Coinbase Vault

If you want to buy some Bitcoin and store it online and have it on your Android phone or your iPhone, then our portfolio company Coinbase has the product for you.

But what if you own a couple thousand Bitcoin? That’s $1.3mm of Bitcoin at today’s price. Well then you might want something more secure.

Yesterday Coinbase announced Vault, a more secure offering designed for people who own a lot of Bitcoin and want to protect it and are willing to put up with more security as a result.

Like the core Coinbase wallet offering, Vault is free. It is being rolled out now and about 5% of Coinbase’s customers have it already. Coinbase told Coindesk that all Coinbase users will have access to Vault by mid July.

I like to think of Coinbase as the bank and brokerage firm for Bitcoin. They have checking accounts (wallet), CD/savings (vault), brokerage (buy/sell), and merchant services.

And more is coming. Stay tuned. I will keep you posted.

#hacking finance

Comments (Archived):

  1. James Ferguson @kWIQly

    Simple trust is probably one of the biggest issues for bitcoin – As @JLM would say Well played

  2. LIAD

    1/ like how in one fell swoop through a few relatively minor changes and some good branding they can obviate a bunch of other companies products.2/ still curious about their doomsday planning. at the end of their probably very long TOS, which I haven’t read, what happens if everything goes wrong and all is lost. Is anyone on the hook for the bitcoin or is the end of the road a bunch of legalese and a shoulder shrug?

    1. fredwilson

      Well there are two primary ways that would happen.1) Bitcoin goes to zero.2) Theft, fraud, hacking, etcThey are working on some really good solutions to #2.

      1. LIAD

        it’s all about #2. – i met last year with underwriters at Lloyds of London about btc insurance. End of the day it al boils down to trusting the operator. As even if bitcoins are insured and the insurer pays out, the operator is the insured party (not the individual depositors) and thus they, the operator, would get the pay out on behalf of depositors. = either you trust the operator or you don’t. insurance is kind of irrelevant as they have the same ability to run off with your cash whether you have it or not.

        1. Henry Glover

          As btc grows i would imagine there would be a market for selling insurance to the individual. Even if it was an insurance policy distributed by the company holding the funds like coinbase. It puts some burden of providing protection and safeguards in coinbases hands as an insurance company wouldn’t let them distribute a policy if the security of the service was questionable. Coinbase gains by generating revenue and the insurance company gains by having a big distribution channel (law of large numbers).As the most basic example, think cell phone insurance sold through your provider.

      2. LE

        are working on some really good solutions to #2.Only really good solution to that is a third party insurance. Then you only have to worry about the third party guarantee (see AIG) and read the fine print there.

  3. andrewparker

    Do you use Multi-sig, cold storage, and withdrawal time delays for the millions in fiat currency and stocks you own?I don’t. Because I (perhaps falsely?) think my normal bank and brokerage account for my fiat-based assets are secure.In this way, Vault feels like it solves the wrong problem… Why can’t I have a Bitcoin wallet that I trust as much as I (falsely?) trust my existing bank/brokerage?

    1. fredwilson

      Well I do Andrew. When I move more than $10,000 out of my bank and brokerage accounts, there is a multi step process with several confirmations including at least one verbal. Coinbase’s offerings are a lot more similar to traditional banking and brokerage than you might think. Except for one thing, they are a lot less expensive

      1. pointsnfigures

        Wiring money is such a pain. I’d much rather write a check and walk it in.

        1. JimHirshfield

          When can you drop by my place?

          1. pointsnfigures

            When you invite me over.

          2. JimHirshfield

            Hit me up next time you’re coming to NYC.

          3. pointsnfigures

            ha. the next time. no idea when that will happen…Fred’s next blog celebration party or if the Cubs play the Mets in the playoffs….or maybe Bulls vs Knicks.

          4. JimHirshfield

            Those sports match-ups only happen in someone’s dream.In other news…no investing in NY tech for you?

          5. pointsnfigures

            If I could raise my fund, perhaps. But as an angel it’s pretty hard to do deals outside of your sphere of influence. Might as well roll dice.

          6. awaldstein

            How about just come down to have dinner?Sounds like a perfect excuse.

      2. awaldstein

        About a decade ago, I decided that for select accounts verbal with follow on authorization worked for me.I never worry about this any longer.

        1. LE

          I never worry about this any longer.Not worrying is great. But big mistake (if I understand what I think you are implying) to not gives this thought and oversight no matter what system the other guy has setup.

    2. JimHirshfield

      Agree with you. The fullest most securest thing there is should be the one and only offering. Feels like they’re saying it wasn’t safe enough without Vault.

