hardware key vs Coinbase Vault – newbie

Bitcoin Questions and AnswersCategory: General questionshardware key vs Coinbase Vault – newbie

joseph asked 1 year ago

maybe @Steven Hay or others can educate me regarding my questions…

new to crypto currency…got an account on Coinbase recently, made a few purchases. plan is to buy littlt by little as funds allow for long term investment. i did created a vault along with 2FA.

does the current wisdom suggest to get a private hardware wallet versus the Coinbase Vault? Will Coinbase allow users to have control over their private key and stll be able to buy via Coinbase?

also, i would store the hardware wallet in a safe but if the safe got trashed, say by fire or flood, is there a way to get my coins from Coinbase then?

1 Answers
Steven Hay answered 1 year ago

Hi Joseph,
Sounds like a solid plan. We always recommend that people store their coins themselves, rather than leaving them in the keeping of an exchanges. Plenty of crypto exchanges have lost or stolen customer’s funds before. Using a hardware wallet is the best balance between high security and day to day convenience available. Check out the hardware wallets in our Wallet Reviews section for details.
Coinbase does not allow users to control their own private key completely – no regular exchange does.
If you hardware wallet is lost or destroyed, it will be ok so long as you’ve made an accurate backup of your seed phrase. Ideally, this should be engraved into stainless steel and hidden somewhere very secure. However, if your private key was stored on the hardware wallet, then it couldn’t be also stored on Coinbase.
I think perhaps the confusion here is between coins and private keys and where each is stored. All bitcoins are stored in Bitcoin addresses on the blockchain. Private keys are what allow someone to actually spend the coins in their associated addresses. This is why when Coinbase keeps your coins in their address to which they hold the privkey, they control your coins. However, by withdrawing coins to an address controlled by the privkey in your hardware wallet, you control the coins. Hope this makes sense.
This article will explain further:

What is a Bitcoin Private Key, How to Use It, Keep it Safe!

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