Coinbase Unveils Base: Empowering Users with an Optimism-Based Layer-Two Chain

Coinbase, the largest cryptocurrency centralized exchange (CEX) in North America, is making a monumental shift by venturing into the realm of blockchain technology. The exchange recently announced the launch of "Base," a groundbreaking Ethereum layer-two (L2) chain built on Optimism. This ambitious move enables Coinbase's whooping 100 million verified users to access the crypto ecosystem through Base's intuitive interface, marking a significant transformation in Coinbase's business model from a centralized crypto exchange to a web3 gateway.

Base, an innovative layer-two chain developed by Coinbase, harnesses the power of Optimism, a prominent L2 scaling solution for Ethereum and the second-largest L2 ecosystem, trailing only behind Arbitrum. The main goal of Optimism is to tackle the notorious blockchain trilemma by offering interoperability and composability for participating rollups, and Base stands as a prominent player in this endeavor.

Optimism's ambitious vision extends to developing a "superchain" of L2 chains, all focused on facilitating Ethereum's scaling. Through this "superchain," developers gain access to shared security models and tools, allowing them to create and interact with Optimism-compatible layer 2s seamlessly. Consequently, all chains on this superchain enjoy the benefits of a standard wallet experience.

Coinbase's collaboration with Optimism has been in the works for over a year, culminating in the joint development of EIP-4844, also known as proto-danksharding. This EIP aims to increase block space and reduce gas fees, a pivotal upgrade that could result in a significant decrease in L2 transaction fees, potentially by 10-100x. Moreover, launching multiple L2 rollups might pave the way for replacing multiple L1 chains, creating an optimistic outlook for Optimism and its affiliated projects.

Base: Its Working Mechanism

Base, being developed on Optimism, operates as an optimistic rollup chain and starts with a centralized block production model. Designed to cater to Ethereum developers and Coinbase's existing user base, Base serves as an experimental platform for DeFi projects. Notably, Coinbase will act as the sole operator of Base, allowing the company to collect fees and explore Base as a potential revenue stream. Base has already announced partnerships with a range of decentralized applications, including major apps like Aave, Sushiswap, and NFT marketplaces like Magic Eden.

Developers have much to gain from Base as it grants them access to Coinbase's extensive user base of non-DeFi natives. This access could act as a catalyst for DeFi adoption among millions of users who primarily utilize Coinbase.

Base & its Future Trajectory

Coinbase's ambitious move indicates a strong bet on web3 and L2 adoption, as it seeks to onboard millions of new users into the DeFi ecosystem through Base. While operating Base in its early stages may involve certain costs, the revenue-sharing partnership with the Optimism Collective demonstrates Coinbase's optimism about Base's transaction volumes. This new revenue stream holds the potential for scalable growth, even if it starts modestly.

However, regulatory uncertainties remain a significant challenge for Base. The likelihood of launching a token amid uncertain regulatory landscapes appears slim. However, creative solutions, such as a potential airdrop similar to Arbitrum's approach, might attract users to Base. Nonetheless, Coinbase remains cautious and will steer clear of anything that could later be labeled as a security.

Base's permissioned rollup approach could potentially require users to undergo Know Your Customer (KYC) procedures on Coinbase before onboarding to ensure compliance and prevent the involvement of sanctioned entities. Despite these hurdles, Base's impact on the DeFi space remains promising.

Conclusion

Coinbase's entry into the Base chain marks a transformative journey towards embracing decentralization and driving DeFi adoption. Base's integration with Optimism presents numerous opportunities for users and developers alike, unlocking new possibilities for the mass adoption of decentralized finance. Coinbase's strategic move positions the exchange as a crucial player in the emerging web3 landscape, fostering a more inclusive and versatile crypto ecosystem for users worldwide.

1. https://coinmarketcap.com/alexandria/article/what-is-base-coinbase-s-layer-two-chain-explained

1. https://base.mirror.xyz/H_KPwV31M7OJT-THUnU7wYjOF16Sy7aWvaEr5cgHi8I