What is Base Blockchain? Can it be a Dark Horse in the L2 Race?

The Birth of Base Blockchain

If one had to choose a race most recognized by major institutions in 2023, it would undoubtedly be the Layer 2 (L2) race. The entire year of 2023 is an explosive year for the L2 race, with giants in the crypto industry like Coinbase and ConsenSys actively participating in the competition. Coinbase chose to launch an L2 test network called Base on February 23 this year; the name nicely corresponds to its stock code, Coin.

What brought Base into the limelight and made it well-known to the public was the recent MEME token BALD on Base. Its news of a 600-fold increase in one day instantly spread across the entire industry, attracting many speculators. Although the BALD token pool was removed by the project party in less than two days, causing considerable losses to speculative traders, the entire incident had already attracted a lot of attention. Everyone began to study the Base blockchain and its ecosystem.

At the very beginning of Coinbase’s establishment, the official had planned four major phases to develop the crypto business. In the past ten years, Coinbase has already completed the first three stages it envisioned:

1. Establishing protocols (popularizing to 1 million people)

2. Establishing an exchange (Coinbase Exchange, popularizing to 10 million people) \

3. Creating mass DApps (popularizing to 100 million people)

Now, Coinbase is unlocking the final stage: building DApps for an open financial system. They hope to create an environment, rebuild an open financial system, and bring over 1 billion users into the global crypto economy.

Image from Base Blog

To complete the task of the fourth stage, there is only one way to go, and that is to build the underlying infrastructure yourself. Relying on the EVM ecosystem to build the L2 network is currently recognized as the best solution, and this is also the reason why Coinbase chose to make the Base blockchain.

Base Blockchain Introduction

Base is an Ethereum L2 public chain incubated by Coinbase, developed based on the open-source project OP Stack by Optimism (OP). Coinbase aims to make Base a highly secure, low-cost, developer-friendly on-chain ecosystem, and to help launch various on-chain products for Coinbase. Many people know that Coinbase is a fully regulated company listed on the US stock market, so it must fully comply with the SEC regulations and various US legal policies. This also implies that it would be difficult for Base to issue its tokens. Therefore, Coinbase has chosen to cooperate with the mature L2 network, OP, for mutual benefit. This way, Coinbase can indirectly accelerate the development of the Base blockchain by empowering OP.

About OP Stack

The Base blockchain network is developed based on OP Stack. It can seamlessly connect with all projects adopting the same technology stack while enjoying the blockchain network support of other OP Stack projects, becoming an essential member of its superchain ecosystem.

Optimistic Rollup (OR) is a Layer 2 scaling technology adopted by the blockchain project Optimism. It does not require extensive computation and storage and can support various types of transactions. The principle of OR is straightforward: it packages all transaction records into one block and then verifies the transactions using fraud proofs. Optimistic Rollup assumes transactions are valid by default, and the onus is on the skeptic to prove otherwise, hence the term ‘optimistic.’ This requires aggregating many on-chain verification nodes to assist in monitoring to ensure that OR does not act maliciously. If the verification is successful, the block is submitted to the blockchain; otherwise, it is rolled back. OP Stack is a set of codes provided by the blockchain project Optimism to support the next generation of architecture. It is a set of tightly integrated, trustworthy blockchain module components, each implementing a specific stack class. Simply put, it provides developers with a very convenient development module, allowing developers to easily modify existing modules or create new modules to meet the needs of building applications.

Features of OP Stack

OP Stack follows three design principles: efficiency, simplicity, and scalability. It can implement expansions of all levels above L1, including blockchain browsers, messaging mechanisms, governance systems, and other tools. Developers can easily ‘one-click start’ any L2 and issue DApps, so the emergence of OP Stack can solve the problem of various L2s being isolated and forming islands. The official Optimism refers to integrating various L2s as a ‘super chain.’ Essentially, it integrates various isolated L2s into a system with interoperability, forming a horizontally scalable blockchain network. Each chain shares security, communication layers, and development kits, ultimately assisting Coinbase in achieving its fourth-stage mission: creating an environment that allows over a billion users to enter the crypto economy and supports the operation of thousands of DApps.

Image from OP Stack documentation

The architecture of Superchain is simple; its future development will revolve around the principles of modularity and optimizing Gas Fees. The Superchain concept will provide developers with more possibilities, making it easier to launch DApps and leverage the scalability and decentralization of public chains. Overall, it is similar to the Apple Store within the iOS system. Still, developers’ DApps can receive user volume rewards from Superchain transaction fees, where the economic model advantage of Web3 over Web2 lies.

Coinbase and OP jointly created this Superchain model. In the short term, this collaborative effort will upgrade the OP mainnet, Base, and other L2s to an initial Superchain structure with shared bridging and ordering. In the future, there will inevitably be more L2s incorporated into the “Superchain” ecosystem. In the long term, the “Superchain” can develop into a vast network that maximizes interoperability, shares decentralized protocols, and standardizes its core architecture.

