What is Coinbase’s L2 Base solution?

09.26.2023

What is Base?

Base is a Layer 2 (L2) solution network built on Optimism’s OP Stack architecture.

Backed by crypto exchange Coinbase, the platform “offers a secure, low-cost, and developer-friendly way to build decentralized applications.” It works like an Ethereum rollup network.

Base interacts with the American company’s main products, including Coinbase Wallet.

The crypto exchange has partnered with Optimism as the core developer of the OP Stack. A portion of transaction fees on the Base network goes to the Optimism Collective treasury.

Coinbase and its venture capital arm also launched the Base Ecosystem Fund. It invests in early stage projects using the new L2 solution.

The Base test network began operating on February 23. On July 13, the project opened access to the mainnet to developers dapps. Application creators have the opportunity to use a number of services, including:

• node providers including Blockdaemon, QuickNode and Blast;
• Safe’s smart wallet infrastructure;
• blockchain explorers Basescan and Blockscout;
• data indexers The Graph, Goldsky and Covalent;
• Developer tools from Thirdweb.

With the opening of the main blockchain network, there was a wave of meme tokens, some of which showed a hundredfold growth.

The full-scale launch of Base took place on August 9. At the same time, functionality for interacting with non-fungible tokens appeared. Users now have the opportunity to issue commemorative NFTs, complete tasks and receive rewards, and reserve cryptocurrencies in Coinbase Wallet.

On the eve of the full-scale launch, the project team launched an official cross-chain bridge.

Why did Coinbase need an L2 solution?

Coinbase is the largest publicly traded crypto exchange in the United States. The platform’s user base exceeds 100 million people.

CoinGecko analysts are convinced that Base represents a “starting point for introducing” exchange clients to DeFi. For developers of already launched dapps, there are incentives to integrate with the new protocol and the opportunity to attract a large user base.

Coinbase’s head of protocols, Jess Pollack, expressed confidence that by launching its own blockchain, the American company will be able to generate additional income.

“At the current stage, Base will be monetized through sequencer commissions, which are accrued when performing any operation on the platform,” CoinGecko experts noted.

However, as Pollack emphasized, the developers are “focused on expanding the use [протокола]”and intend to reinvest profits in innovation.

Does (will) Base have its own token?

Even at the launch stage of the Base testnet, the developers emphasized that the L2 solution does not involve issuing a token – ETH is used to pay transaction fees.

2/ Important: Base is *not* a token

We do not plan to issue a new network token for Base and will use ETH as the native gas token.

— Coinbase 🛡️📞 (@coinbase) February 23, 2023

In September, project representatives additionally noted this point on the X social network profile.

What are the distinctive features of Base?

Base is part of the Superchain L2 ecosystem. The latter is a single blockchain network built using the OP Stack, which offers significant scalability and interoperability, as well as ease of deployment of new systems.

Being an L2 solution, Base relies on the security layer of the Ethereum network.

The new platform is also EVM-equivalent. This means that developers have the opportunity to run applications on Base without making significant changes to the code. Popular tools like Foundry, Hard Hat and Truffle are available to dapp creators.

According to CoinGecko, fees on the Base network are 10 times lower than the Ethereum mainnet.

The disadvantages of the new system include:

1. Centralization. At the current stage, Coinbase operates as a single Base sequencer node, which assumes significant control over transactions, their processing and ordering. However, according to the roadmap, in 2024 the developers intend to achieve “decentralization and security comparable to Ethereum.”
2. Long withdrawal period, which takes about 7 days. This is due to the peculiarities of the work of fraud-proofs from Optimism.

How is the Base ecosystem developing?

Base support has been added by a number of well-known DEX and other DeFi protocols, including:

Forks based on the new L2 solution have appeared:

• landing protocol Aave v3 (Seamless Protocol);
• the largest decentralized exchange in the OP Mainnet ecosystem, Velodrome Finance (Aerodrome).

In early September, Circle released the USDC stablecoin based on Base. Within a few weeks, the market supply of the “stable coin” on the new network reached $165 million.

Against the background of the opening of the Mainnet for public access TVL network reached $153 million. According to this indicator, Base was ahead of StarkNet, which has been operating since 2021.

On September 1, the volume of locked assets on the Coinbase-supported network reached $380.4 million—an increase of 95.9% in just one week. According to this indicator, the L2 solution came in ninth place in the DeFi Llama rating.

The initial driver for the growth of blocked assets in Base was the hype around the Web3 social network Friend.Tech.

Subsequently, the baton passed to the decentralized exchange Aerodrome, whose team is known for the popular DEX Velodrome in Optimism.

In mid-September, Base overtook Ethereum in transactions per second (TPS). The Coinbase-supported L2 protocol reached a value of 12.93 TPS, while the main network of the second largest cryptocurrency by capitalization reached 10.18 TPS.

According to BaseScan, on September 14, the network processed a record 1.88 million transactions per day. For comparison, the segment leaders in TVL Arbitrum and Optimism had 503,655 and 378,444, respectively.

As of September 26, the total TVL of the Base ecosystem is $389 million. The greatest activity occurs on the Aerodrome, Friend.Tech and Compound V3 platforms.

The new L2 solution ranks third in the L2Beat rating, behind only Arbitrum One and OP Mainnet. The latter are also based on Optimistic Rollup technology.

Since the first half of September, Base has been ahead of the above-mentioned second-tier solutions in terms of the daily number of transactions.

In August, the developers presented a plan for transition to a decentralized model, involving several technical upgrades and the elimination of a single point of failure.

In September, the project introduced the Pessimism monitoring system. It is designed to enhance the security of OP Stack and EVM compatible protocols by “rapidly detecting and responding” to threats.

According to the statement, Pessimism has monitored and secured the Base mainnet since launch.

Found an error in the text? Select it and press CTRL+ENTER