Why is cold storage better than coinbase?

[Doubleflip7]

It seems most bitcoiners prefer cold hardware wallets over online platforms but why is that? Considering platforms like coinbase are FDIC insured and have the best security in the business, it seems much riskier to try to secure my bitcoins on my own. I feel my house burning down or some other accident destroying my wallet is much more likely than losing it on Coinbase. And if there is a breach in coinbase, I get it back... so what am I missing?? While I’m not new to owning bitcoin, I am new to learning about it. So I apologize if this is an annoying newb question.

[1715607670]

1715607670

[1715607670]

1715607670

[1715607670]

1715607670

[1715607670]

1715607670

[Lorence.xD]

Cold storage is not prone to attacks online, the only risk of security for cold wallets is that it is physically stolen from you. Unlike Coinbase which locks some users accounts, you can access your funds anytime. You have to watchful because cold wallet are far more inconvenient when you are trading.

[Doubleflip7]

Cold storage is not prone to attacks online, the only risk of security for cold wallets is that it is physically stolen from you. Unlike Coinbase which locks some users accounts, you can access your funds anytime. You have to watchful because cold wallet are far more inconvenient when you are trading.

I understand that the online platforms are prone to cyber attacks but doesn’t the FDIC insurance make that a non issue? The frozen accounts thing is concerning. I wonder the reason?

[harrylime]

I was under the impression that just your USD FIAT CASH was FDIC insured on Coinbase.

[skpanchal]

Cold wallet always I prefer because short wallet somewhere is risky to hold our assets and cold wallet is offline since we not been use. So I prefer cold wallet to use..

[Maus0728]

Pretty simple. It's because you have the full authority to your coins. Hence the saying "Not your keys not your bitcoin". Using non-custodial has the possibility to lock or suspend your account for whatever reason. To some extent, aside from considering the security part of your holdings, people are using hardware wallet or even creating their own air-gapped device to improve not just the security but also the privacy of their holdings which is a missing factor in most of the exchange.

But still, putting much of your holdings on a centralized exchange is a big NO since it defeats the purpose bitcoin in the first place. You don't want your wealth to be controlled by banks isn't it? Then you should take a bit of effort to secure your money from intermediaries.

[Upgrade00]

I was under the impression that just your USD FIAT CASH was FDIC insured on Coinbase.

This is true for FDIC insurance, as digital currencies are not legal tenders, but there is an insurance for digital currencies stored in coinbase (hot wallet) and lost as a result of a breach in their security.

I understand that the online platforms are prone to cyber attacks but doesn’t the FDIC insurance make that a non issue? The frozen accounts thing is concerning. I wonder the reason?

A breach is not the only risk when storing on an exchange, your funds are not under your control as such, you only spend them when the exchange allows you too. They can be frozen at any time *pending any investigation.
Also, there is a privacy concern, as exchanges require you to pass KYC to transact in certain amounts. Coinbase in particular has been known to submit user details to government agencies to help blockchain analysis. This removes the pseudo anonymity in Bitcoin.

it seems much riskier to try to secure my bitcoins on my own. I feel my house burning down or some other accident destroying my wallet is much more likely than losing it on Coinbase.

Your Bitcoins are in your address and not stored on your 'wallet', so you can always recover it if anything happens to your device, as long as you backup your seed phrase.
Creating multiple backups and storing in safe locations is a prerequisite for security.

[stompix]

I understand that the online platforms are prone to cyber attacks but doesn’t the FDIC insurance make that a non issue?

Coins at Coinbase are not FDIC insured, only fiat can be insured up to $250k this way.

Digital currency is not legal tender, is not backed by the government, and digital currency accounts and value balances on Coinbase are not subject to Federal Deposit Insurance Corporation or Securities Investor Protection Corporation protections.

What Coinbase has is private insurance of ~$200 million for the coins that are held in their hot wallet, which's only 2% of the total coins. For the coins in their cold storage, there is no insurance.

The frozen accounts thing is concerning. I wonder the reason?

The reason is whatever they think a reason might be to do so.

[michellee]

Cold storage is not prone to attacks online, the only risk of security for cold wallets is that it is physically stolen from you. Unlike Coinbase which locks some users accounts, you can access your funds anytime. You have to watchful because cold wallet are far more inconvenient when you are trading.

I understand that the online platforms are prone to cyber attacks but doesn’t the FDIC insurance make that a non issue? The frozen accounts thing is concerning. I wonder the reason?

Every person who has bitcoin will know where they can store their bitcoin, whether they will use online platforms or cold storage or a temporary wallet. I am not sure if the FDIC insurance can help them get their funds back once their account gets hacked by the cyber attacks. If that is our money, we need to know how to store the funds in a safe wallet, and we do not have to use the third party services, especially not using the online platforms because we do not know if they can always protect their member accounts or not in the future.

[Walterhank]

You can't really trust online platform no matter how they promise to be secure. Who knows when something bad happens and they back out of their deal. Sure storing with yourself seems risky but if you do store it properly the chances of it being destroyed are pretty slim. I read a guide that allowed me to properly store my bitcoin, here https://mycryptoparadise.com/best-bitcoin-wallet-to-use-in-2020/

[SiNeReiNZzz]

Quite simple: Not your private key's? Not your coins!

