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Written by Logan Robison on July 16, 2021
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How Does Coinbase Work?

In mid-April of 2021, you most likely heard what everyone else in the crypto world heard – Coinbase is the next big thing in crypto. With its astounding initial public offering, valuing the company at over $100 billion, Coinbase set the crypto world ablaze and gained undeniable credibility.

Since that moment, maybe you have signed up for the exchange yourself. Or maybe you have been a long-time customer of the platform.

At any rate, this article is dedicated to breaking down how Coinbase works and what components stand out as critical for investors.

To learn more about Coinbase, check out our full Coinbase review.

What Is Coinbase?

Coinbase is an exchange platform that specializes in cryptocurrencies. It was founded in 2012 and although it is based in the U.S., the platform is available in over 100 countries and currently has more than 56 million users!

On the Coinbase platform, users can easily buy, sell, transfer, and store crypto. This crypto exchange allows users to store their coins for free but charges for services such as the purchase or sale of coins.

Coinbase has a variety of coins on the platform and includes the standards of Bitcoin, Ethereum, Litecoin, etc. Other coins found on the platform (altcoins) are in abundance. There are currently over 25 different coins on the platform with plans to add more in the future.

coinbase earn crypto

How Do I Trade on Coinbase?

The actual purchase and sale of coins on the Coinbase platform is very simple and straightforward. Similar to Robinhood with the user experience of trading equities, Coinbase has made its user interface sleek and simple.

When you log into your account via your android or iOS app (or web version) you will see your portfolio balance followed by the coins in your watchlist. You can easily track their daily performance from this view or click on each one to get a more detailed look.

On the bottom ribbon of the app, you will see options to dive into your portfolio, transact, view prices, or modify your settings.

To transact, simply click on the symbol at the bottom middle of the ribbon and indicate whether you would like to buy, sell, convert, send, receive, or move cash. In this instance, let's say you are going to buy some bitcoin.

Once you click 'Buy', select the coin you are interested in and type in the dollar amount that you are looking to spend (the minimum order is $1.99).

Once you select 'Preview Buy' you will see a breakdown of all the fees associated with this purchase as well as when you should expect the funds to settle. Click 'Buy Now' to complete the transaction.

The process is very similar for selling, converting, and transferring coins.
coinbase phone

How Does Coinbase Store My Coins?

Coinbase has two distinct apps that users can interact with. The first is the common Coinbase app that allows users to transact in cryptocurrencies. The second is the Coinbase Wallet. This is a separate app that gives you, the user, complete control over your coins.

Think of the standalone Coinbase app as a brokerage that will authorize transactions and automate crypto purchases and the Coinbase wallet as a traditional cash wallet that allows you to send, receive, and trade crypto.

The Coinbase Wallet is considered a non-custodial wallet meaning Coinbase will provide the software necessary to secure your crypto but will not store your information like a passcode. The responsibility of this information lies with the user.

Note that it is not necessary to download or use the Coinbase Wallet to store your crypto. However, experts recommend that you do not store your crypto in an exchange for the long term.

coinbase crypto portfolio

What Does Coinbase Charge in Fees?

As mentioned above, Coinbase does not charge a fee to store your crypto, nor does it charge you to transfer your coins to a different wallet.

It does, however, charge per transaction. All of these fees are upfront and visible before you decide to confirm each transaction.

Coinbase charges one-half of one percent (0.50%) for cryptocurrency purchases and cryptocurrency sales.

In addition, Coinbase charges a flat fee. This fee is the greater of (a) a flat fee or (b) a variable percentage (see below). The rates are as follows if the transaction is in the ranges below:

  • Less than or equal to $10, the fee is $0.99
  • More than $10 but less than or equal to $25, the fee is $1.49
  • Greater than $25 but less than or equal to $50, the fee is $1.99
  • More than $50 but less than or equal to $200, the fee is $2.99

The variable fee is determined by region, product feature, and payment type. For this example, we will use the USA though we encourage you to check out this site for details on your specific region.

Payment Method for Purchase/Payout Method for Sale Effective Rate of Conversion Fee (after waiver)
US Bank Account 1.49%
Coinbase USD Wallet 1.49%
Debit Card or PayPal 3.99%***
Instant Card Withdrawal up to 1.5% of any transaction and a minimum fee of $0.55
USD Deposit Method Effective Rate of Deposit (after waiver)
ACH Transfer Free
Wire Transfer $10 ($25 outgoing)
PayPal 2.5%

For example, if you are in the USA and would like to purchase $100 worth of Bitcoin with your debit card, you would pay a fee of $2.99. This is because the flat fee of $2.99 is less than the variable fee of 3.99% of $100 ($3.99).

How Does Coinbase Work: Final Thoughts

Coinbase is an exceptional exchange designed to give users a simple and easy cryptocurrency experience. Through the app, you can transact, convert, and store your cryptocurrencies. However, note that the fees on the Coinbase platform are relatively high compared to its competitors and it is recommended that you do not keep your coins on the Coinbase brokerage platform for long periods.

However, if you are looking for a simple way to invest in cryptocurrencies, then Coinbase might be a good option for you. If you aren't convinced that Coinbase is for you, be sure to check out the other platforms that have cryptocurrencies to find the right one for your goals.

Continue Reading

Coinbase featured image
Article written by Logan Robison
Logan graduated with a degree in finance from Brigham Young University and currently works in merchandising for a large retailer. In his free time he loves to hike and camp with his wife and son. Logan is also heavily involved in real estate investing and manages a blog and email newsletter for pet owners (thepetbrief.com).

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