TVL continues to soar, is BASE the Coinbase chain’s dynasty or a flash in the pan?

Is BASE on Coinbase chain the future or just a temporary success as TVL keeps rising?

1. The Explosion of $BALD and

In late July of this year, the tranquility of the Base Chain was shattered by a meme token called $BALD. BALD caused a sensation not only because of its thousand-fold increase in a short period of time, but also because of the wealth myth behind it, attracting the attention of the entire network and making people widely aware of the Base ecosystem. Surprisingly, without cross-chain bridge support for the Base network, the total assets of the Base Chain skyrocketed from a few million dollars to 80 million dollars, thanks to users bridging their assets to the Base network through contract transfers.

Although a large amount of ETH in BALD’s liquidity pool was withdrawn later and the token price once approached zero, the funds and attention it attracted did not dissipate. The latest data from l2beat shows that the total assets of the Base network have climbed to 220 million dollars, with transaction volume even surpassing the previously hyped L2 network Starknet.

Meanwhile, as a rising star on the Base network, has also brought new vitality to the Base ecosystem. It combines social influence with financial mechanisms, rapidly attracting a large number of users. Especially with its innovative invitation code system and tokenized social model, it injects new vitality into the Base network.

Combining the success of BALD and, we can see the huge potential and opportunities of the Base network. From a fledgling Layer 2 solution to today’s asset giant in just a few days, Base is gradually establishing its own on-chain dynasty. The technological advantages behind it, the support of Coinbase, and the increasingly rich ecosystem applications have made Base the new favorite of investors and developers. Now, let’s delve deeper into the Base network and see if it really has the potential to become the next giant in the crypto world.

2. What is Base?

BASE is a new type of Layer 2 on-chain solution launched by Coinbase, aiming to provide an ideal blockchain development environment for developers. Its core features are as follows:

1. Deep Dependence on Ethereum Security: BASE inherits the strong security and scalability of Ethereum. It combines Ethereum’s underlying security architecture with Coinbase’s optimization practices, ensuring that users can switch freely and securely between Coinbase, Ethereum L1, and other interoperable blockchains to BASE.

2. Benefiting from Coinbase’s Strong Support: BASE has direct access to Coinbase’s abundant resources, including products, users, and development tools. This means that developers can easily build decentralized applications on BASE and seamlessly integrate with Coinbase’s products. More importantly, through BASE, developers can serve over 110 million Coinbase verified users and access the $80 billion worth of assets on the Coinbase platform.

3. Efficient and Low Cost: BASE ensures full equivalence with EVM and has very low fees. In addition, it provides a concise developer API, allowing decentralized applications to easily implement gas transaction abstraction and build cross-chain applications using intuitive bridging tools.

4. Openness: With the support of Optimism, Base adopts the Optimism technology stack (referred to as OP Stack). This is an optimized technology that provides instant transaction confirmation while maintaining compatibility with Ethereum. This means that developers can easily migrate their Dapps to Base without making significant modifications. BASE plans to create a decentralized, permissionless Layer2 chain that is standardized, modular, and supports Rollup. As the core developer of Optimism’s open-source OP Stack, BASE is committed to building an active developer community.

Over time, Base is expected to become not just a Layer 2 solution, but a complete, diverse, and ecologically rich platform that drives the crypto field into the next stage.

3. Advantages and Disadvantages of Base
Coinbase-backed – Strong Strength

BASE, as a Layer 2 solution launched by Coinbase, is backed by the first publicly listed company in the crypto industry, COINBASE. Compared to other chains, BASE has natural advantages:

Brand endorsement and reputation: Coinbase is one of the world’s largest cryptocurrency exchanges with a huge user base and brand influence. BASE benefits from Coinbase’s brand endorsement, which gives users and developers higher trust.

Deep compatibility with Ethereum: BASE is designed as a Layer 2 solution for Ethereum, which means it has natural compatibility with Ethereum smart contracts and Dapps. For developers who have already built businesses on Ethereum, migrating to BASE becomes relatively simple.

Integrated and simplified user experience: As a Coinbase product, BASE can easily integrate with Coinbase’s other services and tools, providing users with a seamless, integrated experience. Base’s long-term goal is not only to serve the Web3 world but also to support applications and services in the real world. For example, through Base, physical merchants can accept cryptocurrency payments without worrying about high transaction fees or network congestion.

Strong funding support: As an industry giant, Coinbase provides strong funding support for BASE, which provides more resources and opportunities for research and development, marketing, and ecosystem construction.

No token issuance – A double-edged sword

Compared to other Layer 2 solutions, BASE uniquely chooses not to issue tokens. This decision brings a series of advantages to BASE:

• Avoidance of public service and allocation issues: Not issuing tokens can avoid various complex issues related to token economics. First, without tokens, the platform does not need to struggle to maintain the utility value of its tokens, which usually involves ensuring that tokens have specific uses and demands within the platform. Second, allocation strategies often lead to controversies, especially in token distribution to early supporters, investors, and the team during project launch. These allocation decisions can cause community divisions, dissatisfaction, and criticism. By avoiding token issuance, BASE can bypass these potential disputes and conflicts, allowing for a greater focus on technology and ecosystem development.

• More pure technological and financial ecosystem development: BASE can focus more on technological innovation and ecosystem construction, rather than the complexity of token economics.

• Avoid legal disputes with the US government: As a subsidiary of a US-based listed company, BASE’s lack of tokenization means it maintains a good relationship with the US government in terms of regulation.

• Unique in the blockchain industry: No tokens but investment in stocks. For those who are already familiar with crypto investments, Coinbase’s stock $COIN may be another investment direction. The price volatility of this stock is high, but it also provides investors with huge growth opportunities. For example, data shows that $COIN grew by 120% in just the past July, while the official token $ARB of a similar top Layer2 Abitrium only grew by 18%.

On the contrary, this non-token issuance also brings some limitations. Tokens are often used as incentive tools within an ecosystem. The absence of tokens may mean a lack of strong incentives to encourage users, developers, and other participants to join and maintain the ecosystem. In addition, tokens can serve as a strong community cohesion tool, encouraging users, developers, and early supporters to participate in and support the project in the long term. The lack of this mechanism may make community building more difficult. Similarly, in many blockchain projects, tokens are also used for governance rights. The absence of tokens may mean the need to find other ways to achieve decentralized governance, which can be a complex process.

Limitations of OP technology

Although Base, as Coinbase’s Layer 2 solution, is quite attractive in terms of technology and strategy, no technology is perfect. Base’s OP (Optimistic Rollup) will face increasing competition.

OP (Optimistic Rollup) adopts optimistic verification. Transactions are initially assumed to be valid unless challenged by an observer. After the challenge period, if there is no problem, the transaction will be finally confirmed. Due to its optimistic nature, it can handle more transactions but takes longer to confirm. OP relies on economic incentives and challenge periods to ensure security, and it is technically simpler, so the development progress is faster. We can see that OP technology has its own limitations, such as delayed determinism, potential higher transaction fees, and security dependence on economic incentives and challenge mechanisms, which may limit the applicability and development prospects of the Base chain in certain scenarios.

4. Conclusion

In summary, Base undoubtedly has great potential and opportunities, but it also faces many challenges and risks. If Coinbase can fully leverage its advantages, formulate wise strategies, and continue to innovate, then Base has the potential to become Coinbase’s on-chain dynasty. However, if these risks and disadvantages are underestimated, Base may become another short-lived project.

Ultimately, whether Base can become the dynasty on Layer2 remains to be proven over time. But at least from the current situation, it has taken a solid first step.