1) They take account verification seriously and leverage best practices around 2-factor auth etc even going so far as suggesting you NOT use simplified solutions like authy.
2) Your "hot wallet" balance is insured from internal breach / external hacking / etc. Good to note it's not insured from somebody stealing your account credentials from you directly.
3) They store 98% of their total crypto balance offline with a physical system designed to minimize losses or attack vectors.
EG their insurance - https://support.coinbase.com/customer/portal/articles/166237...
So seriously they blocked my entirely legitimate account from buying and refused to provide any explanation or recourse.
The fear you have is real, but it is slowly getting better and with that more will enter. Just like investing in early companies, it is riskier now, but as it becomes safer, those risk takers are rewarded.
Funds were lost in mtgox, btc-e, many others and there is fraud abound (pre-SEC times or early), but coinbase and the coins they offer are currently safer than it was. As more players enter it will be safer still.
https://en.wikipedia.org/wiki/Civil_forfeiture_in_the_United...
https://en.wikipedia.org/wiki/Executive_Order_6102
You wait and see what happens when coinbase has 500 billion or a trillion dollars worth of hard currency on their platform, and the us dollar is three years into its slide. The temptation to raid that will be far too great.
Threat models and risk balancing are important.
Per your other argument: a whole host of executive orders spanning 2 years, nearly 100 years ago, designed to work around the federal reserve ratio, doesn't hold much water.
Here is more information about the topic :https://en.bitcoin.it/wiki/Brainwallet
Obviously, this makes no sense to a cryto enthusiast, because they care more about the stuff you talked about.
But the "average" zero knowledge person who freaks out about how Bitcoin is "unsafe" is usually talking about private key theft, or getting scammed by someone. These "unsafe" things aren't a problem on coinbase.
https://www.moodys.com/sites/products/DefaultResearch/200710...
Of course, when you start defining "safe" in a probabilistic way, you end up very quickly estimating the degree of safety instead of binary safe/not safe.
Nice subtle joke(?) with that link to a Moody's March 2008 report on rating bonds given that rating agencies were probably the closest single thing you could point to as the fraud that caused the mortgage bubble and 2008 collapse. Yes, sometimes a feeling can be closer to the truth than a lot of complicated math done with wrong assumptions.
I agree that general public is utterly incapable of understanding basic concepts of probability. (See: Clinto had probability 52% of winning. Trump won -> Forecast was wrong. How stupid is that?) I just commented when you told you have not seen safe even defined in a probabilistic way.
> Yes, sometimes a feeling can be closer to the truth than a lot of complicated math done with wrong assumptions.
To me that is like a stopped clock is correct twice a day compared to a working clock that is just having wrong time all the time.
At least with the complicated math you are forced to spell out the assumptions and there is a chance you are able to recognize them before it is too late.
I come from a construction background (big stuff) and it hadn't occurred to me that people would not get my connotative understanding of 'safety'. For me, safety is about risk minimization. If you haven't considered actual risk when you investigate doing something that could hurt you, it isn't 'safe'.
So thanks for helping me recognize that.