Dangerous disadvantage of web wallet.

[The Cryptovator]

I think most of small crypto users like me just use web wallet to hold crypto-currency. Because we have lack of technical knowledge about bitcoin technology. And as a result most of us don't bother to use wallet software like Bitcoin core or Electrum.

I will describe today one of most dangerous disadvantage of web wallet which have a painful example.

Usually most of us just limited on few boards and don't bother to read even some important board. That's why I am bothering to create a awareness about that disadvantages. So, please take a look on this thread first and read how OP lost 32 bitcoin at once.

If you already read that above thread, I believe you got the point how OP lost his 32 bitcoin. For simple explanation, this user sent fund to a investment platform from coinabse. He used coinbase to buy  and sent bitcoin. Usually all web wallet hold their fund to hot wallet and cold wallet. All the transaction will be made from hot wallet. So when OP sent fund, then coinbase sent fund from their hot wallet. Just imagine, they sent fund from xxx address which is belongs to hot wallet of coinbase, and fund sent to yyy address which is belongs to investment platform. So transaction being confirmed and OP has credited fund to his investment platform.

Somehow OP were not agree to terms and conditions of investment platform and that platform sent fund back to source account (xxx address ). In a result fund directly entered on hot wallet of counabse which is cause op wallet doesn't show 32 bitcoin. Because address were not belongs to OP, it was belongs to coinbase hot wallet.

I have only 1% hope that OP would recover his fund. Only one hope is sent address and receive address were same from both end on both transaction.


Whoever made mistakes but OP has lost fund. Do you believe that kind of amount should hold on coinbase and make transaction of 32 btc a once. If OP were use coinbase just buy bitcoin and use own address which he have private key then he won't lost fund like this way.

Coinbase create a unique receiving address for us and only that address use for receive fund. We can't sent fund from that address because after receive fund on this address automatically will sent and spent to coinbase hot wallet.

So be careful when you are dealing with big amount on web wallet. Use your address which have control private keys. Otherwise fund isn't control by you.  Especially if you are dealing with third party like investment platforms or marketplace just your own address to send fund.

[hatshepsut93]

I also have similar story, though with a happy ending. I used a site that asks you to provide a Bitcoin address for withdrawals, and once you've set it, it can't be changed. I've provided the address of my Poloniex account (it was a long time ago, back when I was a newbie) and it worked well for me for some time. Then, years later, I had to make a withdrawal, and found that Poloniex has implemented KYC and I can't use my account there. Luckily for me, I contacted the owner of the service, and they manually changed withdrawal address for me.

Moral of the story - whatever convenience a web wallet provides you, it's not worth it. Sooner or later you will regret it.

[Findingnemo]

Did read that thread as well, but he may get a chance of getting his back account IMHO because coinbase refunded few times when they send funds using unexisting emails but after a long wait. So if someone holds more than 0.1BTC they should opt for a wallet that gives the full control over their funds.

[smyslov]

Even as a newbie I have second thought of depositing big amount to address I have no control of, I have been reading a lot of these kind of scenarios, people should not become aware of this, we are our own bank and we are always responsible on all action whether sending or receiving, and for newbies, be sure to read and educate yourself before buying or holding a big amount of coins.

[keyscore44]

I'm pretty sure he'll get the money back. Unfortunately, it takes a long time because Coinbase needs to investigate whether the mistake was deliberate in order to use their hot wallet for money laundering.

When it comes to web wallet, it has been explained hundreds of times here to never keep any funds there. You do not need any specialized knowledge to install the wallet on your computer. I'm sure an hour or two with YouTube instructional videos is enough to properly install and use wallet on your computer.

[DdmrDdmr]

The 32 BTC TX incident is now over a month old, and @LssPssn still lacks a positive resolution from Coinbase. I’d say that he still has a fair chance of recovering the funds, after all, it requires is a bit of attention and fair play on Coinbase’s behalf, but then again you never know. Even if he does recover them, being a customer and suffering about the situation for what is now over a month is not something that plays out well.

