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I purchased a bitcoin using a Coinbase account. When I try to verify that transaction to the address, I can't see any activity or balance for the bitcoin address that Coinbase shows as mine. Coinbase, however, still shows my purchase activity and balance correctly on my account.
Has this something to do with the way Coinbase or such wallet services work? Or is there something wrong? Do I actually have the bitcoin or not?
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The coins you purchase are stored in an address owned by Coinbase. This allows them to buy and sell coins using their hot wallet as well as allowing them to move excess coins to cold storage. It also allows them to process send requests between Coinbase users using off-blockchain transactions.
The coins won't show up in an address owned by you until you send the coins to a non-Coinbase address. When you do send the coins, two transactions will be generated by Coinbase. The first transaction moves the coins from an address controlled by Coinbase to a new address controlled by you. The second transaction then moves the coins from this address to the address you specified in the send request.
You can send coins to any of the addresses shown in your Coinbase wallet. Or you can generate a new address at any time to receive deposits.
Since Coinbase keeps just a percentage of the coins in their hot wallet, this can lead to a delay in sending coins if they need to move coins from cold storage back to their hot wallet.
This is no longer correct in 2017. – Anonymous – 2017-12-13T02:13:22.760
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I'm no expert but I'm a user of coinbase and noticed there's a mistake in ScripterRon's answer.
The first transaction moves the coins from an address controlled by Coinbase to a new address controlled by you. The second transaction then moves the coins from this address to the address you specified in the send request.
This is not true from the usage that I've done. When I did the "send" in coinbase, a transaction ultimately went from a coinbase-controlled directly to the destination address and never went through an address controlled by me (e.g. visible under Tools > Addresses).
Some more details from what I saw tracing where the money I spent came from: coinbase had made a series of transactions starting from an account that was holding 0.5 BTC since 23 days. On the day of my transaction, a lot of transactions happened simultaneously coming from that 0.5 BTC master account and funneling through to multiple coinbase-controlled addresses to finally include the destination address I had specified with the right amount.
And their algorithm seems to have some losses because there was a small surplus at the end, and they ended up putting 0.00000866 BTC in an address. Not sure how it will make sense for them to re-use this amount later though, with the current transaction fee costs.
They used to do this, but don't anymore due to the utter idiocy of the behavior. – Anonymous – 2017-12-13T02:10:57.470
@eponymous: This happened on a transaction I did 5 days ago from the time of my posting... Not sure how long ago they stopped doing so as you said. – Wadih M. – 2017-12-13T02:12:16.603
Your answer is correct as of the last 2 years or so, the previous answer was correct for 2013. – Anonymous – 2017-12-13T02:13:10.673
@eponymous Good to know! Interesting to see the changes of the algorithm over the years. Looks like you've been a long term user yourself since 2013 at least? – Wadih M. – 2017-12-13T02:15:14.067
Early 2011, or there abouts. – Anonymous – 2017-12-13T02:17:26.203
@eponymous To be honest, I was a bit surprised by the amount of transaction fees that occurred to lead to my ultimate transaction. It seemed lossy to me, there must be something I'm not seeing on how they make money with that ultimately. – Wadih M. – 2017-12-13T02:20:47.420
Are you looking at the deposit address? Coinbase stores your coin in an account that may not be associated with your deposit address. You should be able to move BTC out of your account to your own personal wallet if you choose to do so. – Mark S. – 2013-11-23T03:29:04.373
Are you saying the deposit address is where I can receive bitcoins from someone? And it is different from the bitcoin address where my bitcoin is stored? – coinbase user – 2013-11-24T04:35:20.080
The deposit address is where you or a customer of yours could send bitcoins. From my understanding coinbase is constantly buying and selling coins they could simply be stored in a wallet that coinbase controls, it may not be associated with the address listed under your deposits. If you want to store your bitcoin in your own wallet you would be able to verify that the coin has been sent to an address that you control. – Mark S. – 2013-11-25T23:23:45.367