What is Coinbase and how does it work?

What is Coinbase and how does it work?

In a short period of time, cryptocurrency has gone from being a small, alternative investment to being worth hundreds of billions of dollars together. Whether you want to invest in cryptocurrencies or use them as a form of payment, you’ve probably heard of Coinbase. After all, with tens of millions of users, it is one of the most popular cryptocurrency exchanges on the Internet. It’s also one of the easiest ways to buy cryptocurrency, which has helped fuel its explosion in popularity.

In short, Coinbase is a cryptocurrency exchange where you can buy popular coins like Bitcoin, Ethereum and Solana. Not every coin is supported on Coinbase, but there are more than 120 different types of cryptocurrencies on the platform. Meanwhile, there are thousands of different cryptocurrencies available in the world. However, Coinbase allows you to trade the most popular types of cryptocurrency, so it works well for most purposes.

All this makes Coinbase a good place for new crypto investors to buy and sell their favorite coins. But is Coinbase safe to use? What about fees? Below we will answer these and other questions.

How to Use Coinbase: A Beginner’s Guide

If you’re new to Coinbase, and maybe even cryptocurrency in general, it can all seem overwhelming. Don’t worry, it’s actually very simple, and we’ll show you how to get started.

How to open a Coinbase account

Opening a Coinbase account is easy. Here’s what Coinbase says you’ll need to create an account:

  • Be at least 18 years old
  • Government photo ID, such as a driver’s license or government ID card
  • A computer or smartphone with internet access
  • Phone number for SMS confirmation
  • The latest version of your internet browser

If none of this is a problem, you’re ready to create an account. To do this, enter your first and last name, email, country of residence and create a password. You will also need to check the box confirming that you are at least 18 years old. The only thing left after that is to set a password. Be sure to set a strong, unique password to protect your account.

You’ll also want to add a payment method so you can transfer money to your Coinbase account. US users can use a variety of methods, including bank account, debit card, PayPal, Apple Pay or wire transfer. Please note that PayPal is only available to US users and you can only use it to buy cryptocurrency or make withdrawals.

Once you’ve created your account and added a payment method, you’re ready to start trading cryptocurrency.

What cryptocurrencies does Coinbase support?

While Coinbase doesn’t support every cryptocurrency, it does support many of the most popular coins. Therefore, most people who buy and sell on Coinbase will not encounter any problems. However, more advanced traders may find that they need to set up an account elsewhere.

There are more than 120 coins available on Coinbase. We won’t list every single one, but here are some of the most popular ones that Coinbase provides access to:

You can find the full list on the Coinbase website.

How much does the store cost?

Fees on Coinbase can be a bit complicated, but they depend on your account type, transaction size, and funding source. Several factors can affect the fee you ultimately pay, including your country/region, payment method, and product.

For smaller transactions, you will pay a margin of 0.5 percent of your trade value plus a fixed fee based on the size of your transaction, as follows:

$10 or less $0.99
Over $10 and up to $25 $1.49
Over $25 and up to $50 $1.99
More than $50 and up to $200 $2.99

Although a single Bitcoin costs significantly more than these dollar amounts, Coinbase allows you to buy fractions of coins, so you can still buy small amounts. The cost of the margin increase is already factored into your purchase or sale price.

On amounts above $200, you will pay a spread margin of 0.5 percent of your total trade value, and Coinbase’s variable fee for transactions above $200 is charged as follows, depending on how you pay for the cryptocurrency:

US bank account 1.49 percent
Coinbase USD wallet 1.49 percent
Debit card 3.99 percent
Instant card withdrawal Up to 1.5 percent of any transaction; minimum fee of $0.55

As you may have also noticed, the fee eats up a significant portion of your purchase for those small amounts.

If you’re a more advanced trader, Coinbase Pro might be worth considering. With Pro, you’ll find additional trading options and upgraded charting features. Coinbase Pro also offers a simpler (and lower) fee structure.

The easiest way to learn about Coinbase’s fees is to review your order, which you can do by following the steps below.

How to Buy and Sell Cryptocurrencies on Coinbase

If you’ve already linked a payment method to Coinbase, buying and selling couldn’t be easier. Once you’re logged into your Coinbase account, here are the steps to buy cryptocurrency:

  1. Click the Buy/Sell button in the upper right corner.
  2. Please indicate whether it is a one-time purchase or a daily/weekly/monthly purchase.
  3. Enter the amount of your purchase.
  4. Choose a cryptocurrency to buy.
  5. Choose a payment method.

Keep in mind that when purchasing via a bank account, the transaction typically takes 3 to 5 business days to complete, according to Coinbase.

Selling on Coinbase is even easier. All you have to do is enter how much you want to sell (or choose “sell all”). Then select which coin you want to sell and how you want to be paid. Note that the same fees apply to both buying and selling.

Is Coinbase safe?

It’s natural to wonder if Coinbase is safe, especially if you’re investing a lot. Plus, it’s still a relatively new platform. While Coinbase is a generally secure platform and has security measures like two-factor authentication, it is not immune to attacks. A quick search online turns up reports of Coinbase users having their accounts emptied overnight. Experts point to SIM card replacement as one of the causes of these incidents.

While this may sound scary, it doesn’t mean you have to avoid Coinbase. There are measures you can take to make things even more difficult for potential hackers, such as using what’s called a non-custodial wallet. Another option is a hardware wallet.

The idea behind these different types of wallets is that you don’t rely on Coinbase to store your money. They allow you to store your own cryptocurrency using an app, software or hardware. So even if someone gets access to your Coinbase account, it won’t give them access to your wallet, where your cryptocurrency is actually stored.

The downside of this approach is that it requires you to remember your own password, also known as your private key. If you’ve heard reports of people losing millions because they lost their cryptocurrency wallet, they probably have a non-custodial wallet. Although this method is more secure, it is up to you to secure access to your wallet.

The point

Coinbase is an easy way to get started for those new to cryptocurrency. Its easy-to-use interface allows people to buy and sell cryptocurrencies in just a few clicks. Although not every type of cryptocurrency is supported, you will find many of the most popular coins there.

One thing to keep in mind about Coinbase is that the fees can add up, especially when you’re buying small amounts of cryptocurrency. For example, you’ll pay a variable fee of $0.99 when you buy up to $10 worth of cryptocurrencies, which means your fee could be almost 10 percent (and that’s on top of the margin already built into the price).

These are among the biggest reasons why Coinbase is useful for beginners, but not for everyone. If you want to avoid Coinbase’s high fees and long processing times, there are many other ways to buy cryptocurrencies like Bitcoin.

And if you decide to invest in cryptocurrency, make sure it’s part of a diversified investment strategy. This means investing in proven assets such as stocks and bonds and real estate if you choose. Also, remember to keep cash on hand, ideally in a money market account or high-yield savings account. Taking these steps should help you weather the volatility that often comes with investing in cryptocurrencies.

Editorial Disclaimer: All investors are advised to conduct their own independent research on investment strategies before making an investment decision. Furthermore, investors are advised that past performance of investment products is no guarantee of future price appreciation.

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