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Recently I created an account/wallet on coinbase.com. Then I transferred my BTCs I already had from blockchain.info to the wallet on Coinbase.

A bit later I bought some new bitcoins directly from Coinbase with my credit card and I expected that I'm able to see something like a transaction ID and a block reference once the new BTCs arrived in my wallet.

Interestingly I got the BTCs but there's no transaction of block reference as expected.

On support.coinbase.com they say:

You can view most digital currency transactions on the network's respective blockchain, which records and verifies the legitimacy of transactions. However, when transferring from a Coinbase account to another Coinbase account, the transactions occur off the blockchain. […] For these "off-chain" transactions, you won't be able to view the bitcoin transfer in the blockchain, and there won't be an "Advanced Details" link when you click on the transaction.

As far as I understand the bitcoin blockchain the idea behind the whole thing is that everybody knows how many bitcoins I own (yes I know, my identity are hash addresses).

But if there's something like off-chain transactions this means that I don't own the BTCs I bought with my credit card, from a technical point of view because no one (the distributed ledger) know's about this transaction.

Is this correct?

  • I would love an answer too. Good question. – dentex Jul 15 '17 at 14:53
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From the perspective of the Bitcoin network, Coinbase owns both the Bitcoins you transferred in, and the Bitcoins they sold to you.

This is useful from a technical perspective, because Coinbase can have as many transactions within their system as they want, and no-one outside of Coinbase needs to keep track of them.

This is problematic because Bitcoin can't give you any guarantee that Coinbase won't take your Bitcoins, and Bitcoin can't give you any guarantee that Coinbase has enough assets to pay all of their account holders.

Coinbase could publish an audit showing how much Bitcoin all of their account holders are supposed to have, and signed statements showing control of enough Bitcoins to cover those obligations, though.

  • That‘s what I expected. I also moved back again from Coinbase to Blockchain.info because it‘s not the idea and the concept behind Bitcoins to give control about my money to someone else. – Ralph Jul 16 '17 at 22:54
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Yes, you have a fully custodial account on Coinbase, thus Coinbase is holding your bitcoins for you. When a customer buys bitcoins or receives a payment from another customer of Coinbase, Coinbase only updates their balance sheet to track their debt to you. This has the advantages that they can forgo to create an on-chain transaction which costs them money (which ultimately is paid by the customers), it allows them to provide instant transactions between their customers, and they are insured against losses which you aren't. As you have correctly identified this has the disadvantage that there is no proof that the money has actually been set aside for you. Note that even if they sent the coins to an address associated with your account, they'd still control the private keys and would be in full custody.

To take full ownership of your coins, you could withdraw them from Coinbase to a wallet with which you control the private keys.

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