Due to popular demand, Coinbase has released its multisignature vault allowing users to control their own private keys.
Users had grown concerned over what can be termed as an increasing degree of centralization of bitcoins with Coinbase. In a sense, Coinbase has taken on a bank-like role as a trusted 3rd party for bitcoin storage. Funds can be transferred between users, in Coinbase’s systems, off the blockchain. They wield the power to block what they consider risky transactions, for which some users feel they go overboard. And if you forget your password to your “online banking”, Coinbase is there to help. The company said in its blog:
“Coinbase is now storing more bitcoin than any company in the world (that we know of).”
Coinbase listened, noting previous disasters such as the MtGox ordeal. They initially underestimated the demand for user such user control, focusing more on building the most secure platform possible.
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Coinbase first launched its vault service in July. In the latest version, Coinbase cannot move funds on the user’s behalf. The user actuates transactions under the multisig scheme, which requires two out of three eligible signatures. 3-of-5 schemes are also available. When joining the vault service, the self-serve mode is enabled by selecting the “I will manage security myself” option.
Users are warned, therefore, that if they forget their password and lose their backup, Coinbase cannot help recover the bitcoins.
Out of the 3 keys, one is stored with the user, one with Coinbase (just in case) and one is shared, but can only be unlocked with the user’s passphrase.
In the event Coinbase is ever offline, they have released an open source tool to recover one’s bitcoins.