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More than 110 million verified users trust $80 billion in assets to Coinbase, the country’s largest crypto exchange. They use the platform to buy, sell, secure, invest and spend their digital assets.
But do people make money using Coinbase?
The answer is that they do — and you can get started earning coins and tokens, even without any experience.
Is Coinbase Good for Beginners?
Coinbase is good for beginners because its Earning Rewards program lets novices earn while they learn.
Coinbase created instructional videos about specific cryptocurrencies, and you can collect a few bucks worth of each by watching and then completing a quiz.
For example, you can earn $3 worth of Access (ACS) and Near Protocol (NEAR), $4 worth of The Graph (GRT) and $15 worth of SHPING (SHPING).
The payouts are nominal and you can earn only once per quiz, but it’s an excellent way for newbies to explore new coins, learn about how crypto works and get a few tokens into their Coinbase accounts.
You need an account to get started, but you’ll earn some free crypto just by signing up. New Coinbase users get to “spin the wheel” for a bonus of $3-$200 when they create an account. 11% win $6 to $200, while the lower 89% receive $3 to $5. Those who sign up and purchase crypto also get $5 worth of Bitcoin added to their accounts.
Put Your Crypto Work Through Coinbase Earn
Once you’ve exhausted the extent of Coinbase’s entry-level giveaways, the real money is in staking — and that’s where Coinbase Earn comes in.
Miners receive rewards for performing maintenance on proof-of-work networks in the same way that proof-of-stake blockchains pay staking rewards to users who help keep things running smoothly. Participants contribute some of their crypto holdings as stakes, which serve as a kind of security deposit for node-based block validation. As a reward, they receive a predetermined yield for locking their assets into the network for a set period of time to help support blockchain operations.
In that respect, it’s a lot like a bank paying interest for money deposited into a savings account, which makes staking a truly passive income source.
And the returns can be impressive.
Hefty Yields With Minimal Effort
Coinbase says that stakers can earn yields up to 6%, but the rate depends on several factors, the most important of which is what kind of crypto you stake. Several assets are available for staking on Coinbase with varying estimated APYs, including top names like Ethereum, Cardano and Solana.
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You must have a Coinbase account to participate in staking, but signing up is easy, and all stakers must have their identity verified with a valid TIN on file. You must also live in a jurisdiction that allows staking, which excludes Hawaii and, for some assets, New York.
Beyond that, you can get started with as little as $1 and just a few clicks.
Consider the Downside
Coinbase does not pay rewards. It connects stakers to validators and protocols, which pay stakers their agreed-upon APYs. In return for facilitating the deal, stakers pay Coinbase a commission on all their earnings, and the fees are significant — between 15% to 35%, depending on your crypto of choice.
But commissions are only one downside to consider.
Locked Assets
Staking locks your assets for a set period of time. Depending on the protocol, that could be anywhere from a few hours to a few weeks. Most protocols don’t allow you to sell or transfer your holdings during the locking period — and as anyone who has ever traded crypto knows, a lot can happen in a few weeks, days or hours. With your assets frozen, you won’t be able to react to changing market conditions.
“Slashing” Penalties
Also, many protocols impose so-called “slashing” penalties for poor performance, which could lead to you losing what you risk by staking — and staking does come with risk.
According to Coinbase, “Although it’s unlikely, there is a possibility you could lose your staked assets or rewards in case of a network or validator failure. We’ve taken measures to reduce these risks, but some events are outside our control.”
Is It Worth It to Use Coinbase?
In the days of rock-bottom interest rates, a relatively safe, relatively liquid passive investment with the potential for steady 6% returns was beyond tempting. But today, banks like CIT offer FDIC-insured high-yield savings accounts that pay 4.5% — some CDs offer rates up to 5% APY. 6% is clearly better, but considering that many Coinbase users won’t earn that much, and will pay hefty fees no matter the APY, the gap between traditional savings and crypto staking is nearing parity.
Even presuming the full 6%, consider what traditional savers get for the 1.5% they forgo by depositing their money in a bank.
The Silicon Valley Bank Collapse
In March 2023, Silicon Valley Bank collapsed after a run on deposits, which was part of a larger banking crisis that saw several back-to-back insolvencies.
The Federal Deposit Insurance Corporation swooped in, creating a bridge bank to take over SVB’s assets and provide account continuity. Customers with insured accounts could access their money uninterrupted without filing claims. The FDIC contacted account holders with updates and instructions from the outset and assured them, correctly, that their deposits were safe no matter the outcome with SVB.
FTX Exchange Crisis
In late 2022, the crypto world endured its own crisis when FTX — a widely trusted and respected major exchange — collapsed into bankruptcy, scandal and fraud.
Its customers had a much different experience.
Confusion and panic reigned as frantic messages went unanswered, accounts froze and servers crashed. Many soon realized they would never see their money again — and many never did.
FDIC Insurance
There’s no indication that Coinbase is fundamentally unsound, but crypto does not offer the security of federal guarantees no matter where you keep it — and this last year put the value of FDIC insurance on full display.
In Closing
If you’re considering opening a passive income stream through crypto staking, start small. As previously stated, you don’t need much to launch, and virtually all credible advisors promote diversification, with crypto playing only a minor role in a well-blended portfolio of assets.
Editorial Note: This content is not provided by any entity covered in this article. Any opinions, analyses, reviews, ratings or recommendations expressed in this article are those of the author alone and have not been reviewed, approved or otherwise endorsed by any entity named in this article.
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