What is Base, Coinbase’s L2?

Beginner

Beginner

What is Base?

Base is a layer-2 solution (L2) built on the OP Stack architecture from Optimism. 

Backed by the crypto exchange Coinbase, the platform “offers a secure, low-cost and developer-friendly way to build decentralised applications.” It operates as a network of rollup on Ethereum.

Base integrates with the American company’s core products, including Coinbase Wallet. 

The exchange collaborates with Optimism as a core developer of OP Stack. A portion of transaction fees on Base flows to the Optimism Collective treasury. 

Coinbase and its venture arm have also launched the Base Ecosystem Fund, which invests in early-stage projects building on the new L2.

The Base testnet went live on February 23. On July 13 the project opened mainnet access to dapps developers. Builders gained access to a range of services, including:

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

Once mainnet opened, a wave of memecoins flooded the chain, some rising a hundredfold. 

Base’s full public launch came on August 9, alongside functionality for interacting with non-fungible tokens. Users could mint commemorative NFTs, complete quests for rewards and reserve crypto handles in Coinbase Wallet. 

On the eve of the full launch, the team rolled out the official cross-chain bridge.

Why does Coinbase need an L2?

Coinbase is America’s largest publicly traded crypto exchange. Its user base exceeds 100m. 

Analysts at CoinGecko believe Base is “a starting point for introducing” the exchange’s customers to DeFi. For developers of existing dapps, the new protocol offers incentives to integrate and access a large user base.

Jesse Pollak, Coinbase’s head of protocols, said he was confident the company would generate additional revenue from launching its own blockchain.

“At the current stage, Base will be monetized through sequencer fees, which are charged for any operation on the platform,” the CoinGecko experts noted.

However, as Pollak stressed, the developers are “focused on expanding [the protocol’s] applications” and plan to reinvest proceeds in innovation.

Does Base have, or plan, a native token?

From the testnet launch, the team made clear that the L2 would not issue 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 reiterated this point on X.

What sets Base apart?

Base is part of the Superchain L2 ecosystem: a unified network of blockchains built with OP Stack, which offers significant scope for scaling and interoperability, as well as ease of deploying new systems.

As an L2, Base inherits Ethereum’s security. 

The new platform is also EVM-equivalent. Developers can deploy applications on Base without major code changes, using familiar tools such as Foundry, Hard Hat and Truffle.

According to CoinGecko, fees on Base are ten times lower than on Ethereum mainnet.

Drawbacks include:

1. Centralisation. At this stage Coinbase operates as the sole Base sequencer node, giving it significant control over transactions, their processing and ordering. However, according to the roadmap, in 2024 the developers aim to achieve “decentralisation and security comparable to Ethereum”.  
2. A lengthy withdrawal period of around seven days, owing to the way Optimism’s fraud proofs work.

How is the Base ecosystem developing?

A number of well-known DEX and other DeFi protocols have added support for Base, including:

• Symbiosis Finance;
• Uniswap;
• Compound;
• 1inch;
• PancakeSwap.

Forks on the new L2 have appeared, including:

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

In early September Circle issued USDC natively on Base. Within weeks, the stablecoin’s supply on the network reached $165m. 

As the mainnet opened to the public, the network’s TVL hit $153m, overtaking StarkNet, which has been live since 2021.

On September 1, locked assets on the Coinbase-backed network reached $380.4m—up 95.9% in a week—putting the L2 in ninth place on DeFi Llama.

The initial driver of TVL growth on Base was hype around the Web3 social network Friend.Tech. 

Momentum later shifted to the decentralised exchange Aerodrome, from the team behind the popular Optimism DEX Velodrome.

In mid-September Base surpassed Ethereum in transactions per second (TPS). The Coinbase-backed L2 reached 12.93 TPS, versus 10.18 TPS on the main network of the second-largest cryptocurrency.

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

As of September 26, the Base ecosystem’s aggregate TVL stood at $389m. Activity was heaviest on Aerodrome, Friend.Tech and Compound V3.

The new L2 ranks third on L2BEAT, behind only Arbitrum One and OP Mainnet. These are also based on Optimistic Rollup technology.

Since the first half of September, Base has outpaced the above L2s by daily transaction count.

In August the developers set out a plan to shift to a decentralised model, including several technical upgrades and the removal of a single point of failure.

In September the project unveiled the Pessimism monitoring system, designed to enhance protection for OP Stack- and EVM-compatible protocols through “fast detection and response” to threats.

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