Cryptocurrency exchange Coinbase, launched in 2012, is considered to be one of the largest exchanges operating in the United States — and the most trusted. However, an alleged wrongdoing back in December 2017, caused a long court procedure, the outcome of which is still vague and uncertain.
It’s all fun and games until a hard fork
On March 1, 2018, an Arizona citizen and trader named Jeffrey Berk filed a lawsuit in the Northern District Court of California on behalf of exchange users who found themselves in a similar situation, accusing Coinbase of sharing misleading information and — most importantly — insider trading, both of which allegedly resulted in mass losses of funds.
It started when the Bitcoin community was about to split the chain. At the end of July 2017, right before the hard fork, Coinbase declared that it would not support the new coin — i.e., Bitcoin Cash (BCH) — since it was hard to predict for how long it would survive and what its market value would be in the future.
A hard fork is an update to a blockchain performed in order to improve it, get rid of bugs that could have popped up, or to add new features. Eventually, the chain splits in two, and a new cryptocurrency appears. This is what happened to Bitcoin, the first and the largest cryptocurrency that was introduced in 2008 “as a response to the financial crisis.” And so, in mid-2017, Bitcoin Cash was born.
Communication is key
Coinbase made several confusing statements about adding Bitcoin Cash to its platform, which eventually led the company to court. Following the declared policy toward the hard fork, Coinbase advised its users to withdraw their Bitcoin from the exchange before the split if they wanted to trade BCH because withdrawals would not be possible after the hard fork. However, in August, the exchange announced that users would be allowed to withdraw their BCH, but not earlier than Jan. 1 of the next year.
The reason for this was that, “in order to safely and securely access bitcoin cash, Coinbase would need to undertake a process of designing and testing significant changes to our systems — including hot and cold storage,” according to a now-delete tweet from Coinbase that was quoted in the lawsuit. At that time, the platform still did not intend to support the new coin, as the court document stated, “Coinbase had announced its intention that customers benefit to the extent possible from hard forks.”
Yet, soon after the hard fork, Coinbase’s director of communications, David Farmer, wrote in a blog post that Coinbase would eventually add BCH, as it had considered customer demand, the network’s security and other factors — but again, not until Jan. 1, 2018. Nonetheless, Coinbase changed the schedule and decided to add the currency on Dec. 19, but the exchange failed to give its customers any advanced notice, while employees were informed that the currency would be added to the exchange earlier than planned, according to the lawsuit.
A trap for traders
Coinbase unexpectedly opened its books for buying and selling Bitcoin Cash just minutes after announcing it. According to the lawsuit, Coinbase is not denying that certain people were tipped off in advance. This means that the situation, which came suddenly for everybody else, was especially beneficial for the insiders.
The lucky traders obtained BCH for fair prices and thus thinned the liquidity, leading to rapid artificial inflation. After a short period of time, within which insiders were able to sell their funds, the exchange stopped all BCH trading, leaving all the other customers with nothing but confusion. The next day, Coinbase repeated the same sequence of actions.
According to the lawsuit, the plaintiff (i.e., Berk) attempted to purchase BCH five minutes after the announcement, but his orders were not executed until about 20 hours later. The next day, Berk found out that
Negligence rather than fraud and unfair competition
The mishandling of Bitcoin Cash’s launch became one of the reasons for the token’s more than 130% rise in price — from $1,865 on Dec. 18, it jumped to $4,300 by Feb. 20. On Dec. 20, the 24-hour transaction volume spiked up to $12,047,600,000, as seen in the chart below. To date, this record has yet to be broken.
In a blog post, CEO of Coinbase Brian Armstrong stressed that “all Coinbase employees and contractors were explicitly prohibited from trading Bitcoin Cash” and also that the disclosure of nonpublic information was not allowed. However, seeing the price fluctuation, Armstrong claimed that an internal investigation would be carried out. “If we find evidence of any employee or contractor violating our policies — directly or indirectly — I will not hesitate to terminate the employee immediately and take appropriate legal action,” Armstrong wrote in the same blog post. To date, neither Armstrong nor Coinbase has disclosed the results of the investigation.
As Cointelegraph has described, the actions of Coinbase have not yet been determined to be fraudulent. U.S. District Court Judge Vince Chhabria concluded:
“The complaint does not sufficiently explain how the launch manipulated the market for Bitcoin Cash or for Bitcoin. Nor does it plausibly or coherently describe Coinbase and Armstrong’s motive to manipulate the prices.”
The judge granted the defendants’ motion to dismiss the claim of fraud as well as the claimed violation of California’s Unfair Competition Law, which means that the case will now move forward as a negligence lawsuit.
