Coinbase Outage Freezes Withdrawals
Crypto investors on Coinbase were unable to withdraw funds from U.S. bank accounts over the weekend. Coinbase cited a ‘major outage’ on their support page as the culprit which froze ACH withdrawals, deposits, and buy failures in the U.S. The incident is another example of the need for digital asset protection.
Coinbase exchange
On Twitter, Coinbase assured investors that their “funds were safe.” Despite frozen withdrawals in the U.S., CoinGecko reported that between Saturday and Sunday, $596 million was traded on the Coinbase exchange, the vast majority of which was BTC and ETH.
By midday Sunday, the issue had been ‘fully resolved’ and all ACH transfers were working. As of writing, the technical reasons for the outage have not been specified by Coinbase.
Digital asset management
Though the Coinbase incident does not appear to be the result of a larger hack, it is a good reminder to investors of the seriousness of digital asset management and security. Protecting digital assets is a multi-pronged effort; assets can be lost or stolen for any number of reasons and it takes proactive measures to secure one’s portfolio.
Protecting digital assets such as cryptocurrency and NFTs requires more than the obligatory data encryption, et al., needed for websites and email. Investors need to understand the need for wallet storage and what their options are when it comes to hot and cold wallets.
Non-custodial wallet
A non-custodial wallet, or ‘cold wallet’, is one of the best ways to protect digital assets. Coinbase is a custodial wallet: a third party platform that holds an investor’s private keys that the investor uses to access their funds on the blockchain.
The problem with custodial wallets is that they hold investors’ data on their platform. Though highly encrypted and generally safe, non-custodial wallets are simply not as secure as custodial wallets. Keeping private keys off of the internet with a non-custodial wallet, such as Ledger, is a better option.
A lesson for investors
As with any new technological platform, there are scammers and hackers trying to take advantage of investors or outright steal from them. With web3 still in its infancy, a lot of protective measures are complex for many investors.
Storage wallets are not the easiest things to adapt to and handling them can be clunky; this is why many investors use custodial wallets like Coinbase. As web3 technology continues to advance, the issues that can arise with non-custodial wallets will dissipate and using cold storage will be more palatable for investors.
In any case, the Coinbase incident shows us that it does not take a hacker or scammer to halt transactions or freeze money. As such, each investor does well to responsibly secure their own funds as best they can.