Most likely it should be the trading platform (the one that issued the refund) the one to pursue the situation with Coinbase, get the BTCs returned to them, and then send them to an address controlled by @LssPssn.

[Wexnident]

It just requires customer support attention, but the OP of the other post should still be able to get his funds back. That's a huge amount, and he still has in his hands the relevant information that proves that THAT transaction did indeed happen and that the BTC originally came from HIS account. Well, it was kind of an accident with partly OP's fault, since it was the transfer of terms that he refused upon. We also can't really blame the system of coinbase for this event, not really their fault. It is rather advisable though, that if you hold that big of an amount of BTC, get a hardware wallet instead. It's rather dangerous to hold 32BTC with web wallet imho.

[BitcoinsGreat]

I think most of small crypto users like me just use web wallet to hold crypto-currency. Because we have lack of technical knowledge about bitcoin technology. And as a result most of us don't bother to use wallet software like Bitcoin core or Electrum.

I will describe today one of most dangerous disadvantage of web wallet which have a painful example.

Usually most of us just limited on few boards and don't bother to read even some important board. That's why I am bothering to create a awareness about that disadvantages. So, please take a look on this thread first and read how OP lost 32 bitcoin at once.

We are talking here about 32 bitcoins and who is stupid enough to hold this much big amount of funds in online web wallet ? You can keep few 1000 dollars in coinbase or other online wallets, but 32 bitcoins should be stored in hardware wallet. I wouldn't even risk to store them on my desktop wallet.
I do hope he gets his money back, i can't even imagine the feeling on losing this much amount of money.

[Lucius]

I think this is an obvious example of how some things should not be done. LssPssn is in big problem just because he did not know how things works on exchanges, otherwise he would have warned the investment platform to not send coins to that address. Yet nothing was lost irreversibly, coins are on an address which is controlled by Coinbase, and now all LssPssn have to do is to be persistent and patient.

I must admit that I am surprised with the fact that Coinbase support is sending just automatic mails for 3 weeks, without any concrete answer. Customer support should be at a much higher level, are they so greedy that they can't hire more people?

[YinShuiSiYuan]

I think this is an obvious example of how some things should not be done. LssPssn is in big problem just because he did not know how things works on exchanges, otherwise he would have warned the investment platform to not send coins to that address. Yet nothing was lost irreversibly, coins are on an address which is controlled by Coinbase, and now all LssPssn have to do is to be persistent and patient.

I must admit that I am surprised with the fact that Coinbase support is sending just automatic mails for 3 weeks, without any concrete answer. Customer support should be at a much higher level, are they so greedy that they can't hire more people?

Coinbase is very sensitive to money laundering. Sometimes they block accounts if someone uses their wallets to play at the casino. I think it is simply about law and they want to be extremely careful. It will take a while, but the money will definitely be returned. (Unless there were some illegal transactions involved)

[Coyster]

I must admit that I am surprised with the fact that Coinbase support is sending just automatic mails for 3 weeks, without any concrete answer...

This kind of lethargic response from coinbase is surprising, it makes people lose faith in a company's services, and this is a a big exchange like coinbase, they should know better. LssPssn made a mistake and all that, but three weeks is good time for them to swing into action(not to have sent the coins)but to have contacted the customer, at least to calm his nerves
.

I think it is simply about law and they want to be extremely careful.

The amount of bitcoin in question is so much and one can understand if they are trying to be very careful, but replying the customer with automatic/bot mails for so long is incompetence, they should reach out to the customer, that's what customer support/help should do.

[yazher]

I remember a certain crypto exchange, called Octaex. in that exchange, I deposited some coins to buy a certain Altcoins I can guarantee it that time that I can make some profits on buying that Altcoins there because they're selling it for a lower price than the other exchanges. Out of nowhere, right after just I deposited my coins, the site cannot be reached anymore. I've waited for days until someone posted here that Octaex just disappears and run away with their user's funds. That's why keeping your bitcoin on some web wallet is dangerous, I experience it myself. what if I deposited a large number of coins, I cannot get that back again until now.

