Coinbase and Coinbase Wallet are two platforms that allow users to buy, sell, and managecryptocurrency assets. While they are both developed and maintained byCoinbase, a major cryptocurrency exchange, they serve different purposesand are suited for different types of users. In this article, we’llcompare Coinbase and Coinbase Wallet to help you understand the keydifferences between the two and decide which one is right for you.
Before diving into the comparison, it’s important to understand theconcept of custodial and self-custody wallets. A custodial wallet is atype of wallet in which a third party, such as an exchange or afinancial institution, holds the user’s private keys and has controlover their cryptocurrency assets. A self-custody wallet, on the otherhand, is a wallet in which the user holds their own private keys and hasfull control over their assets. Both Coinbase and Coinbase Wallet offercustodial and self-custody options, so it’s important to understand thedifferences between the two and how they work.
What is a Custodial Wallet?
A custodial wallet is a type of cryptocurrency wallet in which athird party, such as an exchange or a financial institution, holds theuser’s private keys and has control over their cryptocurrency assets.Custodial wallets are often used by beginners or casual cryptocurrencyusers who are not comfortable holding their own private keys or are notinterested in the technical aspects of managing their own assets.
In a custodial wallet, the user’s assets are stored on the walletprovider’s servers, and the provider is responsible for keeping themsecure. When the user wants to make a transaction, they must initiatethe request through the wallet provider’s platform, which will thenprocess the transaction using the user’s private keys.
Examples of custodial wallets include Coinbase, Gemini, and Kraken.These platforms allow users to buy, sell, and store cryptocurrency in asecure and convenient manner, but the trade-off is that the user musttrust the wallet provider to keep their assets safe and to handle theirtransactions properly.
What is a Self-Custody Wallet?
A self-custody wallet, also known as a non-custodial wallet, is atype of cryptocurrency wallet in which the user holds their own privatekeys and has full control over their assets. Self-custody wallets areoften preferred by experienced cryptocurrency users who value securityand privacy, as they do not need to trust a third party to keep theirassets safe.
In a self-custody wallet, the user’s assets are stored on their owndevice, such as a computer or a mobile phone, and the user isresponsible for keeping them secure. When the user wants to make atransaction, they initiate the request using their private keys and thetransaction is processed directly on the blockchain.
There are several examples of self-custody wallets available,including Coinbase Wallet and MetaMask. Coinbase Wallet is a standalonemobile app that allows users to manage their cryptocurrency assets andinteract with decentralized applications (dApps) on multiple blockchainnetworks, including Ethereum, Bitcoin, and Litecoin. MetaMask is abrowser extension that allows users to interact with the Ethereumblockchain from their web browser and manage their Ethereum accounts andassets. Both Coinbase Wallet and MetaMask are good choices for thosewho want to take control of their own cryptocurrency assets and havefull control over their transactions.
Coinbase vs. Coinbase Wallet
Here are some of the main differences between Coinbase and Coinbase Wallet:
Custodial vs self-custody:
Coinbase is primarily a custodial platform, allowing users to buy,sell, and store cryptocurrency in a secure and convenient manner.Coinbase Wallet, on the other hand, is primarily a self-custodyplatform, enabling users to manage their own cryptocurrency assets andinteract with decentralized applications (dApps) on multiple blockchainnetworks.
Supported digital assets:
Both Coinbase and Coinbase Wallet support a wide range of digitalassets, but they differ in the specific assets they offer. Coinbasesupports a large selection of cryptocurrencies, including Bitcoin,Ethereum, Litecoin, and several other well known cryptocurrencies.Coinbase Wallet chrome extension, on the other hand, supports any ERC20token or asset and also enables users to interact with dApps on theEthereum network. Taking it even further – the Coinbase Wallet mobileapp adds support for other major cryptocurrencies such as Bitcoin, andLitecoin.
Coinbase and Coinbase Wallet have different fee structures, withCoinbase generally having higher fees than Coinbase Wallet. Coinbasecharges fees for buying and selling cryptocurrency, as well as formaking transactions on the platform. Coinbase Wallet charges lower feesfor most transactions, but users may incur fees when interacting withcertain dApps or making transactions on the Ethereum network.
Both Coinbase and Coinbase Wallet prioritize security,but they have different approaches to protecting user assets. Coinbaseuses a combination of cold storage, two-factor authentication, and othersecurity measures to protect user assets. Coinbase Wallet relies on theuser to keep their device and private keys secure by offering iCloudand Google Drive backups.
Coinbase offers insurance for user assets that are stored on theplatform, covering losses in the event of a hack or other securitybreach. Coinbase Wallet does not offer insurance for user assets.
When choosing between Coinbase and Coinbase Wallet, it’s important toconsider your specific needs and preferences. If you’re new tocryptocurrency and want a simple and secure platform for buying andselling assets, Coinbase may be the right choice for you. On the otherhand, if you’re an experienced cryptocurrency user who values privacyand control, Coinbase Wallet may be a better option.
Ultimately, the right wallet for you will depend on your goals andhow you want to use cryptocurrency. Both Coinbase and Coinbase Walletoffer a range of services and features that can be useful for differenttypes of users, so it’s worth considering both options and decidingwhich one is the best fit for your needs.
Crypto news and insights, delivered weekly
All the Latest on Crypto news, Wallet Security, and DeFi in 10 Minutes or Less