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Coinbase.com is a crypto exchange and a secure online platform for buying, selling, transferring, and storing cryptocurrency. The platform also stores your coins if you purchase them, but should you use Coinbase Wallet to store your crypto tokens? Is Coinbase wallet better than Coinbase.com for storing your coins? Let’s find out in our Coinbase Vs. Coinbase wallet guide.
First things first, the Coinbase wallet is a self-custody wallet. This means that the private keys that prove ownership of a blockchain address are stored locally. These keys are not stored on a centralized exchange such as Coinbase.com. This makes the Coinbase wallet a better option to store your coins as they are not prone to hacks.
Think of the Coinbase wallet as a conventional cash wallet where you get total control of your crypto assets. Moreover, you can configure a dApp wallet on Coinbase.com where the exchange holds half of your private key and the dApp wallet on your device holds the other half.
What’s a Self-custody Wallet?
As mentioned earlier, a self-custody wallet stores your private keys locally on a device and gives you full control over your crypto assets. Generally, the 12-word recovery phrase gives you access to your wallet and funds. This recovery phrase should be safely backed up and never disclosed to anyone. The best thing about this type of wallet is that you can sign up for it even if you don’t have a bank account or an email address.
What’s a Custodial Wallet?
With a custodial wallet, your private keys are stored by a third party and your funds are managed by them as well on your behalf. If you opt for a custodial wallet, you have to finish a KYC process and provide various documents to finish onboarding.
What are the Key Differences Between Custodial and Self-custody Wallets?
Here are the key differences between these wallets:
Control of Funds
With a custodial wallet, your funds and private keys are managed by a third party on your behalf. However, with self-custody wallets, you have total control over your private keys and funds through a 12-word recovery phrase.
Transactions
With custodial wallets, your transactions are executed and managed on a third-party exchange. Furthermore, you can send money to self-custody wallets from custodial wallets for further activities.
If you use self-custody wallets, you directly interact with dApps like DEX trading, liquidity pools, lending, and more. Transactions with self-custody wallets are done on-chain and in real time.
Security
Coinbase wallet is a self-custody wallet and you have direct control over all the wallet’s information. You can sign up for this wallet without a bank account or email address.
The safety of the wallet is ensured by a 12-word recovery phrase. You must keep the recovery phrase backed up and private. If the private keys are lost, your account cannot be recovered by Coinbase Wallet. We recommend never sharing your recovery phrase and storing it in a secure location.
Does Coinbase Wallet Charge Different Fees Than Coinbase app?
The answer to this question is, yes. The noteworthy point is that Coinbase doesn’t control or set these fees. When you make a transaction using a self-custody wallet, you have to pay network fees, usually called gas fees. The fee fluctuates based on overall network demand and blockchain in use. Here’s an example:
If you send a crypto asset from your crypto exchange account to your Coinbase wallet, you’ll have to pay a network fee. This fee is paid to the miners and several other network participants. Coinbase doesn’t take anything from this fee, which changes as per network demand and congestion.
Conclusion
In conclusion, we can say that the Coinbase wallet is not the same as Coinbase.com, and to use the Coinbase wallet, you don’t need a Coinbase.com account. Coinbase.com is one of the best places to buy, sell, and manage cryptocurrency.
FAQs
- Is it better to have Coinbase or a wallet?
Coinbase wallets are one of the best in the market because they are safe and easy to use. It is a well-tested wallet and serves great for Coinbase users. This wallet is ideal for both beginners and crypto experts.
- Do I need a wallet if I use Coinbase?
When you use Coinbase to buy crypto, it is automatically stored in a hosted wallet. It is a third-party wallet, which has control over your private keys. Therefore, use a Coinbase wallet as it is a self-custody wallet, which means you have control over your funds and crypto assets.
- Is it free to transfer from Coinbase to Coinbase Wallet?
Coinbase doesn’t charge any fee for transferring tokens from one user’s primary balance to another. If you are making a transaction on a crypto network, Coinbase charges a fee, which is paid to the miners and not Coinbase.