On Tuesday (February 12th), cryptocurrency exchange Coinbase said that the Coinbase Wallet app for iOS and Android had been enhanced such that it was now for users to backup an encrypted copy of their private keys to the cloud (iCloud in the case of iOS users and Google Drive in the case of Android users).
Exactly one week after launching Bitcoin (BTC) support on Coinbase Wallet (formerly known as "Toshi"), Coinbase announced that it was "introducing cloud backup for your private keys on Coinbase Wallet". Here is the tweet Coinbase sent out:
🔐☁️ Introducing Cloud Backup for your private keys on Coinbase Wallet!— Coinbase Wallet (@CoinbaseWallet) February 12, 2019
Backup to your personal iCloud or Google Drive, and explore the open financial system with peace of mind. https://t.co/6uaHT8AZky
According to the blog post by Coinbase Wallet Product Lead Siddharth Coelho-Prabhu, this new feature "provides a safeguard for users, helping them avoid losing their funds if they lose their device or misplace their private keys."
Coinbase thinks although it is great that Coinbase Wallet allows users to experience "the full power of an open financial system" (i.e. " storing their own funds and accessing them anywhere in the world"), this power comes with "great responsibility." Since private keys, which are "generated and stored on your mobile device", are "the only way to access your funds on the blockchain" and owns of non-custodial wallets such as Coinbase Wallet "sometimes lose their devices or fail to backup their 12 word recovery phrase in a safe place, thereby "losing their funds forever," it would be a good for users of Coinbase Wallet to use cloud backup for their private keys, and it is now providing a feature that enables just that.
The new opt-in cloud backup feature provides "the ability to store an encrypted copy of your recovery phrase on your personal cloud account." You will, of course, need to come up with a strong password and a way to remember it somehow, but if "you lose your device or get signed out of the app," you will be able to "easily regain access to your funds with the combination of your personal cloud account (iCloud or Google Drive) and your password."
Coinbase wants you to know that this backup is "encrypted with AES-256-GCM encryption and accessible only by the Coinbase Wallet mobile app." And of course, if you lose the password for this backup, the support staff of Coinbase or your cloud service provider will not be able to help you since they don't keep a copy of this password:
"Coinbase will not have access to your password or funds at any time, preserving your privacy and control. Your cloud backup provider will also not have access to your funds, as only you know the password that decrypts your encrypted recovery phrase."
Although this feature currently only "supports iCloud on iOS devices and Google Drive on Android devices," Coinbase plans "to add support for other cloud services in the future."
Coinbase also wants to remind users that this feature is completely optional and needs to be explicitly activated. Also, it recommends that users also "backup their passphrase manually" after cloud backup activation and "activate Two-Factor Authentication on your personal Google or iCloud accounts to make those accounts harder for attackers to compromise."
Amongst experienced long-time investors in crypto, especially those who strong believe in its ideas of decentralization and self-sovereignty, the reactions on Twitters were quite negative. Here are a few examples:
@coinbase Is this an early April fool’s joke? Why would you recommend storing your private keys on the cloud? That’s not safe whatsoever.— CryptEkim (@CryptEkim) February 12, 2019
I don't understand, how do you misunderstand your target audience so bad?— The Crypto Dog📈 (@TheCryptoDog) February 12, 2019
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