- Like its competitors, new Ethereum blockchain Base used a rewards program to boost its users.
- Similar rewards programs succeeded — until they didn’t, with metrics at Arbitrum and Optimism falling for a period upon conclusion of the programs.
- Still, a rally from the new social media platform Friend.tech has helped Base weather the end of its rewards program, “Onchain Summer.”
In just one month, Base — a blockchain built by crypto exchange Coinbase — has become one of the hottest segments of the crypto ecosystem.
Users have moved almost $400 million worth of crypto to the blockchain and its DeFi ecosystem is now the eighth-biggest when measured by the value of crypto deposits, ahead of many long-running competitors including Solana and Kava. And Friend.tech, a crypto-based social media platform built on Base, has been the talk of the summer.
Still, the end of a rewards program that helped fuel that growth will test its momentum. In the past year-and-a-half, similar programs at a pair of competing blockchains created a surge in activity that fell off a cliff when the programs ended.
Jesse Pollak led the development of Base and has served as its unofficial spokesman since Coinbase unveiled it earlier this year. He said the rewards program, “Onchain Summer,” may succeed where others failed.
“If you look at the data, we’ve definitely seen some slowing down, but there’s still really strong transaction activity,” he told DL News.
Base is a layer 2 blockchain on Ethereum, a blockchain on top of a blockchain.
By batching and appending transactions to Ethereum, layer 2 blockchains make it possible to use the notoriously expensive network at a fraction of the cost.
When those programs ended, in June 2022 and January 2023 respectively, daily transactions and revenue cratered, according to data compiled by Blockworks Research.
When Base went live on Aug. 9, it tried something similar.
The 23-day Onchain Summer campaign encouraged users to move crypto to Base and mint commemorative NFTs or use certain applications. According to Coinbase, users owning more than 268,000 crypto wallets minted about 700,000 NFTs.
Transactions and users on Base peaked on Aug. 21 then declined sharply, according to data compiled by Sixdegree, a crypto research firm.
On that day, more than 145,000 users engaged in about 1.4 million transactions, according to Sixdegree. By Sept. 3, those figures were a hair more than 70,000 and 350,000, respectively.
They have since rebounded, with transactions approaching 1.4 million on Wednesday, according to Sixdegree. The Base blockchain explorer, which provides up-to-the-minute data, showed transactions hitting an all-time high Thursday.
Pollak said the difference in Base’s rewards program means the decline will be short-lived and less pronounced.
“If you look at other L2s that have launched, they’ve tried to do these [rewards programs], but I don’t think any of it really captured the collective energy of the world because they weren’t real things,” he said.
Blackbird, a crypto company that lets users earn rewards for dining at affiliated restaurants, gave Onchain Summer participants a free dessert when they ordered dinner at participating restaurants, for example.
Parallel, a blockchain-based trading card game, gave participants a starter deck for 0.05 Ether.
“Anytime you do a big push on marketing and distribution, you’re always going to have a tail-off at the end,” Pollak said. “I think one of the things that’s really different about Onchain Summer was, this wasn’t manufactured quests that people were doing. This was, like, real utility that people were experiencing on chain, whether they were buying a restaurant pass for Blackbird, or they were buying a pack of cards for Parallel.”
Patrick Scott, an adviser to DeFi projects, said the reason for Base’s resilience may be simpler.
Friend.tech, a platform that lets users of X, formerly Twitter, issue and trade token shares in themselves, is surging in popularity.
On Wednesday, almost 550,000 Base transactions originated from Friend.tech, according to OP Labs data analyst Michael Silberling. Over the previous seven days, the app accounted for 27% of transactions on the blockchain; in the past 24 hours, it was almost one-third.
Scott said Friend.tech might be attracting users amid speculation it may offer its own kind of rewards program: an airdrop, a common crypto marketing tactic in which frequent and early users are gifted newly minted tokens.
“So interestingly, the activity hasn’t been as tied to the NFT program as it was on Arbitrum and Optimism,” he said. “Yes, you’re gonna get a lot of people who just want the NFT, but it’s kind of a cheap way to bring some attention to their ecosystem and to onboard people who are already using crypto onchain.”
To be sure, transactions at Arbitrum and Optimism have recovered since the ends of their rewards programs, and transactions on all layer 2 blockchains now dwarf those on Ethereum, according to data compiled by 21.co.
Scott attributed their success this year, in part, to maturing ecosystems. Arbitrum and Optimism — as well as a slew of protocols on each — have been running for well over a year and weathered several industry crises.
“If they’ve been around for two years now, and they’ve been through Terra and FTX and everything, then it would be pretty unlikely that they would take the money and run after making it through all that,” he said.
For the time being, Base’s fortunes seem tied with those of Friend.tech, he added.
“[Base] also has a DeFi ecosystem, and the DeFi ecosystem has attracted a lot of liquidity,” he said. “However, in terms of actual user activity, a lot of what’s happening is on the Friend.tech app.”
And Friend.tech has so far shown no signs of slowing down.