A Coinbase user has bitterly claimed that exchanges do not “act in the spirit of Bitcoin” and have “turned Bitcoin into something worse than fiat currency”, after being locked out of his account with the popular US cryptocurrency exchange. The user has recounted a torrid experience without access to funds, including a period of homelessness.
“Bitcoin is supposed to be better than fiat currency since it gives control of money back to the people through cryptographic decentralization… but exchanges have ruined that,” said the user.
The Coinbase user, who wished to remain anonymous, told Bitcoin News that he utilized Coinbase several times before to convert Bitcoin paychecks into US dollars for rent, food and basic necessities. The person claims to be a low-income earner depending entirely on these paychecks to stay out of homelessness, with no extra money to use in case of emergency.
The user and his partner lived in a weekly motel without tenant rights. He had developed a routine of depositing Bitcoin earned from freelance work two days before rent was due, as it typically took up to two days before Coinbase withdrawals were reflected in their bank accounts.
On the last occasion on 10 May, the user was locked out after a third unsuccessful login attempt. The user recounts:
“I put the right password, the right 2-FA code. I use the same device for every login but always received an email to confirm a new device. This time, the link from the confirmation email bugged out every time. After my third attempt, I received a notification that my account was locked for 24 hours.”
All attempts to reinstate access via phone support did not work as Coinbase support claimed it had no control over account lockouts even if the user was able to verify identity.
By the time the user was able to log in to sell, Bitcoin’s price had fallen. Making matters worse, the funds had not arrived on the day rent was due. Coinbase could only tell the user that it was not responsible for his loss of money. An unsympathetic landlord threw the user and his partner out of the rental, after which they lived on the streets for several days.
Be wary of exchanges
The user told Bitcoin News that he no longer trusted Coinbase or even other exchanges with his funds and would now seek alternative ways of converting Bitcoin to fiat. He suggested that he might try peer-to-peer trades or look up decentralized exchanges, but admitted he was not sure how they worked.
Decentralized exchanges, as the name suggests, involve trading of currencies without the need to deposit funds onto a centralized wallet where users no longer control their private keys – which is the case with centralized exchanges like Coinbase. Peer-to-peer platforms like Localbitcoins have also been popular among Bitcoin users as they involve direct exchanges between people or traders, eliminating the need to trust intermediaries.
“Let this be a warning to everyone when depositing Bitcoin into Coinbase or any other exchange; the moment you deposit your bitcoin you lose control of your money due to the centralized nature of exchanges. Do not deposit Bitcoin unless you completely trust an exchange,” concluded the user.
Coinbase has not responded to requests for comment. Coinbase receives USD 1 billion of revenue per year.
Image source: Flickr – Charlie Cowins
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