  4. JimHirshfield

    Can I get a mortgage and an auto loan? (They can keep the toaster oven)

    1. fredwilson

      eventually, that is the plan

      1. JimHirshfield

        Bitcoin all the things.

      2. Guest

        why would you borrow in a highly appreciating currency?

  5. Dave W Baldwin

    Good move!

  6. William Mougayar

    Coinbase has been executing superbly well. It is dealing with the “trust” component head-on, and that’s a key feature.We trust banks by default. Why not Bitcoin exchanges. Their endgame is to look like banks anyways, without its overheads and inefficiencies, but with many of the same services.

    1. JimHirshfield

      Why not? Well, there’s FDIC insurance for bank deposits. That’s a big deal.

      1. William Mougayar

        There will be some regulation around Bitcoin eventually. The Wild West can go on for so long.

        1. JimHirshfield

          Is that a business you would want to be in? Would you want trailblaze in the field of bitcoin deposits insurance? I sure as heck wouldn’t.

          1. LE

            In order to insure something you need to be able to quantify the risk. When I got my first insurance policy internet related in 1996 I was listed as doing something completely different otherwise I wouldn’t have received insurance. I think they called us a patent agent or something like that. And the only reason I was able to do that was it was the same company that I had dealt with for years in a previous business.

          2. Ted Rogers

            yes we are dealing with similar issues. insurers are trying to figure out this risk.bitcoins in the Xapo Vault are currently insured through a captive insurance company and we are educating the rest of the insurance market

          3. LE

            Look don’t get me wrong I think this is a step in the right direction.However this analogy, from the page you linked to, doesn’t really play out with electronic risk:What happens to Meridian if 100% of the bitcoins stored in the Xapo Vault are lost?This is a reasonable question but reflects a need to better understand how insurance works. Think of the example of car insurance. If 100% of the cars insured by Geico crashed at the same time, Geico would not be able to pay all of the claims. But the risk of 100% of the cars insured by Geico crashing at the same time is incredibly low. So they maintain an appropriate reserve to cover the expected loss.

          4. Ted Rogers

            hah! indeed. we are trailblazing and clearly we are masochists here at Xapo. tough road to hoe. we started by inuring our Vaults through a captive insurance company and are building from there.

          5. JimHirshfield

            Looks like an interesting approach! At least you know where the assets are that you’re insuring. All the best!

        2. awaldstein

          Can you really have a bank with trust w/o insurance?This is not personal or technological, it’s a guarantee. Money transfers are about trust but they are more about a guarantee.

          1. Dave Pinsen

            My bank was founded in 1887. Federal deposit insurance didn’t come until 1933. So I guess they relied on trust up until then.

          2. awaldstein

            Trust and really big safes!Seriously, what was is I think a bad model for the future when it comes to money.

          3. Dave Pinsen

            I think the main reason for the FDIC wasn’t so much to insure against bank robberies (though, as Robert De Niro’s character notes in Heat, it does that too), but to deter runs on banks, where everyone tries to withdraw their money at the same time. Because, of course, in a fractional reserve system, only a fraction of the deposited money is there.

          4. awaldstein

            I love conversing with you as your depth of knowledge always level sets me.

          5. LE

            Well back then there wasn’t insurance (as you pointed out) but also I would imagine you were physically close and in contact with the actual people who were the custodians.

      2. LE

        Agree. Bitcoin needs a nose for sure. [1]Of course you know if you are from a foreign country you think the safe thing is to stash your money (> 250k or however you finagle it maybe more) in New York real estate.[1] Sofia Loren without a nose is not Sofia Loren.

        1. JimHirshfield

          I don’t think anyone really nose what you just said.

  7. Jon Michael Miles

    This will foster the bitcoin ecosystem enormously.Perfect product and well timed.

  8. Salt Shaker

    If confidence/security are two of the larger impediments to BTC growth/acceptance, part in advance of any regulatory oversight, why not implement Vault like security measures on all transactions? Sounds like there’s a two-tiered system of trust.

    1. JimHirshfield

      48 hour delay might not suit the transaction.

      1. Salt Shaker

        Good point, but then I presume you could opt out for that specific transaction if time is an issue.

    2. fredwilson

      because they are a pain in the ass for small transactions like buying a cup of coffeethink checking and savings, for example

      1. Salt Shaker

        Yeah, no one likes a really cold cup of Joe…part after 48 hrs :)But enhanced security w/ Coinbase should be mandatory at a far lower dollar threshold than trad banks to drive BTC trust/acceptance, no? Putting the onus on the investor to opt-in for enhanced security doesn’t exactly engender greater confidence/trust.I think the institution should set the over/under $ transaction security terms, with an opt-out option avail to the investor or account holder.In many respects, the institution has a lot more to lose from hacking, fraud, etc. than an account holder, even if the latter chooses to opt-out of enhanced security.Trust is earned over time.