[NeuroticFish]

one of most dangerous disadvantage of web wallet

My first ever purchase with Bitcoin was a total mess. Why? Because I've been using back then a custodian web "wallet".
The platform was expecting the payment get sent within a number of minutes, the wallet was optimizing the fees and sent (much) later and I've spent unnecessary amount of time to recover my money.
It ended well, it was not a high amount either since I was testing, but all the other payments I've done from proper wallet and all went out good.

There are more and more examples pointing to the direction that web wallets don't worth be used. We all learn and do the step forward sooner or later. The sooner the better though.

[boris singer]

I remember a certain crypto exchange, called Octaex. in that exchange, I deposited some coins to buy a certain Altcoins I can guarantee it that time that I can make some profits on buying that Altcoins there because they're selling it for a lower price than the other exchanges. Out of nowhere, right after just I deposited my coins, the site cannot be reached anymore. I've waited for days until someone posted here that Octaex just disappears and run away with their user's funds. That's why keeping your bitcoin on some web wallet is dangerous, I experience it myself. what if I deposited a large number of coins, I cannot get that back again until now.

You are tempted by lower prices, and don't carefully research the reputation of the exchange, getting used to more popular exchanges is better because it has a refund clause in some cases.

Transactions for sending to hot wallet have been completed, but I doubt if it happens in a small market, most are not responsible for user errors.

From all this I see the need to refer to caution in checking the transaction address.

[bossmarket1]

In any case, you cannot store large amounts in your wallet and you need to take care of security.

[sikke]

I don't really get why people don't bother to simply download electrum - the processes involved are just as easy as a web wallet, sometimes even easier given the fact that a lot of web wallets hide certain functionalities in obscure places (cough cough, blockchain.com).

Even worse are hosted wallets, where you don't have custody over your own private keys.

It essentially defies the entire point of cryptos to begin with. Absurd.

[keyscore44]

I don't really get why people don't bother to simply download electrum - the processes involved are just as easy as a web wallet, sometimes even easier given the fact that a lot of web wallets hide certain functionalities in obscure places (cough cough, blockchain.com).

Even worse are hosted wallets, where you don't have custody over your own private keys.

It essentially defies the entire point of cryptos to begin with. Absurd.

This thread is not about how difficult it is to install desktop wallet, but more about the risks associated with using web wallets.
Unfortunately, but to buy, sell or exchange cryptocurrencies the most convenient form is online exchange, so if we have to use them, it's good to know the threats and I think that OP mainly for that created this thread.

[rosezionjohn]

Since this post is in a beginner's section, perhaps it would be best if we inform newbies reading this post who are still unaware of the differences between a custodial web wallet and non-custodial web wallet.

In a custodial wallet, users don't have complete control of their private keys and funds. A good example is Coinbase which was mentioned in the OP.
A non-custodial wallet is the complete opposite of a custodial wallet where users have complete control priv. keys and funds.

[Taskford]

I don't really get why people don't bother to simply download electrum - the processes involved are just as easy as a web wallet, sometimes even easier given the fact that a lot of web wallets hide certain functionalities in obscure places (cough cough, blockchain.com).

Even worse are hosted wallets, where you don't have custody over your own private keys.

It essentially defies the entire point of cryptos to begin with. Absurd.

This thread is not about how difficult it is to install desktop wallet, but more about the risks associated with using web wallets.
Unfortunately, but to buy, sell or exchange cryptocurrencies the most convenient form is online exchange, so if we have to use them, it's good to know the threats and I think that OP mainly for that created this thread.

If you are a holder you are at risk of any attacks if you used a web wallet that's why it's advisable to use the hardware wallet so that we can assure the security of our funds but if we are a short time holder and trade what we receive then for me it's ok to use the web wallet since that is more convenient and the thing we need to do is to set up a strong password and always activate the 2fa.

[sujonali1819]

Op is really very informative to all who don't know about it yet. I also do not take it seriously before seeing this topic. Yes, It is right that I know the web wallet has some disadvantage but I don't know it could be so painful. I am now aware of using a web wallet mainly before sending funds to any trading/investment platform. Thank you for making people aware by sharing this information.