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The Layer 2 war has been raging for several months now, and Coinbase officially entered it on August 9, when its Base scalability solution was deployed on the mainnet.
Beyond the stated goal of onboarding "the next billion users and the next million developers on blockchain", Base has above all enabled Coinbase to find new growth drivers. And from this point of view, the launch has been a success.
In just over 5 months, Base has entered the layer 2 podium in terms of total value tied up (TVL) with just under $400 million, behind Arbitrum ($2.35 billion) and Optimism ($820 million). It even made it into the top 10 for all blockchains combined, according to data aggregated by DeFi Llama.
Base generated over $5 million in revenue from transactions made by the more than 390,000 users, according to data aggregated by asset manager 21Shares on Dune Analytics.
These good figures were largely achieved thanks to the launch last summer of the FriendTech social network, whose temporary frenzy triggered a record number of Base transactions, peaking at 1.8 million on September 14 and 1.4 million on October 2.
But speculation is not the only reason for the success of Coinbase Layer 2. "Base has set up a very comprehensive onboarding system. Unlike other blockchains, it's much easier to deploy there. Thanks to this, they were able to mobilize a sizeable community fairly quickly," remarks Mounir Benchemled, CEO of DEX aggregator ParaSwap, which also deployed on Coinbase layer 2 in September.
A strategic alliance with Optimism
To launch its layer 2, Coinbase has chosen to use OP-Stack, the optimistic roll-up developed by Optimism and launched last June.
"Today, OP-Stack is the most developed layer 2 solution. Optimism also offers the advantage of providing a clearer roadmap than its competitors, and support for more advanced projects", continues Mounir Benchemled. For a company with institutional ambitions like Brian Armstrong's, these arguments are bound to set it apart.
A few weeks after the launch of Base, Coinbase announced that it shared Optimism's vision based on the principles of a "Superchain", a network of interoperable layer 2s.
On August 24, the two companies even announced a revenue-sharing agreement for Base. In return, Coinbase Layer 2 will receive up to 118 million OP tokens (around $250 million at current prices) over a 6-year period, which will enable it to participate in Optimism's governance.
Making the most of your brand
"Even though Base has had an interesting start, in the long term it will have to find differentiating elements compared with other layer 2 solutions," warns Stanislas Barthélémi, head of blockchain & crypto at KPMG.
Base has a potential user base of over 100 million, and the power of a brand that is currently one of the most reassuring on the market in terms of regulation.
"In recent years, Coinbase has spent an enormous amount of money on simplifying its user experience as much as possible, both for its platform and for its various products such as Coinbase Wallet. It could do the same for Base, and thus secure itself some interesting traction," continues Stanislas Barthélémi.
There's no shortage of possibilities, especially since USDC, Circle's stablecoin, has been available natively on Base since early September, i.e. without the need for a bridge. For Stanislas Barthélémi, "this integration opens up a wide range of possibilities for everyday payments and cross-border transactions at lower cost. Coinbase clearly has many levers to pull to make Base viable".
Decentralization in focus
In addition to facilitating access to the blockchain for its users, Coinbase has been hammering home in recent months its desire to decentralize the operation of Base to make it "an open and neutral platform where developers and users can participate freely", explains the company, which for the moment has not revealed a precise timetable.
Once mentioned as a possibility "at some point in the future" by its General Counsel Paul Grewal, the launch of a native token for Base has for the moment been totally ruled out by CEO Brian Armstrong. "We have no plans to create a token for Base," he explained to US media outlet Decrypt in early December.
"It's harder to imagine decentralizing a layer 2 without a token," raises Mounir Benchemled. "A token provides more flexibility to set up governance models or incentives to use the protocol," he adds.
It has to be said that the American environment is not necessarily conducive to such a launch, with the Securities and Exchange Commission (SEC) having drastically tightened the regulatory screws on the crypto sector since the fall of FTX. For several months now, the SEC has tended to consider the majority of cryptos or tokens as financial securities. A reclassification that Coinbase wishes to avoid more than anything else.
"Because of this threat and the lack of clarity in the rules, many projects have put their token projects on hold," confides a French entrepreneur who has just spent several months in the United States.