is less likely with Coinbase vault. However, the organization can also be hacked of the coins they store offline. In the case of Bitcoin when a fork takes place, the forked coins will be in the hands of Coinbase, because they owe the private keys of your coins.