Bitcoin Forum

Like Coinbase. It's like paypal for bitcoin, they can block your account at any time or just vanish into thin air.

I will tell you why . It's pretty simple , people like to lose their coins (It took me some time to get this but It's confirmed). Not only , they can freeze your funds but there is a chance of getting hacked as well since they are "online" .
The rule is simple and exists since the creation of Bitcoin "You control your keys , you control your bitcoins - you don't control your keys , you don't control your bitcoins" , now If people wants to continue using these wallets then they should take responsibility in the future for whatever happens to their BTC.

it is simple: coinbase or any other service like it is newbie friendly.

you just sign up there and you can buy/sell/hold/spend/receive bitcoin all in one place without even knowing what bitcoin is, and how it works.

and since people are lazy, they choose these wallets. in comparison bitcoin core is a big pain in the ass for them because you have to download the whole blockchain (70-80GB) and it takes a very long time and you need to understand what bitcoin is how to send a transaction, how to secure your wallet.

besides not everybody is aware of the dangers of using these web wallets, they see a pretty website and pretty promises of security and they believe them until they get hacked like bitfinex and poof all the money is gone.

reasons:
noobs dont know better (still have the fiat mindset that banks are easier)
people dont trust themselves (worry of accidently getting a virus or house fire/floods wrecking their computer)
running a full client is not the same as a two tap smart phone app
backing up the privkeys is not as simple as 'File -> save as'
re-backing up the privkeys after every 'change address' is not an 'autosave' function

though there are alot of people consider running a full bitcoin client as being straight forward (i do as do many others) but we atleast have to admit it to ourselves that to average joe, its not actually straight forward.

even if these custodian wallets put on disclaimers such as
"we manage the funds for you meaning the funds are stored using our private keys, but we follow your requests as to what you want to do with your balance. but please be aware we do not insure your balance against loss, theft or accidents"
or less subtle
"we own the funds on our private keys, we can follow your requests as to what you want to do with the balance. but we are not insured in any way"
people would still use custodian services, for a mixture of reasons

Well that is a good question that many of the people who use it must ask themselves.
Why do they trust in these services with their bitcoins?
I am dammed sure that I will not ever trust paypal with my money. >:(

Some get attracted due to 0 fee internal bitcoin transfer, someone with no knowledge about how bitcoin actually works find coinbase to be easy to use with just signing up as other epayment sites, they support most of the bank deposits so it has become easier for many americans/europeans to buy bitcoin easily with their bank account etc.

But all of them will come to know at one end that coinbase is just like paypal which keep blocking accounts without any real reason. I have heard even they don't respond to support tickets as well as they moniter bitcoin transactions which don't comply with real meaning of anonymous bitcoin transaction.

They can freeze your account or disappear, but the question becomes whether or not they want to. As long as they're generating money from the exchange they have which has increased volume due to people using their wallet, they are happy. Closing an account is something I've only ever heard of a few times from people, and while unsavoury, it might have been justified in some cases. And they won't vanish because they want to generate as much revenue as they can before they vanish. There's no point cutting your profits early.

Don't think that peole like to lose there coins but only are ignorant, negligent and complacent. I also started with an online wallet (XAPO)because it was required by some websites and it was easily accessible from you mobile device. Ordered also a debitcard and did already some successful transactions. If you keep the amount low in your online wallet the damage will be low when they will run or get hacked.

wow There are people who actually go into high risk areas in the cryptospace. But I also believe that some people are not fully aware of such risks.

I agree, I think it's a noob mistake mostly.   Coinbase is in the U.S. and is regulated, so it might be a little safer than other places.  They can freeze your account but it's more likely they'd close it.  I don't think we've had any real horror stories from them yet.  Still no excuse to keep coins there or on any exchange.

There are a lot of newbie friendly SPV wallets or API wallets which at least don't control your keys. For example Blockchain.Info wallet, MyCelium or Jaxx. It's very stupid to use custodial services like Coinbase.