We are in the midst of discovery
On Aug. 9, the court published a stipulation postponing the deadline for Coinbase to answer to the complaint. In an email to Cointelegraph, Lynda Grant, who represents the plaintiff in the case, explained:
“Defendants are now required to make a filing responding to the allegations of the complaint that was filed last year. They need to respond to those allegations by admitting, denying or indicating that they do not have sufficient information to respond to them. They are also required to assert certain affirmative defenses that they may have to the claims. We are very early in the case, and expect many more hearings and orders.”
With regard to the potential outcome, Grant emphasized that the plaintiff is currently continuing to fight the case but that the outcome is not clear-cut:
“It is too early to know what the outcome of a trial would be. We are currently in the midst of discovery and have pleaded enough even at this point to have sufficiently pled a negligence claim. In a trial of the action, a court or a jury could find negligence on Coinbases’ behalf, and we believe that it will, but it is too early in the case to make a prediction. We believe that the victims, or class members here should eventually receive compensation for their damages.”
Better times are yet to come?
To sum up the judge’s latest statement: Coinbase was incompetent, but it was not maliciously incompetent. Keeping this in mind, class members could still expect the exchange to compensate for their damages, although the trial has not happened yet.
The exchange failed to maintain a functional marketplace and thus financially injured its customers, which makes Coinbase blameworthy in the eyes of many. Liquidity and market capitalization needed for effective trading might have been ensured if Coinbase announced the BCH launch an hour in advance. Neglecting such precautions, the exchange should have expected serious consequences. As for the platform’s future, Grant believes that Coinbase “should institute greater protections in the event of a fork and to ensure that its public statements are accurate.”
Coinbase Pro vs Binance: Which Crypto Exchange Is Better? Torsten Hartmann
One of the biggest dilemmas facing any investor looking to enter the cryptocurrency world is: “Which platform should I use to invest into my first coins?” These platforms are called exchanges and today we are going to take a look at two perhaps most popular ones out there, Coinbase Pro and Binance.
Coinbase Pro is an online trading platform extension of Coinbase, probably the most famous place to buy Bitcoin and Ethereum online. It’s an US-based and regulated exchange offering a number of trading pairs for the biggest cryptocurrencies online. It is backed by some serious smart money in NYSE, Andersen Horowitz, Union Square Ventures etc.
Meanwhile, Binance is an independent, Asian-based cryptocurrency exchange focused on supplying English/Chinese speaking markets. While much younger than Coinbase, many regard it as one of the best places to trade various altcoins. The scale of its influence on the cryptosphere can be seen every time a Binance listing instantly causes a massive boost in price of a coin.
So with the initial greetings out of the way, let’s start digging deep to answer the question from the title of this article.
In order to use both of these platforms, you will need a user account. However, the processes of creating them do differ slightly.
- Coinbase Pro
Per Coinbase Pro user agreement, customers are permitted to have one business and one personal account. The differences between the two will include data like your business name, location and CEO when creating a business account. A regular account can be created by clicking on the Create Account button on Coinbase Pro home screen. This will take you to the sign-up page.
Filling out the form data and clicking Create an Account will lead you to a confirmation screen, which will inform you that a verification e-mail has been sent to the address you submitted on sign-up. Opening your e-mail and clicking the link saying Verify Email Address leads to the Coinbase Pro user terms screen.
You can read those, or if you are familiar with them already, simply proceed by clicking the I Accept button. Next screen requires you to input a phone number for better security, and while you can choose to skip it for now, your account will stay in a limited state until you connect a phone number to it. It is always recommended to have a phone linked to enable 2FA.
This will also be required to gain full access to your Coinbase Pro account funding and trading options. Phone verification can be done by entering your phone number in the provided field and then entering a 7 digit SMS code that Coinbase Pro automated response bots will send to your number.
Next up, you will be asked to create an “Individual” or “Institutional” account, which will determine the rest of information that you will need to provide. The full list of details for individuals can be seen here and the list for businesses can be seen here. The account creation process is unique with Coinbase Pro as it is possible to create it by linking your already existing Coinbase account. A complete list of steps to do so can be found here.
Most of the process with Binance is similar. You’ll need your e-mail, a strong password (they require that your password has at least 8 letters/one number/one capital letter), and optionally a referral ID that gives bonuses to the person who linked you to Binance via his referral link.
When all of this is filled out, click Registration and complete the slide verification that will pop up on your screen. You’ll receive the verification mail and be asked to log in again, once you click on the verification mail.
A safety risk notice will pop-up to ensure that your account is fully protected. Click all the boxes and continue. This unlocks the Level 1 account on the platform, and you will need to submit further verification (personal/business) to upgrade your account to levels 2 and 3.
Interface and trading
Well now that you have an account, it’s time to take a look at the belly of the beast.
- Coinbase Pro
Coinbase Pro offers a somewhat more compact interface, which groups the price chart, buy/sell buttons, order books and order and trade history all in one page.
