Coinbase has turned into a behemoth that hates Bitcoin and tries to destroy its privacy and fungibility. Last year, we have seen them acquire Neutrino, a company that’s associated with Hacking Team and used to work with authoritarian regimes to help with the tracking of freedom rights activists and freedom fighters. A year later, Coinbase is trying to sell blockchain analysis data to the IRS and the DEA.
If anything, it’s the real Kraken (no pun intended) due to its many features and services. They’ve bought lots of other Bitcoin-related businesses only to integrate them in their ecosystem and strengthen their position on the market.
So how hard is it to really delete Coinbase?
If you look at Coinbase today, you will realize that it has become much more than an exchange for cryptocurrencies. It’s a custodian for institutions, an investor in “blockchain” projects that suspiciously include nothing related to Bitcoin, a debit card issuer, an OTC trading desk for institutions, a reliable payments processor, and now even a blockchain analysis service.
To its credit, Coinbase also never lost user funds. At least not due to their fault – many users had their personal accounts hacked and lost their coins, but Coinbase as a custodian has been pretty good.
Yes, this doesn’t indicate that they are hack-proof and have reserves to back every coin deposited (it’s likely that they do engage in fractional reserves). But to large investors and institutions, they are the go-to exchange. They trust it because it has a great record and are regulated.
Coinbase started out in 2012 as a Bitcoin-only business, but added Ethereum in 2016 and began making anti-Bitcoin and pro-blockchain industry decisions. It would be foolish to believe that Coinbase was ever on the side of Bitcoin – they obtained BitLicense to operate in the New York state, and have undergone all measures to make sure that they’re compliant with laws and regulations.
Instead of sticking to the Bitcoin values and trying to push for regulatory frameworks that do understand the nature of Bitcoin, they submitted to politicians and big money. Coinbase is not about helping Bitcoin achieve its goal of separating state and money and empowering individuals – on the contrary, it’s about helping governmental agencies surveil the Bitcoin network with great accuracy and controlling large amounts as a custodian (bitcoin amounts that can be seized and confiscated by the governments).
Coinbase has been trying to centralize and control Bitcoin for years
Also, Coinbase has supported every attempt to undermine Bitcoin’s decentralization and establish benevolent dictators in charge of the network. In 2015, CEO Brian Armstrong has praised Gavin Andresen’s BIP 101 (which proposed a constant block size increase) as “the best proposal we’ve seen so far”.
And as the Bitcoin scaling debate went on, Coinbase has showed support for the Bitcoin Classic, Bitcoin Unlimited, and SegWit2X hard forks. Whenever somebody wanted to centralize Bitcoin, Coinbase was there to show support by endorsing the initiative, offering to run a node, or willing to list the forked coin.
Actually, when Coinbase has listed Bitcoin Cash on 19th December 2017, the price of the alt coin has pumped to its all time high of $4.35k – only to perpetually dump from there and essentially stabilize around the same price of August 1st 2017, when the fork from the main Bitcoin blockchain has happened. This phenomenal pump has led to suspicions of insider trading and internal investigations whose results we never found out.
How much does deleting your Coinbase account help?
Is it really as simple as deleting a Coinbase account and using the alternatives? Well, yes and no. If you’re a regular trader, then you’ll find better alternatives with lower fees. If you’re holding your $200 worth of BTC on Coinbase, you should probably start embracing financial sovereignty and withdraw your coins to your own wallet which allows you to manage the keys.
But if you’re an institution that wants to have funds insured and needs a good track record before making a decision, then you’ll probably go to Coinbase. If you need a third party custodian for your company, Coinbase will be among your top choices. If an institutions wants to buy bitcoins OTC, it will most likely go to Coinbase. Keynesians who want to spend their crypto with a debit card will also find it simple to use Coinbase. And if a merchant wants to start accepting bitcoins, then Coinbase offers one of the simplest ways to balance regulatory compliance and a quick setup.
We will not be able to really delete Coinbase unless we replace its convenient and user-friendly services. Lots of people don’t use Coinbase because they like it, but because it works and is friendly with businesses and institutions. And for every Twitter user who deletes his Coinbase account, there’s going to be another institution which uses Coinbase’s OTC trading and custody.
So really, we need exchanges to get better and provide all of these services while also respecting the values of Bitcoin. It’s hard to play catch-up with such a behemoth of a company that has both influence and money, but someone needs to provide better alternatives. Coinbase might have been around since 2012, but the Bitcoin space is still young and there is still room for ethical innovation.
Ideally, everyone should delete Coinbase and watch this ship sink. However, we need better exchanges and services first. Not everyone is going to act in good faith according to the Bitcoin values and there’s a great majority of people who only care about making more fiat money. If we also service these people in a way that supports the values of Bitcoin, then we can finally put an end to Coinbase’s tyranny.
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