When it comes to Bitcoin, there is a lot of confusion about what exactly it is, and who actually owns it. So, the question remains – do you actually own Bitcoin on Coinbase?
Here’s a look at what Bitcoin is, and how Coinbase works to help clear up the confusion.
What is Bitcoin?
Bitcoin is a decentralized digital currency, without a central bank or single administrator, that can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries. Transactions are verified by network nodes through cryptography and recorded in a public distributed ledger called a blockchain. Bitcoins are created as a reward for a process known as mining.
They can be exchanged for other currencies, products, and services. As of February 2015, over 100,000 merchants and vendors accepted bitcoin as payment.
How Does Coinbase Work?
Coinbase is a digital asset exchange company headquartered in San Francisco, California. They broker exchanges of Bitcoin, Ethereum, Litecoin and other digital assets with fiat currencies in 32 countries, and bitcoin transactions and storage in 190 countries worldwide.
Coinbase has a variety of features that make it the leading exchange in the market.
Coinbase allows its users to buy and sell cryptocurrencies through their platform. In order to do this, they hold a large amount of cryptocurrency in their own wallets – this is known as their “hot wallet”.
When you buy or sell cryptocurrency on Coinbase, they are actually just transferring it from their hot wallet to yours (or vice versa). This means that your cryptocurrency is always stored on Coinbase’s servers – you do not actually own the cryptocurrency itself.
This can be seen as an advantage or a disadvantage, depending on how you look at it. On one hand, it gives Coinbase full control over your cryptocurrency and means that you are trusting them to keep it safe for you.
On the other hand, it also means that you do not have true ownership of your cryptocurrency and could lose access to it if Coinbase decides to shut down or if their servers are hacked.
So, do you actually own Bitcoin on Coinbase? The answer is technically no – but for most people, this does not matter. If you are happy with entrusting your cryptocurrency to Coinbase then they provide an easy way to buy, sell and store it.
However, if you want true ownership of your Bitcoin then you will need to look elsewhere.