Projects Building on Coinbase Base
By Noah Washington October 20, 2023
- Coinbase is revolutionizing web3 amid waves of innovation and controversy with its Base blockchain
- Base aims to enhance the usability of cryptocurrencies by reducing transaction time and costs
- It facilitates payments, decentralized finance (DeFi) interactions, and non-fungible token (NFT) trading
- Coinbase plans to decentralize Base gradually, aiming for a Stage 2 rollup by 2024, a milestone that signifies increased security and autonomy within the network
In February 2023, Coinbase, the leading North American cryptocurrency exchange, unveiled Base. It is the exchange's layer 2 blockchain network, permissionless and open to all users.
Coinbase's launch of Base marks the exchange's ambitious journey into blockchain development. It also cements Coinbase's position as a leader in shaping Web3.
Base is built on Ethereum and is defined as a Ethereum layer 2 network. There are very few differences between building on Base and Ethereum.
The goal of Base is to increase the usability of cryptocurrencies by reducing the time and cost to engage in transactions. This makes it easier for users to employ cryptocurrencies to make payments and engage with decentralized finance (DeFi) apps. Base also facilitates users engaging in the purchase, sale and trade of non fungible tokens (NFTs).
Total transactions since Base went live in July 2023. Source: Dune Analytics
Coinbase's move into blockchain-building is particularly significant because it expands the number of services the exchange offers. It ensures Coinbase will remain a leader in the crypto ecosystem by introducing more users to an array of services. Coinbase's venture into blockchain building is beneficial for the crypto ecosystem as a whole. Base is increasing the number of users who engage in digital transactions, as well as the number of transactions per user.
Understanding Optimistic Rollups
Base is an open-source optimistic rollup, defined as a scaling solution that moves computation and storage off the main Ethereum chain. The term "optimistic" refers to the assumption that the transactions on the second layer are valid.
Coinbase built Base on top of the Ethereum blockchain to help scale the network. Optimistic rollups like Base bundle hundreds of transactions off-chain, hence "rollups". They then submit transactions to the Ethereum mainnet in a single transaction.
The work of an optimistic rollup significantly reduces gas fees, defined as the fees to interact on the chain. Employing rollups allows Ethereum to support higher throughput and lower fees while maintaining the security guarantees of the underlying blockchain. As an open-source project, Base allows developers to build decentralized applications (dapps) on top of the rollup. The dapps benefit from the scaling improvements.
Wallets and Costs
An entity can use Base with the Coinbase Wallet and any other Ethereum Virtual Machine (EVM) wallet like MetaMask. There are two fees for every Base transaction, a layer 2 (L2) execution fee and a layer 1 (L2) security fee.
The L2 fee is the amount necessary to execute a transaction on the L2. The L1 fee is the cost to publish the transaction on the L1. Usually the L1 fee is higher than the L2 fee. The L1 fee varies depending on the amount of transactions on the L1. The L2 fee goes up or down depending on the number of transactions being submitted to the L2.
This makes the overall network more accessible and useful for users and dapps. The advantage of having a second layer is that the second layer can offer features and functionality that may not be possible on the more conservative Layer 1.
Projects Building on Base
- BaseSwap : BaseSwap is a decentralized cryptocurrency exchange. Its native coin is Eco. BaseSwap currently has the highest total value locked (TVL) of any platform on Base, at around $29 million. The term "TVL" refers to the amount of all digital assets locked on the platform.
BaseSwap allows users to exchange Base chain tokens and stablecoins like U.S. Dollar Coin (USDC). BaseSwap has a user-friendly interface to simplify DeFi interactions. Key features include cross-chain token swapping, liquidity pools, yield farming and a bridge to Ethereum.
- Krav : Krav (KRAV) is a cryptocurrency that enables trading Bitcoin using altcoins as collateral. This method of exchange prevents liquidations, defined as the forced sale of an investor's assets due to a continuing loss.
The reason that there needs to be a guard against liquidations is because Bitcoin is highly volatile. Krav's goal is to bring lending, trading, staking and farming services to Base chain users.
- RocketSwap : RocketSwap is a decentralized exchange (DEX) on Base. Its native coin is RCKT. RocketSwap acts as an Automated Market Maker (AMM), using a mathematical formula to price assets in liquidity pools and exchange tokens.
RocketSwap has realized over $4 million in TVL. Ways to make money with RCKT include earning RCKT with yield farms and staking, earning RCKT with Swap and earning additional tokens with RocketSwap pools.
- Other projects: These include Alien Base, another decentralized exchange; Beam, a self-custody payments wallet and ImToken, a non-custodial mobile wallet.
Base's Impact and Future
The purpose of the Base blockchain is to bring more users to the crypto economy. Coinbase is enticing users to this chain with flexibility, low gas fees, high security, easy access to the Ethereum mainnet and access to other layer 2 solutions.
In addition, Base offers access to other layer 1 ecosystems such as Solana. Notable node providers include QuickNode, Infura and Blockdaemon. Base's developers are tasked with a critical responsibility, building on the Base testnet for the mainnet launch.
Coinbase is committed to decentralizing Base gradually. By 2024, it hopes to progress to a "stage 2 rollup". A stage 2 rollup is generally defined as one without training wheels. This means that if the code for the chain does not have bugs.
As Base takes steps to remove its limited training wheels, the crypto community is watching to ensure the chain remains secure, usable and efficient. Coinbase's reputation for ease of access and its potential to collaborate with other actors in the crypto ecosystem are on the line.