This allows you to analyze the data quickly without having to switch away to another screen. The platform currently offers three types of orders: market, limit and stop orders. Coinbase Pro also offers margin trading with leverage up to 3x (on BTC/USD and ETH/USD pairs, up to a limit of $10,000), or 2x (for BTC/EUR pair up to 3,000 EUR, and for LTC/USD pair up to $500).
There is no deposit limit on this exchange when it comes to wire or cryptocurrency transfers. Fiat deposits made to Coinbase Pro can be sent via the ACH bank transfer system, which typically takes 3-5 business days* (which can be as many as 7-10 calendar days, depending on the timing of weekends and other bank holidays) to complete.
This support section does show you how to make almost instant wire transfers. You can transfer funds from a Coinbase account for free. As for withdrawals, there is a limit of $10,000 per day on those.
New users might not spot this at once but Binance offers two interfaces: Basic and Advanced. The switch option is slightly non-intuitive and can be found at the top left corner of the screen under the “Exchange” button.
Read our comprehensive guide on best cryptocurrency exchanges.
The difference here is that the Advanced view is
As for trading options, there are only limit and market orders available here. More advanced users will probably be unhappy with this lack of options (can’t even place simple stop-loss orders) but if you want to quickly purchase an altcoin for BTC the interface will be just enough. Binance does not support any fiat currency (USD, JPY, etc.) deposits or trades on their Binance.com platform, but they do support it on their newly launched Binance Jersey.
Only cryptocurrency may be deposited and traded on the exchange. There are no deposit limits here. As for withdrawals, the platform has a 2BTC limit for Level 1 users and 50 BTC limit for Level 2. There is also an option to contact support to increase your withdrawal limit.
Fees for trading
- Coinbase Pro
Maker fees are 0% while Taker fees vary based on 30 day volume.
An average fee of 0.1% is paid on every Binance trade. The fees are 50% lower if you use BNB, the platform’s token.
- Coinbase Pro
Coinbase Pro offers a wide range of fiat and cryptocurrency pairs for Bitcoin, Litecoin, Ethereum, Bitcoin Cash, XRP, ZRX, ETC, BAT, MANA, LOOM, DNT and CVC. The exchange is known for its small currency portfolio but they’ve announced plans for expansion of their altcoin pool in the future. They added 8 new coins in last year only.
Binance blows Coinbase Pro away in this category. It currently trades over 100 different coins including, but not limited to Bitcoin, Bitcoin Cash, Bitcoin Gold, Ethereum, Ethereum Classic, EOS, Dash, LiteCoin, NEO, GAS, Zcash, Dash, Ripple and more.
They even have their own coin, BNB, which can be used to lower your trading fees on platform. As mentioned before, Binance also supports numerous ICO projects and helps them by listing their tokens on the platform.
This willingness to add new coins has brought some criticism to the platform, as many feel they don’t do their due diligence when it comes to researching if the coin is a scam or not. Some scam coins have indeed been traded on the platform, which gives weight to these accusations.
As of now, neither Binance nor Coinbase Pro have been hacked or in any way endangered by an outside malicious player. There have been a couple of cases where people fell for phishing schemes but this has nothing to do with these platforms’ inner security workings. As seen above, Binance now goes out of its way to warn new users about potential dangers which await them in crypto.
Coinbase Pro is a regulated company where customers’ funds are insured by FDIC, while 98% of cryptocurrency funds are kept in cold storage. Binance is secretive about the ways it stores its funds, but has shown in the past that it has ways of protecting them. Both offer 2FA which is always a good thing to see.
Every major exchange will have to deal with a large volume of customer support requests pouring in daily. Both Coinbase Pro and Binance are no exception. And while there is a fair amount of posts about unsatisfied people on both exchanges, it would seem that Binance fared somewhat better when it comes to processing and handling user support inquiries.
Location and team
Coinbase Pro is the exchange part of Coinbase, an American made platform, located in San Francisco, CA. The exchange adheres to strict US regulations, which perhaps explains the low number of currencies it trades. While most of the team works on Coinbase as well, there are some employees dedicated solely to the crypto for crypto section which is Coinbase Pro. Important Coinbase Pro team members can be found on this link.
As for Binance, they just recently moved their operations from Japan to Malta stating:
“After reviewing several different locations, the company decided to invest in the European nation due to its existing pro-blockchain legislation and the stability that it offers financial technology companies through its regulatory framework.”
Malta is considered somewhat of a tax-free zone so that helps as well. The company is also listed in Hong Kong. Binance team is full of young crypto enthusiasts, led by Changpeng Znao.
Binance CEO C. Zhao meeting the government of Bermuda
The team is active on social networks and constantly updates its users with any new information.
