Crypto watchers cheered Coinbase’s latest venture called Base – a new blockchain designed to help scale crypto’s top DeFi hub, Ethereum.
The project helps bridge the gap between centralised corporate exchanges like Coinbase and decentralised protocols, which tend to attract those who prefer the permissionless and inclusive nature of blockchains including Ethereum.
“Coinbase has millions of users who’ve maybe bought a little crypto in the past, but who’ve never actually taken the leap and used their crypto in non-custodial DeFi protocols before,” Michael Bentley, CEO of DeFi protocol builder Euler Labs and Coinbase’s launch partner, told DL News. “Base is significant for Ethereum.”
Base will provide vast increases in transaction speed while slashing fees to cents on the dollar compared to the main Ethereum chain. It will join several other so-called “layer 2s” – separate blockchains built on top of Ethereum that rely on it for security – in making Ethereum cheaper to use and more accessible for regular users.
A spokesperson for Coinbase told DL News that the crypto community is “aligned with our vision and believe that Base will be a huge step forward for the entire industry.”
“It will be a huge distribution funnel for users into DeFi.”
As a blockchain, Base will be non-custodial, meaning users must hold crypto in their own wallets rather than on the Coinbase exchange to interact with it. Crypto enthusiasts view non-custodial wallets as the gold standard in the space as they remove third-party custodians like centralised exchanges and give users complete control over their crypto.
“It will be a huge distribution funnel for users into DeFi,” Bentley said, because users will be able to “swap, lend, and borrow their crypto assets on protocols like Uniswap and Euler at low cost without the need to trust a third-party custodian.”
Nick Almond, founder of DAO infrastructure platform FactoryDAO, also said Base will help bring more users on-chain and using DeFi protocols. “There’s a vast user base on Coinbase and the majority of those people will have never done anything on-chain. So the Base launch should tempt users over to DeFi, dApps and DAOs,” he said.
Base is not the first time a centralised exchange has launched its own blockchain. In September 2020, exchange giant Binance made inroads on-chain with its Ethereum-compatible Binance Smart Chain. Then in November 2021, the Crypto.com exchange launched its own chain called Cronos. However, Coinbase’s Base is the first time an exchange has built a new chain directly on top of Ethereum.
According to Almond, Coinbase won’t be the last crypto company to create its own blockchain either. “It’s likely that most major entities in the space will have their own blockchains sooner or later,” he explained. “It makes sense for them to be layer 2s, using Ethereum as a base layer for security and borrowing from existing architectures like Coinbase have done with Optimism.”
Base is built on the MIT-licensed “OP Stack,” a shared, open-source development stack that powers fellow Ethereum layer 2 chain Optimism. Blockchains built using the OP Stack will form what Optimism calls “The Superchain” – a mesh of interoperable blockchains that share Ethereum’s security and can communicate with each other.
“Base, if anything, is a validation of Optimism’s ‘Superchain’ thesis,” Sebastien Guillemot, CTO and co-founder of Ethereum layer 2 Milkomeda, told DL News. “The fact that Coinbase not only is willing to sign up to Optimism’s superchain vision but also pay for it shows their vision may be viable beyond small OP Stack-based app-chains.”
Optimism’s native OP token rose 16% on the Base announcement. It has since cooled off but is still trading close to all-time highs at the time of writing.