Coinbase CEO clears up four misconceptions about hot and cold wallets

23 Feb, 2019
by Richard Allen
News
Coinbase CEO clears up four misconceptions about hot and cold wallets

Brian Armstrong, CEO and co-founder of San Francisco-based Coinbase decided to address some common misconceptions doing the rounds about hot and cold cryptocurrency custody and storage solutions.

In an article on Fortune, Armstrong explains that the first misconception is that “you can’t trade crypto using funds in cold storage.” He explains that platforms like Coinbase Custody let users trade over-the-counter using delayed settlement. In other words, users can trade while their funds are stored offline.

Secondly, Armstrong states that it's inaccurate to believe “you can’t ‘stake’ (or earn interest on) funds in cold storage.” He explains that Tezos offers a method for earning interest on your crypto while keeping them in cold storage:

Read more: Coinbase announces new acquisition, wants to become 'Google of crypto'

“… you can delegate your funds in cold storage to a ‘baker’ and earn interest. The baker, which acts as the staking equivalent of a miner in the Bitcoin example, keeps a smaller percentage of funds online—and those don’t need to be customer funds. In other words, customer funds are kept safely offline but are still fully able to participate in the network, earning a yield for the customer.”

The third misconception is believing that cold storage means relying on a single authorized user who could lose funds. “A well-designed crypto custody solution doesn’t rely on any single person,” he explains. He adds that “Instead, it utilizes multiple keys to achieve consensus and redundancy.”

The final misconception Armstrong touches on is that hardware security models (HSMs) are just as good as cold storage. While these are a great security tool, they don’t quite match the security offered by cold storage. By keeping them offline, “a remote hacker can’t access them without some physical attack as well,” he states.

Read more: Coinbase CEO Brian Armstrong shares his views on QaudrigaCX

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Read more about:CoinbaseBrian Armstrong

Poll

Did you believe any of the misconceptions?

(3 votes)

Add a comment

I would like to say thank you for learning BUT he did not say what to do so that Coinbase would not freeze your account spontaneously or if it had already blocked it. what to do, Armstrong?
24 Feb, 2019 - 08:00
And why did Brian not explain why Coinbase’s wallet stores backup copies of private keys on cloud services? Or does he not tell about his fuck ups? I`am really shocked about it!
24 Feb, 2019 - 09:01
Probably Brian Armstrong does not know that google drive is not cold storage ahahah
24 Feb, 2019 - 09:37
You told the true truth! I do not understand how Coinbase added storing private keys on the cloud service. Its foolish and dangerous
26 Feb, 2019 - 22:28
i don't think that ceo of scam exchange coinbase can be expert in some issues ))
24 Feb, 2019 - 18:54
Again coinbase hype. Guys, it's becoming annoying.
24 Feb, 2019 - 19:34
listen to ceo of coinbase more and you will have nothing to store
24 Feb, 2019 - 19:43
brian tells only that information which is profitable for him…
24 Feb, 2019 - 20:34
I would never trust my money to brian and recommend you the same!
24 Feb, 2019 - 21:16
better to save it on cold wallets, hot wallets are too risky in Coinbase
25 Feb, 2019 - 13:11
The main rule - listen to Armstrong and do the opposite))
25 Feb, 2019 - 21:06
I want to hear an explanation from Brian how cloud storage of private keys can be secure? I am sure he will not be able to answer this question and Coinbase made a terrible mistake!
26 Feb, 2019 - 03:53
Brian speaks about the security but at the same time he asks to save private keys in Google. No, I won't listen to Coinbase opinion, just don't see the point.
26 Feb, 2019 - 14:41
can the CEO of coinbase please explain me why the exchange is freezing funds and accounts of clients for no real reason ? maybe this happens because they want to seize funds from clients ...
26 Feb, 2019 - 17:38
It's strange to hear such a variant of storing money because other experts say the opposite... so Brian must be want to cheat us
26 Feb, 2019 - 22:37
Is Brian a big dreamer or arrogant liar? Because this crap can say only one of them...
28 Feb, 2019 - 22:24

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