Coinbase, the US-based exchange aimed at making Bitcoin mainstream for American users, is a well-established crypto platform often recommended worldwide, especially for those new to crypto.
Several factors set Coinbase apart from its competition. Firstly, unlike offshore exchanges run by unknown entities, Coinbase is based in the US and regulated by local authorities. Moreover, it’s operated by a dedicated team of well-known experts. This bolsters the exchange’s reputation, making it unlikely to vanish with users’ funds.
Coinbase is also praised for its security practices that protect users’ funds. While some of these practices are now common, the Coinbase Vault, a unique security feature recently integrated, offers options like delayed withdrawals and multi-signature capabilities not found on other cryptocurrency exchanges.
This guide will explore why Coinbase vaults are beneficial and how opening a Coinbase vault can assist with your cryptocurrency transactions.
How Are Coinbase Vaults Different From Coinbase Wallets?
To make cryptocurrency transactions, you first need a crypto wallet. Like many other exchanges, Coinbase offers its own online wallet to its customers. When you open a Coinbase account, you get a unique wallet for all the cryptocurrencies you purchase on the platform.
Coinbase wallets are convenient for traders because the digital currencies stored there can be immediately traded on the exchange. Traders can quickly take advantage of price volatility without moving assets between platforms. Since Coinbase wallets are custodial, customers are spared the trouble of protecting their private keys, as the exchange handles security.
However, keeping large amounts of digital currencies in exchange wallets carries risks, as they are connected to the internet and vulnerable to theft. Many people prefer cold wallets for offline storage, like paper wallets or hardware wallets (e.g., Trezor or Ledger). The downside is that users must manage their own security, and transactions take longer.
If you want a middle ground between these options, Coinbase vaults are the answer.
What Are Coinbase Vaults?
Coinbase vaults provide online crypto storage with additional security measures, unlike the immediate access offered by Coinbase wallets. Think of your Coinbase wallet as a spending account for quick access, while vaults act like savings accounts with a waiting period for withdrawals.
Coinbase vaults add a waiting period before approving withdrawals, which helps prevent impulsive decisions. This feature is enhanced by multi-signature capabilities for group vaults. While Coinbase wallets are mainly for individuals, group vaults can be controlled by multiple people, allowing couples, families, and business partners to manage cryptocurrency together.
How Do Coinbase Vaults Work?
Now that we know how useful Coinbase vaults can be, let’s look at their functionality. Coinbase vaults are available to all customers at no charge. You can open a vault for each type of digital currency you own.
Depositing assets into Coinbase vaults is similar to depositing into a Coinbase wallet. Each vault has a unique address, just like a wallet address.
Withdrawals from vaults differ as they require more time and security steps. You must confirm a withdrawal request from two separate email accounts within 24 hours, and the withdrawal will complete after a 48-hour waiting period.
This waiting period and email confirmations apply to group vaults as well.
Supported Cryptocurrencies
All cryptocurrencies available on Coinbase can be stored in vaults, including popular assets like Bitcoin (BTC), Ethereum (ETH), Bitcoin Cash (BCH), Litecoin (LTC), Binance Coin (BNB), Cardano (ADA), and Solana (SOL).
How to Set Up a Coinbase Vault
If you already have a Coinbase account, you can easily open a vault. If not, go to Coinbase.com and create an account. After signing in, you can see your cryptocurrencies through the Assets tab. Select the cryptocurrency you want to create a vault for and choose the “Create Vault” option.
When creating a vault, you can choose between an individual vault or a group vault. Individual vaults are controlled by you alone, while group vaults require multiple signers. For individual vaults, you will need to provide a secondary email address for added security.
After opening a vault, you will receive a vault address for depositing assets. Remember that each cryptocurrency has its own vault and address, so sending ETH to a BTC vault could result in loss of assets.
How Do Group Vaults Work?
Group vaults work differently from individual vaults. The person who opens the group vault is the master account holder and can add other Coinbase users as members. While everyone can deposit into the vault, only the master account holder can request withdrawals. These requests must be approved by a majority of the group members within 24 hours.
Withdrawals from group vaults follow the same 48-hour waiting period as individual vaults. The master account holder can cancel the request during this time, but if the majority of signers do not approve it, the request is automatically canceled.
How to Send Bitcoin and Other Cryptocurrencies to a Vault
Each vault comes with a specific vault address, similar to a wallet address. Anyone can send crypto to a vault using this address. For example, if you have a Bitcoin vault address, anyone can send BTC to your vault from their own wallets.
You can copy-paste the vault address or use a QR code, available on the Coinbase mobile app. You don’t need a Coinbase wallet to send digital currencies to a vault, but if using a Coinbase wallet, do so through a browser, as the mobile app does not support vault deposits.
Conclusion
A Coinbase vault is ideal for long-term storage of digital assets, preventing impulsive spending. Unlike regular wallets, vaults require a 48-hour waiting period for withdrawals and confirmation from two email accounts, adding an extra layer of security.
The most exciting aspect is that vaults can be controlled by multiple people, making them suitable for families, friends, and business partners who want a mutual cryptocurrency fund. Withdrawals must be confirmed by the majority of signers, ensuring shared responsibility and security.