GDAX has always been an important part of the crypto world and people are always asking themselves the same question, “is GDAX safe?” and we get it, with all of the issues that the crypto sphere has been through, it's no wonder people are afraid to fully commit to anything.
That's why in this article, we're going to show you some features of GDAX and give you information to prove if it is really safe to use.
Cryptocurrency exchange, or digital currency exchange (DCE), is a business that allows customers to trade cryptocurrencies or digital currencies for other assets, such as conventional fiat money or other digital currencies.
A cryptocurrency exchange can be a market maker that typically takes the bid-ask spreads as a transaction commission for its service or, as a matching platform, simply charges fees.
The GDAX exchange is owned and operated by the most well trusted and popular cryptocurrency exchange in the world, Coinbase. 98% of customers' cryptocurrency funds are stored in secure offline cold storage. The remaining online crypto funds are fully insured.
What is GDAX?
GDAX is a cryptocurrency exchange that allows people to buy, sell, and trade a range of digital coins. Launched in 2016, GDAX stands for Global Digital Asset Exchange. The people that created GDAX are part of the same company that runs Coinbase, which is now one of the largest exchange brokers in the world!
Essentially, the platform is a middleman between buyers and sellers, and in return — GDAX makes their money by charging transaction fees. For example, if John wants to buy some Bitcoin and Jenny wants to sell, they are both matched by the GDAX exchange!
The founders wanted to provide their 13 million Coinbase users with a more advanced trading platform. The reason for this is that Coinbase only allows you to buy and sell cryptocurrencies. On the other hand, GDAX allows you to trade them in real-time, using a variety of different trading tools.
Although GDAX is looking to target the more experienced trader, it is still possible to use real-world payment methods such as a bank account to deposit and withdraw funds!
The great thing is that if you have a Coinbase account, you automatically have a GDAX account too! All you need to do is enter the same log in details that you use at Coinbase!
Just like Coinbase, GDAX now has one of the largest trading volumes in the cryptocurrency industry. At the time of writing in July 2018, the exchange averages about $100 million in daily trades. The most that have ever been traded at GDAX is $650 million in a single day, which it achieved in late 2017!
So now that you know what is GDAX is and how they got started, the next part of my GDAX review is going to talk about their recent rebranding to Coinbase Pro!
So Just How Safe is GDAX?
This depends on your frame of view and how you characterize a threat to your financial safety. Which actors do you classify as threats; hackers, corporations, and governments? Which of these entities would you like to have access to your data and funds? We explore all this and more in “Is GDAX safe?”.
GDAX was rebranded to Coinbase Pro on the 29th of June 2018. Unfortunately, people keep googling GDAX, so for the sake of this article, we will refer to Coinbase Pro as GDAX. GDAX, or Global Digital Asset Exchange, was always owned by Coinbase. GDAX was originally called Coinbase Exchange, the name was changed for the 1st time in 2016.
Coinbase was founded in 2012 by Brian Armstrong and Fred Ehrsam and by 2015 they needed to evolve their business to include features for casual traders and investors, institutional traders, and more active traders and investors. They created GDAX exchange to allow for highly active traders to trade in bitcoin and altcoins.
Since GDAX belongs to Coinbase, it has all the bells and whistles to be considered a bank and is located in San Francisco, California, USA. Coinbase is registered as a Money Services Business with FinCEN.
Coinbase also adheres to the Bank Secrecy Act, USA Patriot Act, and the various state money transmission laws and regulations. Coinbase has also complied with the IRS to hand over all relevant tax information whenever asked.
Cryptocurrency funds stored online by Coinbase are insured by a syndicate of Lloyd’s of London. Additionally, as this is an FDIC insured bank, all USD wallet balances are insured up to $250,000.
Coinbase investors include Fred Wilson, Andreessen Horowitz, Union Square Ventures (USV), Ribbit Capital, Draper Fisher Jurvetson (DFJ), the New York Stock Exchange (NYSE), USAA, and several banks.
While $250,000 used to seem like a good benchmark, that has been eclipsed by Civic crypto wallet which now provides $1,000,000 cover when using their wallet. While the type of insurance is drastically different, they serve different purposes and need to be researched.
