If you are a Coinbase user or are looking to use Coinbase and want to store your cryptocurrency on the exchange then the vault service that they offer may be a good choice for you. But what is the vault and is it worth using?
In this Coinbase vault review I’ll be going over what exactly the vault is, the difference between the regular wallet and the vault, security features, how it all works, the safety of it and how to set it up if you think you want to do so…. so pretty much all you need to know on the topic.
Coinbase Vault Review
Ok, so first off what is the Coinbase vault? This is the first questions that needs to be answered.
The vault is a cryptocurrency storage service that Coinbase provides to its users. It is a free service that any user can take advantage of. What it allows you to do is store your cryptocurrency right there on the exchange.
Its the same type of deal as the normal Coinbase wallet that they automatically provide users with but a bit different. Its more for those looking to store large amounts of cryptocurrency for long amounts of time.
The vault is something that all Coinbase users can set up for free but it is not automatically set up for you. You are able to have 1 vault for each cryptocurrency you have on the exchange.
What’s The Difference Between The Vault and The Wallet?
The main 2 differences are the security and the speed at which you can move funds around. The vault is more secure which is why it is best for people with large amounts of funds to use this service. But at the same time the added security of the vault makes it slower to move funds with. The withdrawal process takes longer.
The best way of thinking about the wallet and the vault are to compare them to a checking account and a savings account in a normal bank. The checking account is less secure but you are able to move money around easier. The savings account is more secure but moving money around is more of a hassle because there are more safeguards in place to protect it from theft.
Both checking accounts and savings accounts should be used together. You keep some money in your checking account that you need on-hand and then you keep the large portion that you are saving long-term in your savings account. This is what you should do with the wallet and vault.
For more information on this you can read my Coinbase Wallet vs Vault post.
Security Features of The Vault
The security that the vault provides is structured around the withdrawal process. If you are going to deposit funds into your vault its the same as it is for the wallet. There is no need for security here. The worst that can happen is someone accidentally sends funds to your account and you get lucky.
The security features that are in place to protect against unauthorized withdrawals include 2FA, multi approval, 48 hour holds on withdrawals, and cold storage. The big changes that separate the vault from the wallet are the multi approval feature and the 48 hour hold.
2 Factor Verification (2FA)
The first thing you will have to do to initial a withdrawal is enter your 2FA code from the Google Authenticator app. If you are unaware of what this is, basically its an added layer of security to ensure that the person initiating the withdrawal is the actual owner of the account.
The Google Authenticator app will be synchronized with your Coinbase account and will provide a time-sensitive code for you to enter.
A big safety feature that the vault has is the multi signature approval. What this does is requires you to get multiple approvals before your funds are withdrawn from the account. This protects against hackers potentially hacking your account and stealing your funds. They will not be able to remove the funds without these approvals, which fall into 2 categories: individual and group…
- Individual – If you set your vault to require individual approval, meaning approval from only you, you will have to hook up a separate email account to your vault. This way, when you go to withdrawal funds Coinbase will email your original email address along with the new one asking for permission to withdrawal.
- Group – You can also create a group approval for withdrawals on your account. What you would do here is require friends, family, business acquaintances, etc to approve of withdrawals. They will receive emails about the withdrawals and will have to approve in the same way.
48 Hour Delay
There is also a security feature in place that places a 48 hour hold on all withdrawals. This means that no withdrawal will start to be processed before 48 hours. This allows for a fair amount of time for users to cancel withdrawals that they do not want to go though. So if a hacker were to get into an account and place an order for withdrawal, the real user would have 48 hours to cancel it.
98% of all vault holdings will be in cold storage. What this means is that Coinbase keeps the funds offline, which means that they are un-hackable. Cold storage is the safest way to store cryptocurrency.
How It All Works
Ok, so lets say you set up your vault and are looking to make a withdrawal. Here is the process you will have to go through…
First you will have to enter the 2 factor verification (2FA) code that you get from your phone to be able to start the withdrawal. You will enter how much of the particular cryptocurrency you want to withdrawal along with where you want to send it.
Then the multi-approval part of the withdrawal process will begin. If you set your account to “Individual” then you will have to approve of the withdrawal from the 2 different email accounts you hooked up. If you set it to “Group” you will have to wait for the group of people you selected to approve.
Next up the 48 hour hold has to be met. If the multi-approval is met before the 48 hour hold you still must wait.
After all of the conditions have been met the withdrawal is then processed and you will receive your funds wherever you sent them.
How Safe Is It Really?
The Coinbase vault is about as safe as it gets when it comes to 3rd party storage like this. They do a great job at keeping all funds safe from hacking by storing 98% offline in cold storage and they do a great job at providing features so that you don’t give hackers any chance of being able to withdrawal funds.
HOWEVER, that said… you still have to trust Coinbase. You have to trust that they are storing your funds safely in cold storage. They say that they actually store the private keys to the accounts in real safety deposit boxes and in real vaults, which I do believe, but it is up to you to trust them or not.
*By the way Coinbase has never been hacked; not the platform itself.
If you aren’t the type of person to trust places like this then you should look into storing your funds in cold storage yourself with a hardware wallet like TREZOR or Ledger Nano. This gives you complete control over your own funds.
Conclusion & How to Set It Up
The Coinbase vault is a great service that Coinbase provides and is very helpful if you want to have someone else keep your funds safe. It is much more secure than the wallet but both should be used in conjunction with one another. Store larger, long-term holdings in the vault and short-term holdings in the wallet.
If you want to set up the vault then keep reading. You can also read my full review of Coinbase here if you want.
Setting It Up
The process is pretty simple so I’m not going to get into too much detail.
When you are logged in and go to Accounts within Coinbase you will have the option to “Add Account” on the left side of the page. You are going to want to click that and choose Vault.
You will then be able to choose which cryptocurrency you want to set the vault up for and what you want to name it.
Then you will set up the multi approval part. You will choose either “Individual” if you want to approve your own withdrawals or “Group” if you want to give other people the ability to approve. The secondary email that you choose if you chose Individual or the other people’s emails if you chose Group will then have to be approved. Confirmation links will be sent out via email to them.
After that you are good to go. You have your vault ready in which you can start depositing funds into.
As always, leave any questions or comments below and I’ll get back to you soon 🙂