One of bitcoin’s biggest problems is a lack of convenience. Ironic, right?
It can be difficult though, to navigate all the different wallet options, to enter those long addresses or to know who to trust. While bitcoin and other cryptocurrencies are ‘trustless’ decentralized networks, fiat currency requires trust and third parties. There simply is no way to avoid using a trusted intermediary to exchange dollars for bitcoin, because dollars require intermediaries.
Naturally, this is where Coinbase comes in.
Customers in the United States and 25 European countries link a bank account to Coinbase through ACH or SEPA. Once confirmed, you can buy bitcoin directly from your linked account, and sell bitcoin directly back into it. By adding a credit card you can complete the purchase instantly. Coinbase collects a 1% fee.
Coinbase is one of the most popular services in the world to buy and sell bitcoin. Coinbase is quick and convenient. Part of the reason is that Coinbase is centralized. This is important to understand because there is one important difference between the wallet in your Coinbase account and wallet software on your computer.
Unlike in a true bitcoin wallet, a Coinbase wallet is entirely custodial. Coinbase controls all the private keys, and offers no way for users to import them. Coinbase is as trustworthy as any financial institution, but if you want actual control of your bitcoin, you need to withdraw it to a real bitcoin wallet that you control after your purchase is complete.
A nice benefit that goes along with this centralization is off-chain transactions and the immunity they have to bitcoin’s network rules. When sending to another Coinbase account, the transaction happens instantly. You can also enter the account’s email address instead of the full bitcoin address.
In days past, buying and selling was all Coinbase did. By not accepting deposits and instead only completing sales, they avoided the licensing requirements of an exchange. Coinbase has since seen a lot of growth and a lot of VC interest. They have pursued that licensing and added an exchange to their offerings.
On the exchange, you are not buying from or selling to Coinbase. Instead, trades on the exchange are between users, with Coinbase holding the funds and settling the accounts. Like any other bitcoin exchange, really.
Coinbase claims their bitcoin exchange is the first registered exchange in the US. Because each state has its own money services laws and licenses, each license in each state must be pursued individually. Whether you see the Coinbase exchange when you log in depends on which state you live in.
The Coinbase exchange is licensed in 23 states; New York is not one of them. Coinbase was vocal in its opposition to the content of the so-called “BitLicense” and has not moved to comply with its outrageous terms, instead opting to abandon New York like so many other crypto businesses.
Coinbase offers a service to merchants to take the volatility out of bitcoin payments. Accept payment in bitcoin via Coinbase, and merchants can have the dollar amount transferred to their account instantly. Coinbase charges no fees on the first $1 million in sales, and just 1% thereafter.
Coinbase is great for small business since the service is basically free. You can accept bitcoin payments through Coinbase directly through a smartphone app, with no need for additional hardware like with credit cards. Large enterprises including Overstock, Expedia, and Dish Network trust Coinbase with their bitcoin payments.
Due to their centralized nature, Coinbase can offer something from other Coinbase account holders that merchants can’t get from bitcoin by design – subscriptions.
Because bitcoin is strictly push (meaning no one can pull money from your wallet, they need you to push it out to them), there is no way to set up recurring payments in bitcoin. Because Coinbase has custodial control of the funds on their network, subscription payments can be arranged, with permission.
Custom merchant solutions and other applications can be developed using Coinbase’s full API, which currently powers over 7000 bitcoin apps including Lawnmower, Gliph, and Purse.io.
To start taking advantage of everything they offer, just sign up for a free Coinbase account. You will be able to accept bitcoin immediately, but buying some requires some setup. It will take a little while to get your accounts linked, and if you’ve ever set up a PayPal account, the process will be familiar.
Once everything is set up, buying bitcoin is a snap.