I think most people trust a company more than they trust themselves sometimes, which can lead to a loss of there bitcoin, but it can be hard for a newcomer to the bitcoin scene to put their bitcoin on to paper wallet or hardware wallets.

Mostly because they are lazy and still used to banks.
Believe it or not but many people don't want to take responsibility for their own money as well.
Sounds crazy right?!

sometime,the new don't know the risk!

It may also happen that most people are not that tech-savvy, but wise enough not to trust themselves to store their coins locally, in their own desktop wallet, where the coins will be prone to theft by viruses, trojans, etc. I mean these people are not sure that they can provide the required level of security themselves.

do you think the millions of online users are wrong or doing mistake by trusting bitcoin? you are doing nothing but just spreading bullshit here.
paypal is the number 1 payment source of the web with no doubt. and it is trusted of course.
if paypal banned someone's account or frozen somone's money then they have valid reasons too.
don't accuse paypal with no reason guys.

i never use it because of that, in my opinion its not worth using it, i definitely like to have my bitcoins in my own wallet where no one can take it

millions of users use many different services that are trusted, do you know how many people thought like you and used MtGox+Cryptsy+bitfinex+Bter+many more exchanges that scammed them and they lost their money?
and yes paypal is the number 1 payment processor but it is also number 1 for scams and customer un-satisfaction. the charge-back is the nightmare of the merchants.

Finally, many are aware of this. I think it is too risky if you have a wallet but did not have the private key from the wallet. Because anytime something bad could happen. I want to add the above example. This applies also for the wallet exchangers, and we know many cases exchangers which carry off the money their customers or hacked. IMO

it is the choice between an easy platform like coinbase where you can store bitcoin as your wallet and also trade it there too
and choosing a wallet, installing it, sync wit the network and keeping it safe and secure.

so most people ignore the risks of using web wallets and use them because it is easy.

I agree that keeping all coins on desktop wallet especially on Windows it's risky too, maybe even more risky than using Coinbase for unlearned user, but there are a lot of solutions between Coinbase and desktop wallet which mitigate both risks. BitGo, Copay, even Blockchain.Info is better.

They are easy to use and many people don’t want to sink more than $100 into something they know nothing about. They are there for beginners and as you grow your bitcoin wealth you learn how to protect it better. They are simply learning sites that are easy to use.

you don't need for considering from 1 perspective, in another reason they are using the custodian wallet like coin base because they are not just offering a wallet. they are offering an exchange at the same time. they are considering from a lot of factor before wanna for using a custodian wallet.

If they block our account, maybe we doing violation or rules. I recommend if we don't use custodial wallet service if we have big amount.

I think the reason has a lot to do with social conditioning around not wanting to take personal responsibility for your own finances, and just being so used to having other folks take care of your assets. Cryptos make you take responsibility, not for everyone!

Some people are convenience driven and too scared to take responsibility for their own finances. It is also easier for them to link their bank account to these services and then convert fiat to BTC. Some merchants will also only deal with other financial services that adhere to KYC & AML regulations. ^hmmmm^

I learned a simple lesson early never leave your btc on any exchange wallet. You have no control of your funds as long as you leave it there.

Yes, exchanges are hacked periodically (or just scam on their users like what Cryptsy did), but if you are a day-trader (or close to being that) you may not have any other option apart from keeping your funds in your exchange account. Until distributed decentralized exchanges kick off for real (if ever), you have to either risk your money being stolen by hackers (exchanges themselves) or stay away from Bitcoin trading altogether missing out on a lot of good opportunities to earn decent profits.

I think people like coinbase because of it is can be trusted and it were run for long time, although it is like paypal they can block our account. And usualy the costumers has be comfortable with its service.

I think the reason behind using the custodial wallets like coinbase is the ease of using. You don't have to download the blockchain to your computer which is close to 300 GB. Also you can access your accounts from anywhere, you don't have to carry your laptop everywhere. These are the main reason I guess.

Also I see no reason to worry if you are holding a small amount of bitcoin in these wallets. But if you are holding some serious amount of bitcoins then it is recommended to use a hardware wallet.