What we’re focusing on is the 4x amount increase offered simply by using the wallet, there are no other conditions that need to be met. The wallet is also underwritten by Lloyd's of London and provided by Coincover.
GDAX / Coinbase Pro Security
All of Coinbases’ products offer support via phone and email. Phone support is a dying customer right, that is super easy for hackers to exploit. This service makes it easy for older and young users alike to feel like they're in good hands.
Speaking to a human being, even a rude one, is always better than speaking to a bot. While this happens to calm users down, it also opens up accounts for exploitation by crafty hackers using social engineering. Users also have their defenses up if they get a call from another exchange but if Coinbase calls you, you are more likely to comply with certain requests.
All things being equal, Coinbase itself has some impressive security and is safe and secure. They have an incredibly large pool of their customers’ cryptocurrency, 98 percent is offline and in cold storage wallets. This cold storage, offline wallets are kept in secure vaults and safety deposit boxes around the world, allowing for not a single point of failure.
While Coinbase does use SMS 2FA, both these methods have been proved insecure but the end-users are to blame, not the exchange. The systems put in place are designed for a false sense of security, forcing the end-user to be hardened against silly attacks that are more opportunistic in nature. As opposed to being hardened against sophisticated hackers that know how to penetrate systems.
Coinbase uses multiple 2FA methods to secure users' accounts. The simplest way used revolves around receiving SMS to your cell phone, these SMSs contain a number that needs to be input after your login details. This method has always been unsafe.
Another method is using Google 2FA or Authy as an additional layer of security on your phone. Another code is generated by these programs that need to be input at the time of login. While this seems secure, professional cybercriminals have no problem accessing this data.
GDAX / Coinbase Pro Security 2.0
Next, we need to look at what Coinbase Pro is doing right with on-chain analytics. From a business point of view, acquiring Neutrino was an excellent choice for Coinbase to partner with. They have a long history of using data analytics to report the behaviors and activities of large groups of users.
Leveraging the technology acquired from Neutrino, Coinbase is leaps and bounds ahead of their competition by having this in house. As a cryptocurrency company striving to be a bank, that is too big to fail requires safety measures.
While International banking has been set up for fraud, tax evasion, and blatant corruption, it’s near impossible to catch anyone. What happened to the Panama Papers? A better question is; where is the torrent the journalist supposedly used? Those documents should have gone viral?
Blockchain, on the other hand, is trackable, traceable, and identifiable. That being granted, sophisticated methods such as coin join and Ricochet can wash your Bitcoin BTC and other currencies very quickly but this might be illegal in your country.
What makes Neutrino perfect for Coinbase, is their long history of working with data analytics. Even though this stems from working with governments that have a flair for human rights violations.
Chain analysis is fundamentally designed to violate privacy rights, every transaction that enters or exits their wallets will be scanned and reported to law enforcement.
So what better group of people to use than the Hacking Team, who don’t mind violating human rights and won’t mind writing the code that violates your rights.
The good news is there was some backlash and the Hacking Team members were removed. However, Coinbase still owns Neutrino and will continue to violate digital rights by scanning every transaction. The end goal of these violations is to get institutional business and prove that cryptocurrencies are worthy of regulation as a more secure and auditable mode of transaction.
The next amazing feature could be the use of Clearview’s facial recognition software, this will allow for instant verification. This is definitely a marketing move that would create confidence in the Coinbase brand along with gathering a lot of data about their users that could be sold or could be accessed with a court order. Either way, those are both bullish cases for the bitcoin price.
Computers are really unintelligent and only do what they are told and we personally can’t wait to see how this gets hacked. Something like this “Hacker fakes German minister's fingerprints using photos of her hands”
GDAX / Coinbase Pro Hacks
While Coinbase is a safe exchange and the likelihood that the whole exchange will be hacked is very low, it is not impossible. The odds of individual end-users being hacked is astronomically higher.
The odds of end-users being hacked depend on how they interact with society about cryptocurrencies and as well as what coins you own. Currently, cell phone providers are not helping to solve the problem but simply want to also blame the user.
