Coinbase Thinks It’s a Good Idea to Backup Private Keys to the Cloud

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:

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:

 

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Crypto Derivatives Hit a 2020 Low in June: CryptoCompare Report

Michael LaVere
  • CryptoCompare's latest edition of the 2020 Exchange Review Guide found that both derivatives and options trading plummeted during the month of June.
  • Crypto derivatives recorded their lowest monthly volume in 2020, with exchanges across the board witnessing a decline.

Cryptocurrency derivatives and options trading saw a double-digit decline, with the former reaching its lowest monthly volumes in 2020. 

According to the latest edition of the CryptoCompare Exchange Review, both cryptocurrency derivatives and options took a hit in June. 

Derivatives volume dropped a whopping 35.7% last month to $393 billion, reaching its lowest monthly volume in 2020. Despite the decline, total spot volumes witnessed a greater decrease of 49.3% to $642 billion. As a result, crypto derivatives gained market share during the month of June and represented 37% of the market compared to 32% in May. 

cryptocompare derivativesDerivatives Trading Volume vs Spot Market in June | Source: CryptoCompare

According to the CryptoCompare report, all derivatives exchanges saw “large decreases” in trading volume in June, with BitMEX undergoing the greatest proportional decline (-50.3% to $51.6 billion). 

Despite undergoing a 38.3% decline in trading since May, Huobi was able to maintain its status as the largest derivatives exchange by volume at $122.4 billion. OKEx ranked second with $106.9 billion in volume (down 30.4 percent from May), followed by Binance with $85.9 billion (down 34.2%). 

Maximum daily derivatives trading volume clocked in at $23.8 billion in June, occurring on the first day of the month. 

Options trading also witnessed a decline in June, although less severe than the derivatives market. The report found Deribit monthly options volume decreased by 17.8%, which was less of a decrease than seen on other derivatives exchanges only offering futures products. 

deribit options trading june 2020Deribit options trading June 2020 | Source: CryptoCompare

Daily options trading witnessed two major peaks in volume on the 2nd and 26th of June at $178 million and $162 million, respectively. The report claims these peaks were comparable to the daily records established in previous months. 

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