So there you have it. Both Binance and Coinbase Pro have their own advantages and a few drawbacks. Coinbase Pro is maybe a bit more suited for beginners, with its lower coin count, simple interface and direct pipeline to Coinbase. Binance isn’t that hard to master either, and anyone looking to trade altcoins won’t be too disappointed with what it has to offer. You will probably use fiat to buy BTC/ETH on Coinbase/Coinbase Pro and then send that BTC/ETH to Binance to buy some shiny new altcoins. All in all, both are excellent exchanges, up there with the best ones on the market.
Coinbase Product Manager: DeFi to change market interactions; how will Ethereum benefit?
At the Coinbase Winter 2019 hackathon, the company’s product manager Jacob Horne described DeFi as an opportunity that could change how individuals interact with markets. In a tweet, Coinbase said that the hackathon itself focused on building DeFi-related tools:
“DeFi, or decentralized finance, is an essential part of an open financial system. DeFi tools are censorship-resistant, unbiased, programmable, and available to anyone with a smartphone. For this hackathon, we’re focusing on bringing DeFi to the world.”
$657 million locked in DeFi, mostly platforms built on Ethereum
According to DeFi Pulse, a site that analyzes and ranks DeFi platforms, the total value locked in DeFi has reached $657 million in Ethereum. It is up by more than 38 percent since October, within a two-month span.
Considering the rapid growth of the space, Horn said:
“DeFi is an opportunity to build financial infrastructure that spans the world, is open to everybody, and starts to change how we interact with markets.”
In essence, DeFi works similarly to existing financial products and banking services that allow individuals to receive and provide loans in exchange for compensation. However, with decentralized platforms, all transactions are processed in a peer-to-peer manner through the use of smart contracts on the Ethereum network.
Other areas like decentralized exchanges (DEXes), derivatives, and assets pooled together with major markets like lending form the foundation of DeFi. The sector itself has significant room to grow, as most of the capital locked in DeFi derives from lending and derivatives.
Developers have found it difficult to make DEXes and decentralized payment platforms as seamless as centralized alternatives, which have led other aspects of DeFi to struggle. In that regard, progress with scalability on major blockchain networks like Ethereum that prioritize smart contracts could pave a path for DeFi to grow over the long-term.
Explosive growth, but what needs to improve?
Over the past two years, the DeFi market grew from $10 million to nearly $660 million in Ethereum value alone.
Still, there are significant risks involved in DeFi since all platforms are decentralized. Usability wise, practical scalability solutions have to be adopted by Ethereum to allow decentralized applications to run more seamlessly. In the upcoming months, developers and companies are expected to continue building on top of the existing DeFi infrastructure, based on the recent trend.
IDEG, Coinbase Custody Launch Bitcoin Trusts in Apparent First for Asia
Digital asset manager IDEG is launching what it claims are Asia’s first Bitcoin (BTC) trusts.
The two new funds — Asia Bitcoin Trust I and Atlas Mining Trust I — were officially announced in a press release on Dec. 8, confirming an earlier disclosure from the firm in Hong Kong in late November.
Coinbase Custody will act as custodian for both trusts, with Asia-based Profound Trust Company acting as trustee. The combined size of the two trusts is $200 million.
Bringing old money to a new sector
The first of the two funds, Asia Bitcoin Trust I, is an actively managed investment vehicle and as such, is being pitched by the firm as a contrast to Grayscale’s flagship Bitcoin Trust , which has seen consistent year-on-year appreciation, outstripping many traditional investments.
Whereas Grayscale’s trust is passively managed, IDEG is setting its approach apart from that of its predecessor, as the firm’s CEO Kevin Yang states:
“As the investment manager of the Trust, IDEG will apply a range of hedging and arbitrage strategies in order to gain more Bitcoin for the investors and meanwhile effectively control the risk of drawdowns.”
IDEG is aiming to further drive traditional investors to include
In his statement, IDEG founder Raymond Yuan claimed that the firm is seeing solid return ratios on its mining activities because of its focus on capex, opex, operational and risk management strategies, as well its capacity to invest in hardware and infrastructure.
“Individual miners are dropping out because institutional miners like us can improve in almost every aspect,” he claimed.
As reported, Grayscale’s highly-successful Bitcoin Trust (GBTC) has recently filed a Form 10 with the United States Securities and Exchange Commission (SEC) in a bid to become the first crypto fund to report to the regulator.
If approved, this would designate the fund as an SEC reporting company and require it to register its shares under the country’s Exchange Act. Ostensibly, given that many institutions hinder investors from considering trusts that lack SEC-approval, Grayscale’s eligible investor base could widen considerably should the filing be successful.
As Cointelegraph reported in September, another U.S.-based investment management firm VanEck has also launched its own Bitcoin trust, but gained relatively low traction in the first week of its operations.