Not much has changed in how telecommunications operators have done business in the last 40 years. The technology has gotten better but they still use the same identity document, most companies still have the same or similar authentication protocols to use their networks. And their infrastructure has not improved on the backend.
This is the perfect breeding ground for social engineers to hack people, as well as the systems put in place to secure telecommunication networks. If you would like a deeper understanding of how telecommunication networks are set up and what makes them vulnerable you should read Ghost in the Wires: My Adventures as the World's Most Wanted Hacker by Kevin Mitnick.
If you're looking to do more research into social engineering, check out the social-engineer podcasts or you can read Christopher Hadnagy books. Mitnick's books The Art of Intrusion, The Art of Deception are better but drier reads.
If you have business cards, you are handing out most of your details on a daily basis. Someone just has to wait outside your office and hijack your cell phone network and your accounts can be drained. That's the simplified version.
Your best bet is to use a burner phone or a phone not registered to you. This is illegal in some countries, as the government needs to track you for your safety just in case you have accidental dealing with known criminals, terrorists, or freedom fighters. A good book for cryptocurrency security is The Art of Invisibility.
GDAX / Coinbase Pro Crypto’s Broken Markets
GDAX once broke the Etherium market, the ETHUSD trading pair went down from $317 to $0.10 this has been a problem affecting many currencies and exchanges and Coinbase shouldn't feel too bad. In 2019 Bitstamp had the same problem: illiquid markets and impatient sellers that don’t care.
With the amount of ICO money floating around from 2017-2019, it’s not surprising that these events took place. Looking at 2020, the current crash in line with the S&P500 has us pointing fingers at BITMEX and thanking their engineers for being incompetent, else Bitcoin would have gone to $0 and the music would have stopped.
The Bitmex team has a credible excuse for halting trading, as they suffered two DDoS attacks on March 13 at 02:16 UTC and 12:56 UTC. At one point there were only about $20M of bids left on the entire BitMEX order book. It's a good thing Bitmex went down and the market had time to stabilize.
While this was happening, DeFi was also failing hard by being overly complicated. The only smart person in the room managed to purchase Millions of dollars worth of Ethereum ETH for $0.00. While this seems crazy, nothing is impossible with smart contracts. Look at the previous hacks that are solved with insurance and money printing.
In Conclusion to the question “Is GDAX safe?“, GDAX or Coinbase Pro has always been seen as a centralized, evil crony, working with the evil empire known as the American government. There are no two ways around the opinion of cypherpunk. They are right but what of it? Will their opinions stop human greed? No.
While early adopter cypherpunks can pump and dump Bitcoin prices and have fun with the crypto market structure, real money has invested in Bitcoin and Cryptocurrency market infrastructure. Companies like Coinbase are running effective businesses that need to stay in the black or they will go bust. To stay in the black, some users' rights will be violated to assure regulations are met from the traditional banking world.
Rights are going to be trampled by cryptocurrencies going mainstream because end users refuse to use hard wallets and instead risk all their funds trading or lending. Additionally, end-users refuse to learn about wallets etiquette and true security and safety best practices even if they are annoying and a waste of time. Lastly, Cryptocurrency purchasers would rather give away their KYC data than mine cryptocurrencies.
Luckily, Coinbase will safely manage your Funds, store your Crypto, and just about keep you safe. So Safe in fact, will hand over your data to most governments that ask for it just to keep everyone safe. You're safe using Coinbase unless you get hacked because FDIC covers the bank going bust, not the end user’s negligence.
Also if you really get hacked, you are locked out of digital life until the hackers are done with you. Digital networks are set up to help you reset a password, not reclaim an account. It can take days to have your problems resolved, by then you would be broke and have all your nude photos online.
Having a hardware wallet that was set up not to be linked to anything associated with you. Using prepaid credit cards, burner phones, or our favorite, using mining rigs set up under a shell company to privately and anonymously burn fiat into crypto.
Anonymity is a choice, while Blockchain analytics can see everything they don’t know who everyone is. Unless you let them.
Using or not using Coinbase Pro needs to be an informed choice and doesn’t have to be definitive. It could be on a case by case basis. The only thing you can do to secure the future you want to live in is to live the life you want others to live and ask a few people to join you.