Keep Calm and Own Your Private Keys

6 minute read Modified:

How Coinbase walked off with millions of customer coins during the Bitcoin Gold hard fork. And how to make sure it never happens again.

If you’re one of 10 million plus Coinbase users and didn’t move your bitcoin to a wallet “under your control” prior to the Bitcoin Gold hard fork you may never see any of the Bitcoin Gold you were entitled to receive at the or, more precisely, at block 491407 when the snapshot was taken. And here’s what happened next…

But less than a week before the fork Coinbase decided to exert their mafia-like status over millions of customers by shutting the door on BTG, otherwise known as Bgold or Bitcoin Gold, keeping it for themselves while leaving the door cracked just enough to create a sense of hope and give Coinbase a back-out strategy—a likely story indeed.

Coinbase’s current priority is to add support for Segwit2x, followed by Bitcoin Cash. We will continue to monitor the development of Bitcoin Gold, and if its network proves to be both secure and valuable, Coinbase may decide to support it at a later date.

Coinbase, Bitcoin Gold FAQ
Confused about Bitcoin Gold? Learn about it in this article from Fortune Magazine.

Not every exchange shut the door on Bgold, however. Bitfinex and several smaller exchanges made it available for trading right after the fork. And trade it did. For a short time after the fork BTG mooned with over a 450% gain as shown here:

Bgold trades up more than 450% in hours after fork
Bgold trades up more than 450% in hours after fork

Such price movement is unlikely to happen again anytime soon. And with the October senate repeal of the big bank arbitration clause, it is now highly unlikely Coinbase users can do anything about the cryptos they lost as a result of Coinbase’s actions.

What Coinbase never told its customers—I mean, c’mon, why would they—is that it was still possible to collect Bgold during the fork. All users had to do was move their bitcoin into a wallet under their control as designed by Satoshi Nakamoto when he created the worlds first peer-to-peer electronic cash system: Bitcoin.

But what does it mean to have a wallet “under your control” exactly? Here’s John Blocke to explain in the context of the Segwit2x chain split:

Where does that leave you, the confused spectator? If you want to play it safe, you don’t have to do anything. Make sure your coins are in a wallet that gives you control of the private keys, and after a split you will have your bitcoins on both chains.

John Blocke, Bring on the Chain Split

As John mentions, to get both coins you need to move your bitcoin into a wallet which gives you control of the private keys. Coinbase doesn’t do that.

Even those who knew to move their coins prior to the fork were liable to fumble after Coinbase published misinformation on the Bitcoin Gold FAQ in the days leading up to the hard fork as warned by the Bitcoin Gold team:

At this time, Coinbase cannot support Bitcoin Gold because its developers have not made the code available to the public for review. This is a major security risk.

The fork has already privately occurred at a point known only to the Bitcoin Gold development team. The Bitcoin Gold blockchain will be made publicly available when the Bitcoin blockchain reaches block number 491,407, which is currently estimated to occur on October 25, 2017.

Bitcoin Gold Community Response to Recent Misinformation

Coinbase kept the misinformation in place until one day before the fork occurred, even after the Bitcoin Gold team issued response, before abruptly changing their FAQ without notification with just one day left before the fork. Only they screwed up and never updated their newsletters, like this one sent to all GDAX customers after the fork:

Email newsletter from GDAX after Gold fork on the 24th
Email newsletter from GDAX after Gold fork on the 24th

It’s clear Coinbase acted negligently during the Bitcoin Gold hard fork. Coinbase failed to do even the bare minimum to inform users of their choices prior to the fork, then spread misinformation as I’ve shown and, as a result, caused their users to suffer the sudden and systematic loss of potentially hundreds of millions of dollars in Bitcoin Gold.

And guess what? There’s nothing you can do about it. Except there is one thing…

Keep Calm and Own Your Private Keys

To collect during bitcoin forks, you need to own your private keys. Here are some wallets I recommend individuals consider to ensure they receive their coins during the next fork:

Exodus is an easy-to-use multi-currency wallet and exchange.
Ledger wallet is a hardware wallet and secure bitcoin storage device.
Electrum is an advanced and long-standing open source bitcoin wallet.

Though the Ledger Nano S is my favorite of the three. Of course there other wallets which put you in control of your private keys. Be sure to educate yourself, and never let Coinbase walk off with your coins again.

No one said the ride to the moon wouldn’t be bumpy.

John Blocke, Bring on the Chain Split