Isn't this just security theater? Does moving coins to one of their "vaults" actually do anything in the event coinbase is hacked?
The only attack vectors are cryptographically, which you can pretty much rule out (safe for human error), and some kind of human attack. (blackmail, social engineering etc) But there's procedures in place there, too. The offline keys are multi-signature, requiring multiple executives in multiple locations to clear industry security protocols, then come together and commit a crime.
The remaining 2% of online funds are insured.
If anything goes wrong, it's extremely likely to be on the customer side. They offer the usual secure connections, multisig etc, and the vault adds an extra 48h withdrawal period ontop.
If you know the basics of bitcoin's cryptography, it's pretty trivial to store bitcoins on private keys that never saw the light of day, using a bunch of dice and an offline open source bit of software. But if you have to use a service, I'd say Coinbase is pretty damn secure. Just make sure your side's clean. Accessing secure systems from compromised phones/laptops is a losing battle, and as there's no real recourse with bitcoin, that's usually where things go wrong even when using secure services.
Since this is also true of their ordinary wallet product, I think "security theatre" isn't totally unfair here. The only thing this really adds is the 48 hour delay.
I wonder how they handle a lost key, do they have to move $1 billion+ of Bitcoin to a new wallet each time?
If you have control over your own keys (such as in the case of the "old" Coinbase vault) those things are a non-issue. But with the way how the new vault works a hardware wallet looks like a better solution.
That's why this new vault functionality is so important, it protects your assets from personal negligence.
With these new features, all your bases are covered.
I thought Coinbase had insurance that only covered the online portion but not offline vaults, where most of the 'money' is stored?
If an offline vault is compromised through their system then what? The promise of keeping things separate doesn't guarantee anything.
'All digital currency that Coinbase holds online is fully insured.
'Coinbase holds less than 2% of customer funds online. The rest is held in offline storage.'
They only insure less than 2% of their coins. This does nothing to protect private keys that go missing or are destroyed in their offline wallets.
I would love to know that I'm wrong.
https://support.coinbase.com/customer/portal/articles/166237...
In the future I imagine crypto wealth will be secured by breaking it into multiple wallets stored in vaults controlled by different organizations. That protects you from total asset loss due to institutional failure. And this type of failure isn't limited to crypto (see Bernie Madoff's hedgefund).