You’ve heard of Coinbase. But have you heard of its new Layer2 network Base?
An in-depth analysis of why Coinbase (NASDAQ: COIN) launched a new Layer-2 chain using the OP Stacks.
With the launch of Base, its Layer-2 (L2) network built on top of the Ethereum ecosystem, Coinbase became the first publicly traded company (NASDAQ: COIN) to launch a blockchain.
Coinbase had considered launching a chain twice before: in 2018 and 2020. Both times the company rejected the idea.
However, in February, Coinbase announced through a blog post that the company decided to launch Base and Ethereum L2 network, “offering a secure, low-cost, developer-friendly way for anyone, anywhere, to build decentralized apps on-chain.” Fast-forward a few months, Base’s mainnet went live on August 9, publicly available for all users and builders.
Coinbase’s Meteoric Rise Sets the Stage for Base
Coinbase, a household name in the crypto realm, has experienced an astronomical growth trajectory. Since its inception, the platform has seen a substantial increase in users, going from 56 million users in 2021 to an impressive 108 million in 2022. This extraordinary 92.8% YoY growth is a testament to Coinbase’s strong resonance with the crypto community.
Coinbase’s “Secret Master Plan”
The roots of Base go back to the advent of Coinbase when Brian Armstrong delineated Coinbase’s secret master plan to create an open financial system that increases economic freedom globally.
Over the last years, alongside continuing investments in the first three phases, Coinbase focused on unlocking the final stage: the open financial system’s decentralized apps (dApps). As the team looked towards the future, Jesse Pollak and the team wanted to help teams building in the web3 space to build more products or apps leveraging the full power of the on-chain environment. But how could they help?
A Secure, Low-cost, Developer-friendly Ethereum Layer-2
The answer to the aforementioned question was creating a network that offers a “secure, low-cost way for anyone, anywhere, to build decentralized apps on-chain.”
Here are the main five things to know about Base:
- The Base chain was built using the OP Stack. Coinbase turned to OP Stack, a modular, open-source framework used to deploy optimistic rollups* developed by the team behind Optimism Optimism Foundation. From the outset, the Base development team has collaborated closely with OP Labs, a core developer of OP Stack. Beyond their alignment of how to scale Ethereum, they also share the vision of creating an interoperable “superchain” of Layer 2s. Base choosing to build as an Ethereum L2 is attractive because it allows them to leverage the decentralization and security of Ethereum while having less regulatory risk.
- Base has no native token. Unlike other L2s, Base doesn’t have its dedicated network token, and there are no plans to issue one. Also, the project has offered no token incentive in the form of airdrops for locking assets on Base.
- The network hosts Coinbase’s on-chain products but also has broader ecosystem ambitions. There is no secret that Coinbase funded the development of Base and that the crypto exchange operator intends to use the network to power various products going forward. But having said this, the vision of Base has always been to create an open ecosystem that will attract other applications.
- Base has a roadmap for decentralization. Coinbase’s involvement invites criticism that Base is inside a private corporation’s wall garden. Yet, as stated in this blog post, decentralization has been a baseline priority (P0) for Base and the OP Stack. This means a delegated decision-making process will be implemented in the following months. As the Base ecosystem grows, it will roll out more democratic governance mechanisms to represent the interest of all participants and shareholders. Base also announced a roadmap for decentralization in 2023.
- Base supports account abstraction**. Two companies, Gelato Network and Safe, collaborated to help facilitate this feature on Base. Supported features of this account abstraction SDK include social onboarding, gasless transactions and fiat on-ramping, which can all be accessed by developers building on Base.
*Optimistic rollups are a scaling solution for the Ethereum network that allows faster and cheaper transactions by processing them off-chain.
**Account abstraction allows users to use smart contracts as their accounts instead of using Externally Owned Accounts (EOA). This enables transaction batching, allowing users to bundle multiple transactions into a single operation, so you would not need to make a separate transaction for each dApp interaction (no need to incur high gas fees).
What does Base have to do with “Superchain?”
OP Labs, Optimism Collective and Base aim to form a Superchain that jointly scales Ethereum.
Here are the main goals of the collaboration:
- Base will bring Coinbase’s on-chain products and user base into the superchain ecosystem
- Base will provide a % of the fees earned through transactions to the Optimism Collective to be part of the Superchain, contributing back to funding core public good infrastructure.
- Base will collaborate with the Optimism Collective to co-create primitives for L2s that join the Superchain.
What is the relationship between Coinbase and Base network?
Base was incubated inside of Coinbase, which means it can leverage the decade-long experience of Coinbase building crypto products. Also, with 100+ million verified users and $128 billion worth of assets (as of June 2023) on the platform, Base benefits immediately with a large pool of users, liquidity and partners to draw from.
With their investment in Base, Coinbase has an even larger motivation to help scale the underlying platforms that Base builds on. An example of Coinbase’s investment in core crypto infrastructure is their work on EIP-4844*, a proposal to reduce fees for Ethereum L2 rollups (and was collaborated with OP Labs).
*EIP stands for ‘Ethereum Improvement Proposals’, standards specifying potential new features or processes for Ethereum.
What can users (like you) do on Base right now?
- Bridge tokens: Users can bridge Ether (ETH) from mainnet Ethereum to Base using the official Base bridge.
- Swap tokens and provide liquidity: At least two decentralised exchanges (DEXs) have announced they are running on Base — one of them being Uniswap.
- Make payments: Web-based payment app Beam, which allows users to make payments using USDC or the app’s native coin Eco, announced its launch on Base.
- Register a username: After Masa Finance has released its soulbound token (SBT) protocol for Base, users can now register “.base” Masa usernames which can later be used for credit underwriting and other KYC-compliant services.
- Launch a DAO: Decentralized autonomous organisations (DAO) can be easily created on Base using Aragon’s no-code Aragon app and modular OSx.
- Mint and collect NFTs: Multiple brands will allow users to mint NFTs exclusively on Base. This includes the Coca-Cola NFT collection that can be collected this week. Also, you can mint “Base, Introduced”, a commemorative NFT that celebrates the initial launch of Base — for free!
The information provided in this article is for general informational purposes only and should not be considered financial, investment, or professional advice. The author of this article is not affiliated with Coinbase, Base, or any other companies mentioned in the content. Readers are strongly encouraged to conduct their research and consult with a qualified financial advisor before making any investment decisions.
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