Ethereum: Where does Coinbase buy coins from?

Ethereum: What Happens to the Coins You Buy on Coinbase?

Coinbase is a popular online platform known for allowing users to buy, sell, and hold cryptocurrencies like Bitcoin, Ethereum, and many others. But have you ever wondered what happens to the coins your money buys on Coinbase? In this article, we’ll dive into the world of cryptocurrency trading and explore where Coinbase gets its coins from.

What is Coinbase?

Coinbase is a digital currency exchange platform that allows users to buy, sell, and store cryptocurrencies like Bitcoin (BTC), Ethereum (ETH), and others. The company was founded in 2012 by Brian Armstrong and Fred Egraham, and it has since become one of the largest and most reputable online cryptocurrency platforms.

How does Coinbase make money?

Coinbase makes money through two main revenue streams: fees and interest.

• Fees: Coinbase charges users a flat fee for each transaction, which is typically around 1-5% of the amount they buy or sell. This fee is usually deducted from the user’s wallet.

• Interest: Coinbase also earns interest on its stored cryptocurrencies. The company holds coins in custody and earns interest on them, which can range from 0.5% to 3% per annum.

Where do Coinbase get their coins?

Coinbase does not mine or produce new cryptocurrencies like Bitcoin (BTC) or Ethereum (ETH). Instead, it buys and sells existing coins on the open market. Here’s how it works:

• Buying and Selling: When you buy coins on Coinbase, they are typically sourced from a variety of places, including:

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Stock exchanges: Coinbase may purchase coins directly from stock exchanges like NYSE, NASDAQ, or AMEX.

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Cryptocurrency exchanges: Coinbase might also acquire coins through other cryptocurrency exchanges that have been sold or delisted (removed) from the market.

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Mining pools

: Some Coinbase users may be part of mining pools, which are groups of individuals who pool their resources to mine cryptocurrencies. In some cases, Coinbase may purchase coins directly from these mining pools.

• Storage and Custody

  

  : Once Coinbase buys coins, they are typically stored in a secure custody solution, such as:

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Cold storage: Coins are held in “cold storage” (offline) accounts that use advanced security measures to protect them.

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Hot storage: Coins may be stored in online wallets or digital currency exchanges with faster access times.

Conclusion

In conclusion, Coinbase makes money through a combination of fees and interest earned on its stored cryptocurrencies. While the company does not mine new coins like Bitcoin or Ethereum, it buys existing ones from various sources on the open market. By understanding how Coinbase operates and what happens to the coins your money buys on the platform, you can better appreciate the inner workings of the digital currency ecosystem.

Disclaimer: This article is for informational purposes only and should not be considered as investment advice. The cryptocurrency market is inherently volatile, and the value of coins can fluctuate rapidly. Always do your own research and consult with a financial advisor before making any investment decisions.