As the crypto industry grows, so do concerns along with it. As projects continue to get bigger and larger players to pile in, a new problem is presented. How to manage the wealth of crypto assets effectively? As new services roll out and mature, infrastructure takes center stage.
Coinbase has been developing cryptocurrency custodian solutions for quite some time. Coinbase has recently released a FAQ page regarding the costs of custody services, which is an excellent step toward explaining the security of its system. And why we should trust it with our coins. We’ll look at the wallet service, how to use it, and more.
Coinbase custody is a new product that makes it easy to invest in cryptocurrencies.
Coinbase custody is a suite of institutional products and services that helps financial institutions and hedge funds safeguard crypto assets. They aim to be the most trusted and easiest-to-use crypto custody solution for people and institutions worldwide. They’re building Coinbase custody as the most secure, compliant, and reliable way to store digital assets.
Coinbase Custody builds on Coinbase’s existing Know Your Customer (KYC) and Anti-Money Laundering (AML) procedures, which helps their team identify the right customers for this new service. Additionally, they have an extensive process to onboard new customers, including face-to-face meetings with their compliance team and identity verification documents.
Coinbase is a cryptocurrency trading platform that allows you to buy, sell, and store cryptocurrencies. It currently offers support for the following cryptocurrencies:
Bitcoin is a cryptocurrency and worldwide payment system. It is the first decentralized digital currency, as the system works without a central bank or single administrator. Since the network is peer-to-peer, basically there’s no need for a middleman to facilitate transactions between the users. These transactions are verified by network nodes through cryptography and recorded in a publicly distributed blockchain.
Ethereum is a blockchain-based distributed computing platform that is open-source and accessible to the general public. It supports smart contracts (coding). The Ethereum Virtual Computer (EVM), which it offers, is a decentralized Turing-complete virtual machine that can run programs via a global network of public nodes. ETH2 is the native token of the Ethereum platform that enables Smart contracts and Distributed Applications (DApps) to be built and run without downtime, fraud, control, or interference from a third party.
Tether is a cryptocurrency that is pegged to the US Dollar. It is designed to be a stable alternative to other cryptocurrencies, which can fluctuate greatly in value.
Tether is a cryptocurrency backed by actual fiat currencies such as USD, EUR, GBP, and more. It is mainly used to trade against other cryptocurrencies.
The token can buy other cryptocurrencies and fiat currencies like the US dollar or Euro from Coinbase Pro. However, it cannot be transferred between wallets or exchanges without converting it into another cryptocurrency via the “Send” feature on your account settings page.
USD Coin (USDC) is another stable coin that has been listed on Coinbase. It allows for low-cost transactions across exchanges and services built on top of the open financial system of the internet.
BNB stands for Binance Coin. It’s a currency issued by Binance, a cryptocurrency exchange based in Malta, which also operates in other countries worldwide. Binance is one of the largest crypto exchanges in the world, handling billions of dollars worth of transactions daily.
What are the Coinbase custody services?
Cryptocurrency custody services are a new type of service that’s being offered by some cryptocurrency exchanges and financial institutions. The purpose of these services is to protect your cryptocurrency holdings from theft, hacks, and other types of damage.
Custody services are very similar to traditional investment management services. They allow you to hand over control of your cryptocurrency holdings to a third party who will manage them on your behalf. You’ll pay a fee in exchange for this service, but it may be worth it if you want peace of mind knowing that your investments are safe.
Cryptocurrency custody services take care of all aspects related to storing your cryptocurrency. This includes:
- Creating a wallet only you can access using multiple security layers like 2FA and encryption keys.
- Securing the wallet using maximum security measures like multi-signature wallets or cold storage where private keys are stored offline.
- Monitoring for suspicious activity and reporting any unusual activity immediately so the company’s security team can investigate it.
Third-party custody is a type of storage where you transfer your digital assets from a wallet or exchange account into the custody of a third party. This can be done via an API call or manually sending funds over by signing off on the transaction. The third party then stores their assets in their secure storage system, which may include hardware wallets like paper wallets. Once the assets are stored safely at the custodian, you can use them as normal.
Partial custody involves a custodian holding some of your cryptocurrency and allowing you to maintain possession of the rest. Partial custody is most often used by institutional investors who want to invest in crypto but don’t want to manage it themselves.
Self-custody is a storage method for cryptocurrencies that does not rely on a third party, such as a bank or exchange. Self-custody refers to storing private keys and fund recovery phrases on your devices.
Some of the significant self-custody benefits include the following:
- Security: You are the only person with access to your funds, which means nobody else can take them away from you. Additionally, you are responsible for keeping your devices secure, so if they get hacked or stolen, you will lose out in this case.
- Control: You have full control over your private keys to decide how much money to send and receive. You also have complete control over when you want to sell or buy cryptocurrencies, as there is no need to wait for approval from anybody else.
- Privacy: Self-custody allows you to keep your funds private because nobody else can access these keys or recovery phrases used by different wallets and exchanges. This makes it impossible for someone else to see how much money is stored in these accounts or whether they even exist!
Coinbase stores your coins in their wallets, which means your private key is never shared with them, and they are securely stored or ‘custodied’ in the Coinbase vault.
To access your private key, you will be asked for it when you withdraw from Coinbase. You can also import your private key into a wallet that supports this feature, such as Electrum or Mycelium.
The FDIC insures Coinbase through its parent company, Paxos.
The FDIC protects consumers by insuring deposits at banks, savings associations, and credit unions.
The FDIC requires all banks to become members of the Federal Deposit Insurance Corporation (FDIC) and to deposit a certain percentage of their deposits with it as a cushion against losses. The amount of each bank’s deposit insurance depends on its size and how much capital it has relative to its deposits.
The new service is a win for users because they don’t have to worry about dealing with the security of funds or the added cost of engaging a third-party service provider. It will be interesting to see if this model will become more widespread in the crypto world and, if so, what impact that might have on crypto service providers.
Get to know:
- 10 Best VR Headsets For Upcoming Year 2023
- Gaming Industry To Make $500 Billion By 2027-2030
- Gamestop NFT 2023: Everything You Need To Know About
- World’s 10 Most Expensive NFT Fashion Brands 2023