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Coinbase announced today that its Coinbase Wallet platform will now allow users to backup their private keys on their personal iCloud or Google Drive accounts, with the hope of making it easier for recovery should they lose access to their device or other issue.
🔐☁️ Introducing Cloud Backup for your private keys on Coinbase Wallet!
— Coinbase Wallet (@CoinbaseWallet) February 12, 2019
Backup to your personal iCloud or Google Drive, and explore the open financial system with peace of mind. https://t.co/6uaHT8AZky
It is not uncommon for users to lose access to their crypto wallets by accidentally losing their backup seed phrase, and this prompted Coinbase to try to come up with another option for consumers. Their solution is to allow users to store an encrypted backup of their private keys on their own personal cloud storage account. Currently iCloud and Google Drive are supported.
Read more: Coinbase Wallet now supports BTC, store your BTC on your Crypto Wallet app
Users make a unique password to unlock the encrypted keys, and so only need to remember one password, not a whole recovery seed. Though this may help some users, many on twitter pointed out that this at best goes against decentralization, and at worst could be a huge security risk.
Lol nothing says decentralization like putting your private keys on a centralized server 👍🏻
— TAT3AN (@TAT3AN) February 12, 2019
@coinbase is also creating a dangerous precedent.
— LiL Whale ⚡ (@lilcryptowhale) February 12, 2019
Not only the idea defies elementary cybersecurity, it also comes against of the most important aspect of #crypto: self-sovereignty.
So beware, @coinbase, #cryptocurrency users are well educated and always vigilant.
Private keys in the cloud? Bad idea. Coinbase I think you have been too slow to progress, you are going to be left behind
— JJ (@imjjj1) February 12, 2019
The main concern is that should either cloud service get hacked, thousands of users private keys could be compromised. The counter-argument is that these keys are themselves heavily encrypted so as long as users use solid passwords they should be safe even if accessed by a third party. Coinbase and some on twitter defended this choice along these lines.
🔒Your backup is encrypted using a user-provided password with AES-256-GCM encryption and stored accessible only by the Coinbase Wallet mobile app.
— Coinbase Wallet (@CoinbaseWallet) February 12, 2019
The backup can only be decrypted using your password. Use a strong and unique password and protect your cloud account with 2FA.
Lol why is everyone flipping out over this? It’s pretty much same security model as the https://t.co/u7tfb7gghA wallet but you’re using Apples or Googles servers to store the encrypted keys. Presumably you’d still have the seed phrase as paper backup in case servers go down. https://t.co/1snA5S7gEx
— Christian Lundkvist (@ChrisLundkvist) February 12, 2019
Ultimately each user can ask themselves if the benefit of another backup is worth the inherent risks and trust issues. The most hardcore will likely always prefer to hold their own personal backups of any relevant keys and recovery phrases, though others might prefer the convenience of having a cloud backup and trust their password is sufficiently uncrackable. Coinbase will leave it to each user to decide for themselves.
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