      2. Jon Michael Miles

        Reminds me of Amazon S3 vs Amazon Glacier. Or my wallet vs my savings account. I expect and accept a certain level of insecurity for what’s in my pants pocket or on my cell phone but not what’s in my deposit box.

        1. Salt Shaker

          But Amazon is an established, trustworthy entity, where Coinbase (and others) aren’t. This is hardly a level playing field…far from it!

          1. Jon Michael Miles

            I was drawing the parallel of S3 for quick retrieval (small transactions) vs Glacier which takes longer (buying a car with bitcoin) Vault points out the inherent insecurity of a bitcoin purse, but as I mentioned, insecurity it expected in small denominations. It’s simple thief arithmetic – not worth the time to hit small value targets.

      3. LE

        When I refill my Starbucks card it’s totally annoying that I have to type my password each time I need to do that. Which is pretty frequently. After all they know that I am me because a) I’m physically in the same place and b) I am always ordering the same thing. So I have a transaction fingerprint that could easily tell them info they need not to mention that, well, I’m on my phone. How much risk is in it for them?However for bitcoin I would imagine that it is fairly simple to do a bunch of small transactions and drain an account.

        1. Richard

          Why not just refill it at register?

    1. JimHirshfield

      Lost me at “Speaking through a robot from Sydney…”

      1. jason wright

        the Aussie twang? baffling really. typically Guardian.

  9. Richard

    CAMELS & BASELSCapital AdequacyAssetsManagement EarningLiquidity SensitivityBuilding a vault requites one type of expertise. Building a bank, on the other hand, requires crossing a chasm where many have perished.

  10. Ted Rogers

    Xapo has had “Vaults” for more than a year and was built on the concept Fred outlines above. Imitation is the sincerest form of flattery and Coinbase has complimented us enormously 🙂 Seriously — we have a lot of respect for Coinbase and it is gratifying to see confirmation of our strategy from them. We also have to do a lot better on marketing because it appears many people think this is new. That’s on us.

  11. RichardF

    The problem for me is that I don’t have an excuse to use a bitcoin wallet let alone a vault

  12. LE

    And more is coming. Stay tuned. I will keep you posted.I hope the “more” is some kind of insurance that will make people feel more confident in using bitcoin at this bank.

  13. jason wright

    ‘Dungeon’ has a pleasing ring to it. ‘Vault’ is so generic.

  14. Carl Rahn Griffith

    Where do people see Bitcoin going?

    1. JimHirshfield

      There’s no crystal ball, is there?

      1. Carl Rahn Griffith

        Indeed, Jim. It’s the opposite of the farce that is fiat so that’s good enough for me. Wish I could buy some!

  15. matthughes

    “Vault” – back to basics.

  16. sigmaalgebra

    Sounds like you picked another winner.

  17. LE

    This post made me remember that I have both computer fraud protection as well as money and securities coverage (on and off premises) as well on our business policies. (Haven’t checked the personal policy).Which means that if they come standard (they did) you can always buy more coverage.This, which I just pulled up has some interesting info on computer fraud coverage that seems to relate to some of the risk regarding coinbase users…And this:

  18. Matt Zagaja

    Today I donated some bitcoin to Prof. Lessig’s MayDay PAC. The slightly confusing part of the transaction flow comes at the end when they display the bitcoin address to send it to. It wasn’t completely obvious that the expectation was I go into Coinbase and enter the amount and manually send it over. Although my only other bitcoin purchase was using a coinbase vendor that processed it a bit more directly. But I figured it out and it worked.

  19. Jon Myers

    Coinbase wants to function as a modern bank,…. and they keep investing in these resources that might grab HNNews and TC headlines, yet…..They have ZERO phone support.Sometimes the unsexy stuff doesn’t grab headlines, but it certainly wins more loyalty and trust.Their existing support is atrocious.I used their “instant bank account verification” – to connect my Chase business checking account, executed a sell of BTC with my payout method going to Chase, and – their “instant verification” captured the wrong routing number.I called Chase – and they wanted to call someone at Coinbase to work it out….Nope… Nobody to call -The funds hung out there and were finally returned a week later to Coinbase, and I had the displeasure of dealing with some pompous customer support rep in a little chat window.—No way I’d leave a large amount of BTC in a “Vault” with a company that functions as a financial institution, yet doesn’t invest in the courtesy of phone support.When I have a problem or question with one of my banks or brokerage, I can call them.Building trust and supporting customers in this regard isn’t rocket science.The unsexy stuff like phone support is crucial.With support unsolved, everything else rings gimmicky until this is tackled.