Wondering what the difference is between a Coinbase wallet vs vault? They are both used to store funds but they differ in the way they work and the security that they provide. Coinbase makes an analogy of a checking account vs a savings account when referring to the difference between the two. This is a great way of putting things.
With a checking account you can more easily move money around but it doesn’t provide the amount of security as a savings account. This pretty much sums it all up. The Coinbase wallet is a checking account and the vault is a savings account.
I’ll be going over all the differences you need to know, how they both work, and how to get things set up if this is something you are interested in.
Coinbase Wallet and Vault
Both the wallet and vault that Coinbase provides have the same purpose… to store your cryptocurrency funds. These storages are a free service that everyone gets access to with a Coinbase account and can be used to store all the cryptocurrencies that Coinbase deals with including Bitcoin, Litecoin, Ethereum and Bitcoin Cash.
Every Coinbase account can have 1 wallet and 1 vault for each cryptocurrency. For example, you can store Bitcoin in both the Coinbase wallet and the Coinbase vault. And as I mentioned above, this is similar to how you use (or should use) both a checking and savings account when dealing with fiat money in your bank account.
The big difference between the two are that the vault provides additional security steps to prevent funds from being stolen. Added security is a great thing but this also makes your funds less “liquid”. They cannot be moved around quite as easily and this is why both the wallet and vault should be used in conjunction with one another.
Added Security With The Vault
If you are a Coinbase user and have been for some time then you are probably familiar with using the wallet already. Its pretty simple to use. When you withdrawal cryptocurrencies from your wallet you simply put in the destination wallet address and confirm the transaction. There isn’t really anything to it.
There is more to it when it comes to withdrawing from the vault and this is because of the added security measures in place. These include…
With the vault you are able to set it up to require multiple signatures before a withdrawal goes through. You could make it so that friends, family and/or business acquaintances have to sign off on things. They will be able to do this via an email they will receive after the withdrawal has been initiated from you. However, you, the account owner, are still the only person who can initiate a withdrawal.
This multi-signature feature is optional. You can use the vault individually and not require this feature. If you do this you will still have to verify the withdrawal from 2 different email addresses.
This makes things much more secure from hacking. If a hacker were to get into your personal account they would not be able to withdrawal without these signatures or without confirming the withdrawal from multiple email accounts.
48 Hour Hold
There will be a 48 hour hold on all withdrawals in which you can easily cancel. This is to ensure that you were the one that initiated the withdrawal and if you did not, if someone hacked your account, you can stop it.
Even if you have the multiple signature feature set up and everyone signs off you will still have to wait for the 48 period to end.
98% Offline Storage
Coinbase says that 98% of the funds that you put in the vault will be stored offline in cold storage. This means that if they are hacked the hackers will only have access to about 2% of funds that are kept online for liquidity reasons.
This is about as safe as you will see when it comes to online exchange wallets.
They claim that they store these funds in real vaults and safety deposit boxes. Whether this is in hardware wallets, paper wallets, etc I don’t know, but it is extremely safe.
This is also likely part of the reason they have a 48 hour hold on withdrawals. Its because they have to move funds back online from the cold storage in order to go through with the process.
A Look At The Withdrawal Process
Step 1: Choose destination, amount to be sent, and enter in 2FA security code from phone
Step 2: Wait for confirmations from others
Step 3: Wait for 48 hour wait period to complete if it hasn’t already
And that is it. This is an example that came from Coinbase’s site but it shows everything clearly so I used it.
Should You Use The Vault or The Wallet?
The answer to this question depends on your situation. If you have little funds that you are not planning on keeping for long, then the wallet might be sufficient for you. But if you have a lot of funds that you are planning on holding onto for a while then the vault is definitely the more safe choice.
The only difference really is that the vault is more safe like a savings account and the wallet is easier to move funds around like a checking account.
They can both be used together. You can keep some funds in your wallet that you plan on doing something with and then you can keep the majority of funds that you plan on holding onto long-term in your vault.
*If you are interested in using the vault you might want to look into getting your own hardware wallet like TREZOR or Ledger Nano. This way you can safely store your funds offline but won’t have to entrust Coinbase to handle things for you. It all depends on what you are looking for.
How To Create a Vault
If you are reading this I’m guessing you already have a Coinbase account… which means that you already have a wallet for every cryptocurrency on the exchange. When you create an account you automatically get wallets for each. The Vault is the optional that you probably didn’t even know existed when you first signed up.
Creating a vault is simple. It can be done from your existing Coinbase account. There is no need to go out and create another. It is a separate “account” to store your funds in but is still tied to the same Coinbase account.
The procedure for setting up a vault is as follows…
Step 1: Login to your Coinbase account (or you can create one with my referral link here: Coinbase.com/join if you don’t have on yet.)
Step 2: Go to your accounts, scroll down and click “+ New Account”
Step 3: Choose account type (vault), select what cryptocurrency you want to create the vault for (I’ll be using Bitcoin in this example), and name your vault
Step 4: Choose who approves withdrawals: Individual or Group, then add emails of “approvers” (will enter a second email if you choose individual)
Step 5: Confirm emails and wait
You will have to confirm the emails you entered or wait for your group to confirm.
I hope you found this post helpful. As always leave any comments or questions below and I’ll get back to you soon 🙂