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Coinbase Problems - Slow and Broken Transactions

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One of the wallets I use for Bitcoin storage is Coinbase. This is an awesome site because it helps keep things in the cloud (so I can access the coins from anywhere), keeps things organized, and it also pays transaction fees on my behalf. One thing I have been running in to, though, that many others are as well, is that of slow transactions. While this is not an issue when you are not in a rush to get coins somewhere, it can be when you are. I am not really sure why the transactions take as long as they do to make it to the block chain (being that they are all sent with fees attached), but wanted to share my experience to help better understand what to expect if you plan to use them as your main wallet.

Broken Transactions

I learned a couple months ago that if you have a lot of smaller incoming transactions, your Coinbase outgoing one may just not go through. I am not sure what the limit is (maybe it is around 5-10 kb?), but at some point it will attempt to send the transaction, only to send you an email a day or two after letting you know that since it did not go through, the funds were returned. This can be a huge issue if you are trying to send your funds to someone else, and while it is not clear whether or not this has to do with the transaction size itself, I did something that appeared to fix it on my end. So here is what to try:

  • Estimate about how many incoming transactions you have that need to go somewhere. If you have more than around 50, break up the transaction the best you can in to smaller chunks. For example, if you are trying to send 1.2 Bitcoins:
    • Send six transactions of 0.2 Bitcoins
    • Send three transactions of 0.4 Bitcoins

When I broke up a transaction in to small pieces like this, it hit the Blockchain. It did still take a while, but prior to this I had gotten three fails and my funds were going nowhere. It is also important to note that they will pay fees on your behalf, so although you are sending multiple transactions, it does not have a negative effect. With that said, you do need to ensure that whoever you are sending them to knows what is going on.

As an alternative to this method, you can also create a new address and title it something like “compilation.” From here, break up your transactions and send them to that address. This way when you need to send off your coins, you can do so with a single transaction instead of a lot of smaller ones, making life a lot easier down the road. I am not completely sure if this will work, being that Coinbase uses an internal address structure as well, but I think that it should if it works properly.

Slow Transactions

There is really nothing you can do about the slow transactions going out from Coinbase, other than to accept them as they are. If you need to get your coins to someone as soon as possible, you definitely want to send them from another wallet. My last few transactions going out took a minimum of twelve hours each, with one taking around twenty three. Yes, almost a day! Then tack on the time it took the blocks to be resolved so that the transaction could be verified. Since I was not in a rush to get these coins out it was just an annoyance, but had someone been waiting on them it could have caused some problems.

Sometimes Coinbase will get their transactions out fast. Sometimes they will not. If you choose to use them for the storage of your coins, you are basically taking a risk on this front. If you do not like that risk, take your coins (at least however many you need to be “liquid”) and put them in a local wallet or on a faster service.

It is worth noting that while the outgoing transactions are slow, the incoming ones are still instant. As soon as a transaction is broadcast, Coinbase will see it. Along with this, if you have someone sending you funds that also comes from a Coinbase address, the transfer will be instant; no waiting on confirmations or anything. Plus, they can do this from address to address or from email to address or address to email. The system recognizes all of these as being the same so you can keep the anonymity you want without any problems!

The Trade Off - Free Transactions

A great benefit of Coinbase is that they pay for the transaction fees on any outgoing transactions that are for an amount of at least 0.01 BTC. While this is not a big issue for some people (in that the fee is currently only 0.0001 or so Bitcoins per kilobyte of data), for those that are taking and sending a lot of payments can save a bit of money over time. This is a benefit that no other services do; at least not that I am aware of. It does lead to questions as to whether or not it will work out in the long term, being that Coinbase has to be earning more than this in profit in order to sustain the system, but it is a great benefit for as long as it lasts. Even if they have to remove it at some point in the future due to the risks associated, I definitely give them credit for being willing to take a hit for their users, despite not having to. For me, this is one reason why the slower transactions and other issues are not such a big problem. I feel that any company that is willing to go out of their way to try and give their customer the best experience they can deserves a lot of credit. While I do think that Coinbase has issues that they still need to get resolved, they are definitely heading in the right direction. Let us just hope they keep it that way!

Buying and Selling vs Speeds

Generally speaking, people like to use Coinbase for the buying and selling aspect of Bitcoin. You can make your deposit to the site's wallet and then sell them to the site, or you can buy coins and then transfer them out to your own wallet. You can, of course, use Coinbase as your only wallet and pay people out from there, but as stated it is a bit risky. Since Coinbase gets their money from the buy and sell orders, though, I really do not think they have any issues with people using them for just that.

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