Image from Base

Advantages of Base Chain

As shown in the figure above, the Base official has introduced some main features, which are mainly divided into the following four points:

1. Based on the Ethereum EVM ecosystem: Base provides the security and scalability required to support decentralized applications. It leverages the underlying security of Ethereum and the practical experience of Coinbase, allowing entry into Base from the Coinbase exchange, Ethereum Layer 1, and other interoperable chains.
2. Meager transaction fee cost: Base provides complete EVM compatibility at an extremely low cost and is dedicated to promoting the development of the developer platform. It uses simple APIs to set gas fees for developers’ dApps to account for abstraction and securely builds multi-chain applications through easy-to-use cross-chain bridges.
3. Open Source: The goal of Base is to be decentralized, permissionless, and open to anyone who wants to create a super chain with Optimism.
4. Backed by Coinbase ecosystem: Coinbase has a large number of verified users, holding nearly a hundred billion dollars in assets, and in the future, Base can be seamlessly integrated with various products under Coinbase. Therefore, with the backing of Coinbase, Base chain can easily bridge CeFi and DeFi and bring many users into DeFi.

Development History of Base Blockchain

2022-02-23: Coinbase announced the launch of the Ethereum Layer 2 network, Base, and the establishment of the Base ecosystem fund.

2023-02-27: Base will integrate Coinbase’s self-custodial wallet and dApp wallet.

2023-03-26: Base Ecosystem Fund announced four major support directions: stablecoins trackable to the inflation rate, reputation platforms, limit order book (LOB) platforms, and safer DeFi products.

2023-04-01: Layer 2 network Base announced it will push Base to the mainnet in the coming months.

2023-05-24: The Base official website released the “Base Mainnet Roadmap,” stating the five prerequisites to be completed before the launch of the Base mainnet, two of which have already been completed. The specific prerequisites include:

1. Successfully completing the Regolith hard fork on the testnet; (Completed)
2. Successfully conducting infrastructure review with the OP Labs team; (Completed)
3. Optimism successfully completing the Bedrock upgrade;
4. Successfully completing internal and external audits without any serious issues;
5. Demonstrating the stability of the testnet.

2023-07-13: It was officially announced that the full development of the Base mainnet will begin in early August.

Base Blockchain Team

Base was incubated by Coinbase, one of the largest cryptocurrency exchanges in the world, founded by former Airbnb engineer Brian Armstrong in June 2012. Today, around 245,000 ecosystem partners in over 100 countries and regions trust Coinbase for quickly and securely investing, spending, storing, earning, and using cryptocurrencies. Currently, the assets on the Coinbase platform amount to $128 billion, with a trading volume of $92 billion this quarter, and the company has over 3,400 employees. Notably, Coinbase completed a Series E financing round of $300 million at a valuation of $8 billion on October 30, 2018, and listed on NASDAQ on April 14, 2021, under the ticker symbol “COIN.”

Base Ecosystem Introduction

Image Source: DeFiLlama Public Chain Data

As shown in the above figure, Base’s Total Value Locked (TVL) in the public chain race has risen to 12th place. As of August 20, the TVL of the entire Base blockchain has reached $176 million. Although this is still some distance from mainstream Layer 2 (L2) projects, for example, Arbitrum One alone accounts for over 50% of the total market share, Base has been the fastest-growing in the past month.

We can compare Base with Linea, a project that also recently went live. Linea launched on July 18, half a month earlier than Base’s mainnet, but its TVL is currently less than one-tenth of Base’s, indicating that the market’s primary focus is still on Base. Although Base gained popularity due to its swap application, Leetswap, and a MEME token, BALD, the subsequent increase in TVL proves that users genuinely appreciate the quality of this public chain. Although there are currently few official on-chain products, except for the most basic wallet, browser, node tools, and data indexers, and few third-party developers participating in its construction, we believe that as the overall market recovers, the speed of its ecosystem development will rapidly increase.

Conclusion

As a new L2 public chain, Base’s most significant advantage may be its backing by the Coinbase ecosystem. Currently, Coinbase has over 100 million real users and manages tens of billions of dollars in cryptocurrency assets. Moreover, Coinbase did not choose to create a separate, independent public chain but based it on the Ethereum ecosystem. This perfectly leverages Ethereum’s moat while adding its own user base advantage, leading us to believe that once the market recovers, its ecosystem will quickly grow. Compared to other L2s, Base has few technological innovations, and due to Coinbase’s strict regulatory requirements, it is challenging for Base to issue tokens. This means that compared to other L2s, it lacks a natural token economy incentive advantage. Fortunately, Coinbase is aware of this, so in its collaboration with OP, it has allocated all the ecosystem development incentives to OP, aiming for a mutually beneficial and win-win situation. We can look forward to the future of the Base blockchain. We hope that its future success will not rely on hyping MEME tokens but on having its own unique ecosystem applications. To become a dark horse that can challenge the champions, Base still has a long way to go.