A question I’ve been asked several times since publishing my last cryptocurrency tutorial: How to buy Ripple XRP using Coinbase, GDAX and Binance is
“Why do I need to use GDAX? Can’t I transfer to Binance, Bittrex etc straight from my Coinbase account?”
The short answer: Yes you can.
The longer answer: Well, here goes…
The reason why Coinbase is making so much money from cryptocurrency is because they’ve made it so easy easy to buy their offerings in Bitcoin, Bitcoin Cash, Litecoin and Ethereum. Coinbase has successfully made purchasing cryptocurrency – an emerging technology that I don’t really even understand – as easy as shopping through the ASOS app.
And, that, is exactly how they have done it. Their Android and iOS app is dead simple to use:
In exchange for this abstraction from the complications of purchasing coins, paying for gas, and storing your coins safely in a wallet, Coinbase charge a fee on all transactions, transfers and withdrawals.
Basically, every time you buy a coin you pay a percentage fee. If the value of your coin goes up and you decide to sell, you pay a percentage fee. If the value of your coin goes down and you decide to cut your losses and sell, you pay a percentage fee. If you buy a coin on Coinbase and want to spend it, store it in your own wallet or gift it to a friend, you pay a percentage fee. The only time you don’t pay a fee is when you add cash like Pound Sterling, Euro or Dollar to your Coinbase account.
At this point it is important to distinguish the difference between the fee Coinbase is charging you, and the network fee of your chosen coin.
Coinbase charge you a percentage fee when you buy, sell or transfer a coin. This starts at 2.99%.
The network charges you a fee when you create a transaction – i.e. you move your coin from one address to another. This, by design, is very small.
The idea with cryptocurrency is that fees are very small. This is why coins like Ripple XRP have so much potential. In order to transfer $400M worth of XRP from one address located in the United Kingdom to another address located in Mongolia it will currently cost you a few cents (less than a dollar). This is partly due to the cost of each coin, the number of coins available in circulation, and the technology behind Ripple.
Bitcoin – the world’s biggest cryptocurrency by market cap – has higher fees than Ripple. Again, this is partly due to the cost of each coin, the number of coins available in circulation, and the technology behind Bitcoin. More recently, Bitcoin transactions have become more and more expensive and slower to process. You may have heard of these reasons being the motivation behind the Bitcoin Fork.
GDAX is a cryptocurrency exchange owned by Coinbase. I personally have suspicions it holds the architecture Coinbase uses to process cryptocurrency transactions, but this is unconfirmed. For some reason, transferring coins from your Coinbase wallet to your GDAX wallet is free of Coinbase fees. And then transferring coins from your GDAX wallet to any other address is also free of Coinbase fees. That means you only have to pay network fees, which as explained above is negligible on Ethereum, Ripple and Litecoin and maybe noticeable on Bitcoin transactions.
Simple. Don’t ever transfer coins from your Coinbase wallet to another exchange. Coinbase have already charged you a fee when you purchased your coins – and that’s fair enough. They provided an easy-to-use platform to buy cryptocurrency.
Instead, log in to GDAX and transfer your balance in your Coinbase wallet to your GDAX wallet and then transfer it to your wallets on other exchanges.
If you have a verified Coinbase account, your GDAX account will automatically verified. Just log in with your Coinbase credentials.
