Coinbase is the largest crypto exchange company by volume in the United States. However, crypto exchanges aren’t strictly regulated as other stocks or bond exchanges.
Crypto exchange hack is a common occurrence where hackers steal all the money from exchanges. Due to the nature of the cryptocurrency, it’s near impossible to track down the flow of these hacked currencies.
Over the last few years, more than a billion-dollar cryptocurrency has been hacked from these exchanges. Only in a handful of cases were the users reimbursed for the loss. However, most of the time, the customer suffers and loses their life savings.
Here is a list of hacks that happened across multiple crypto exchanges in the last few years.
- In January 2022, Crypto.com admitted that over $30 million worth of Ethereum and Bitcoin had been stolen from customers’ accounts. The hackers exploited a 2FA system and stole the money (source). Even though Crypto.com said they had reimbursed impacted customers, it eroded customers’ trust.
- In December 2021, hackers stole more than $196 million from Bitmart. For days, Bitmart didn’t say anything about the hack, didn’t address the issues, and didn’t return any media inquiries (source).
- In August 2021, Poly Network lost more than $600 million due to a security flaw (source). However, in this case, the hackers returned almost all the money and pointed out the security flaw. As a result, Poly Network gave the hacker reward money of $500,000 for being a good hacker and not running away with the money.
- In August 2021, hackers stole $97 million from a Japanese crypto exchange named Liquid (source). This time, however, hackers didn’t return any hacked cryptocurrencies. Moreover, the Liquid exchange also didn’t return money to affected customers. Thus, many customers lost hundreds of thousands of dollars.
- In January 2018, hackers stole $523 million from another Japanese crypto exchange named Coincheck (source).
- In March 2019, a crypto exchange named CoinBene lost more than $105 million to hackers (source). Initially, the company didn’t admit the hack and said that no hack took place and all the customer’s money was safe. However, later it is revealed that CoinBene has lied, and indeed they got hacked.
- In May 2022, Forbes reported that hackers stole more than $600 million from blockchain platform Ronin Network (source). The Ronin Network failed to track down the cryptocurrencies. It’s also reported that affected customers couldn’t withdraw money from their accounts.
In 2021 alone, more than 10 crypto exchanges got hacked. Therefore, crypto exchanges aren’t a safe place to keep cryptocurrencies. When hacks occur, the customers suffer, not the exchanges.
A Coinbase customer can buy crypto and store their currencies in two ways.
- Hot storage
- Cold storage
Coinbase Hot Storage:
When a Coinbase customer keeps their money on the exchange, which is connected to the internet, it is called Hot storage. It has both some benefits and drawbacks.
In case of a hack, there’s a high probability that you may lose all your cryptocurrency.
Coinbase Cold Storage:
Cold storage is also known as a hard wallet. These are potentially USB devices that store cryptocurrency and are entirely offline. Coinbase is only used to exchange currency in this scenario. Even if Coinbase is hacked, it will not impact the customers as their coins are offline.
Coinbase Freezes Account
Coinbase regularly bans accounts from transferring or withdrawing their cryptocurrencies without any notice. Especially during a significant price swing of Bitcoin or Ethereum. This account ban also affects users who want to sell their coins at a profit.
There’s a term, “Not your key, Not your wallet.” It means that if a customer keeps their cryptocurrencies at Coinbase, then those aren’t yours because Coinbase can ban you and seize all of your cryptocurrencies without any recourse.
Moreover, their customer service is unhelpful in helping the customers.
Long Term Investors
The real-life use case of cryptocurrencies is rare. Nowadays, cryptocurrencies are primarily used as an investment vehicle. For long-term investors who want to buy cryptos and hold onto them for more than several years, it’s best to store all the currencies offline in a hard wallet.
Coinbase isn’t the best place to store cryptocurrencies.