On February 23, Coinbase, one of the largest cryptocurrency exchanges in the world, announced the testnet launch of its Ethereum layer-2 network, Base. The main goal of Base is to offer a secure, low-cost, and developer-friendly way for anyone to build decentralised apps (DApps) on-chain.
"Today, we’re excited to announce the testnet launch of Base, an Ethereum layer 2 (L2) network offering a secure, low-cost, developer-friendly way for anyone, anywhere, to build decentralised apps or ‘DApps’ on-chain, said Will Robinson, VP of Engineering at Coinbase.
Through the launch of its L2, Coinbase aims to bring phase 4 of its roadmap to fruition, which is to onboard one billion or more users into the crypto-economy. For now, Base is an Ethereum L2 that is internally controlled and operated by Coinbase. However, going forward, the plan is to achieve complete decentralisation and interoperability with other blockchain networks.
“We’re incubating Base inside of Coinbase, leveraging the last decade of our experience building crypto products, and plan to progressively decentralise the chain over time,” Robinson added.
Projects that build on Base will also be able to leverage the benefits of Coinbase’s existing ecosystem. This includes its several product integrations, easy fiat onramps, 110M+ verified users and the $80 billion worth of assets on the exchange.
In this regard, Base has already held preliminary discussions with several renowned web3 projects that are looking to come on board. According to the project lead and the head of protocols at Coinbase, Jesse Pollack, some of these projects include Chainlink, Etherscan, Aave, Dune, Nansen, Magic Eden, The Graph, Wormhole, Blockdaemon and so on.
Interoperability is also a big part of the Base roadmap. To begin with, Base will be integrated with the Coinbase exchange and wallet. This will be followed up by support for Coinbase NFT. Eventually, Base aims to be interoperable with other blockchains in the ecosystem beyond Ethereum. In fact, the Base team has already held talks with several leading L1 and L2 protocols, including Polygon, Solana and Avalanche.
Base is built using Optimism's OP Stack. This will allow the L2 to leverage Optimistic Rollups. Through this technology, Base will verify and roll-up transactions off-chain (and in huge batches) before submitting them to Ethereum. This will reduce congestion on Ethereum. It will also help Base users avoid the high, gas-heavy transaction fees on Ethereum.
As such, Base intends to charge an initial fee of just around $0.10 or $0.20, which is similar to other Ethereum Layer 2 counterparts, such as Arbitrum and Optimism itself. However, in the future, Base aims to reduce its transaction fees to $0.01, depending on the success and adoption of Base.
Moreover, Base is designed to be fully open-source and freely available. By making Base open source, anyone can contribute to it, making it more decentralised and permissionless. In this regard, the project has already set up an ecosystem fund in collaboration with Coinbase Ventures. This fund will be used to incentivize and support project developers looking to build on Base. As per finding from Analytics Insight, Coinbase Ventures is one of the most active VC firms in crypto, with more than 240 investments to date.
Mainnet launch and token plans
The Base testnet went live on Feb 23. The team behind the project is now working on the mainnet, which is expected to launch in Q2 of 2023. However, the team does not have any plans of launching a native token for the network. “We do not plan to issue a new network token for Base and will use ETH as the native gas token,” Coinbase said in a February 23 tweet.
However, it must be noted that even Optimism and Arbitrum launched without native tokens or any plans of launching one. However, 3 years after its launch, Optimism airdropped 200 million OP tokens to 250,000 of its early supporters. There have also been plenty of reports that Arbitrum is working on its token launch. So, while Base has no plans of launching a token as of now, future needs may necessitate one in the future.
Base lights a fire under the Coinbase and Optimism ecosystems
The news of the launch of Base has already positively impacted the share price of Coinbase, which went up by 10 percent. $COIN jumped from $58.44 on Feb 24 to $64.83 at the time of writing. It has also spelt good news for the Optimism Ecosystem. For instance, the platform’s native token, OP, rallied 16 percent after Coinbase announced the launch of its L2 platform on the OP stack.
Base has also propped up the native token of Velodrome Finance, VELO. The token jumped 21 percent following the launch of the Base testnet. For the unacquainted, Velodrome is an Optimism-based decentralised exchange (DEX). It is also the ninth-largest DEX in the world, with 2.5 percent of the total market volume.
Conclusion
It makes sense for crypto exchanges to launch their own blockchain networks. The Binance Smart Chain is a prime example of this. Launched in July 2017, the chain’s native cryptocurrency, BNB, has already notched up a market capitalisation of nearly $48 billion.
Coinbase has already made significant progress on the trading and exchange front. As such, the launch of Base could help develop and further the utility side of the exchange. It will also go a long way in helping the network achieve its goal of onboarding 1 billion users in the crypto economy.
(Edited by : Anushka Sharma)