[mk4]

OP, check out: https://NotYourKeys.org/

[mich]

It seems most bitcoiners prefer cold hardware wallets over online platforms but why is that? Considering platforms like coinbase are FDIC insured and have the best security in the business, it seems much riskier to try to secure my bitcoins on my own. I feel my house burning down or some other accident destroying my wallet is much more likely than losing it on Coinbase. And if there is a breach in coinbase, I get it back... so what am I missing?? While I’m not new to owning bitcoin, I am new to learning about it. So I apologize if this is an annoying newb question.

To make it easy and simple I like to tell people it is more safer to have your coins in my possession in my lock box then it is to keep them on a exchange.  This way I know my keys are in my possession and not someone else.

Even if I could someway lose my hard wallet in my lock box there is a better chance of a platform like Coinbase going down for long periods of time as happened many times in the past.

The platforms are insured like you say but it will still be a horrible process I think to go through a hassle to recover coins that were lost or hacked.  It is okay to store some coins in a exchange in my opinion but only some and not all of them.

[adzino]

All I know is, if you store your coins in coinbase, you don't have access to your private keys of your wallet. It is coinbase that has access to it. This means that you actually don't own the coins. Again, coinbase is centralized. This means if coinbase gets taken down, you might lose all your coins. Again, if your coinbase account isn't secured enough, and if your email gets hacked, chances of your coinbase account getting compromised is high. So many reasons why you should avoid coinbase if you wish to store coins for long term.

[tabas]

It seems most bitcoiners prefer cold hardware wallets over online platforms but why is that? Considering platforms like coinbase are FDIC insured and have the best security in the business, it seems much riskier to try to secure my bitcoins on my own. I feel my house burning down or some other accident destroying my wallet is much more likely than losing it on Coinbase. And if there is a breach in coinbase, I get it back... so what am I missing?? While I’m not new to owning bitcoin, I am new to learning about it. So I apologize if this is an annoying newb question.

No, you still have unsure answer if Coinbase is hacked. They can reason that all funds were stolen by the hacker. It's best to keep your bitcoins alone, on a hardware wallet. What you only need to keep are those recovery seeds, other than that when you're accessing the wallet, you'll be asked to confirm your withdrawals or addresses for deposit which you need to do and be done on the hardware wallet. You don't own your private keys in Coinbase and you don't have control over it.

[shoreno]

its just a matter of choice @op . you already state your reason why you feel or why you think that coinbase is safer than a cold/offline storage so what are you waiting for ? just do it and just go for it .

 i believe that there are alots of people that are like you that also prefer online wallets but they dont have a reason like you . infact i use online wallet too , the one where i dont hold my keys but its not coinbase , i have a bad history with that wallet .

[davis196]

It seems most bitcoiners prefer cold hardware wallets over online platforms but why is that? Considering platforms like coinbase are FDIC insured and have the best security in the business, it seems much riskier to try to secure my bitcoins on my own. I feel my house burning down or some other accident destroying my wallet is much more likely than losing it on Coinbase. And if there is a breach in coinbase, I get it back... so what am I missing?? While I’m not new to owning bitcoin, I am new to learning about it. So I apologize if this is an annoying newb question.

If you are so afraid of your house burning down,why don't you just put your cold wallet in safe deposit box in a bank.
If you are still afraid,just buy an insurance policy for your BTC from an insurance company(even though I don't think that they provide such insurance products right now,they might start going this in the future).
In conclusion,there's no 100% safety for your Bitcoins anywhere,but it's still way better to keep your coins and your private keys in your house,instead of relying on the mercy of some big corporation.

[raidarksword]

Offline wallets are much safer than centralized wallet like coinbase wherein it's prone for a cyber attack and we all know no security protocols are safe from hackers and no system is impenetrable is not possible to them. One thing about cold wallets that you have the full control of your assets and private keys, you just have to keep it in the safe place away from thieves.

[hd49728]

Cold storage is the best is bitcoin will be store offline. Exchanges have many hacks and since 2018, they changed to move from hot wallets to cold wallets, from single signature to multi-signature wallets.

"Not your keys, not your coins" so let consider a non-custodial wallet for your bitcoin. Bitcoin core, and Electrum are one of top non-custodial wallets.

If you don't want to disclose your bitcoin address, you can create a wallet with Electrum when your computer is offline. Save a receiving address and make deposits to that address from another wallet of yours.

If you care about privacy, you need to use Tor browser when you check that deposit transaction or that wallet.

[Oshosondy]

Cold wallet is the security while coinbase is the privacy invading, not only coinbase is the privacy invading wallet but many other wallets that are custodial and require verification to be fully functional. Aside privacy invasion, also is the inconveniences custodial wallet can pose, there are many coinbase users that says their account was blocked, freezed and some complains like that, cold wallets are noncustodial which means privacy. Not only that but also it stores private keys offline, while something offline will be hard to be known to hackers. For any recommendation, coinbase should not be there.