Quote from: anorphirith on December 18, 2013, 10:18:42 AM

Hi, I was wondering how coinbase can take your USD and change it to bitcoins ?
did they somehow gather a lot of coins to start with and then allows people to buy and sell coins from their wallet ?
do they have a direct connection to other bitcoin trading website so they can tap into their reserve as well ?
how does this whole USD>Bitcoin exchange works ?
thanks for your insight !

They are exchanges like normal exchanges for anything else. You basically put your BTC or your currency into their system like you do a money market with any exchange. You do your trades they take their transaction costs and feed your account appropriately. You then extract it via direct deposits, wires whatever with you incurring any transaction fee's.

There is no magic just you paying a few people to handle your money and letting you do all the work.

Edit: They do not have access to your personal wallets, you have to transfer BTC to their system and trust them to handle your transaction honestly. Just as you do with normal brokers, except in this system you have no x amount fraud protection it is all on trust.