Why Did Coinbase Build Base As A Layer 2

Recently the market has been very excited about the birth of a Layer 2. Because Ethereum has a large community and Layer 2s are also of interest to many people. In particular, this project was built by a force on par with Cz’s Binance, which is Coinbase.

On February 23, 2023, at the same time that Coin98 Insights and Weakhand were discussing zkEVM in Community Call No. 41, the main Twitter account of the Base project announced the existence of a Layer 2 called Base. built by Coinbase exchange on Optimism’s OP Stack framework.

That’s why the community is talking a lot about Base and is no exception to that community, today I and everyone are talking about this Base project. But this is a subjective article from a personal perspective. Hope everyone reads this article for reference purposes only!

Base Overview

As mentioned, Base is a Layer 2 on Ethereum, it uses Optimistic Rollup technology built by Coinbase using Optimism’s OP Stack. Coinbase’s support will be a springboard for Base to develop in the future.

OP Stack is a toolkit for building Layer 2 using Optimistic Rollup technology. OP Labs is the unit that released OP Stack and to make it easier to understand, OP Stack can be compared to Cosmos SDK. With this development method, Base easily interacts with Ethereum as well as other Layer 2s.

Base is also a Layer 2 Blockchain EVM similar to Optimism, meaning developers on Ethereum can easily build dApps on Base using Solidity or expand projects from Ethereum to Base. This is also the approach of many Blockchain platforms, because Ethereum is still the leading Smart Contract platform in the market, with the largest cash flow and users.

Why Did Coinbase Build Base As A Layer 2

In fact, Coinbase building Base as a Layer 2 is also very understandable, because of its current position and market factors, Coinbase decided so. In my personal opinion, this decision is influenced by many factors but this is probably the best way for them.

Decentralization is the trend

There have been many centralized platforms that have collapsed and caused huge losses to investors such as MtGox, FTX, Celsius, Voyager,… Especially centralized platforms that control users’ money and can easily appropriate it. , disperse or create vulnerabilities to cause loss to users.

Decentralized exchanges now have enough facilities to receive large cash flows. Along with the infrastructure of solid platforms that are growing very strongly like Ethereum. Because they are aware of this, Coinbase also joined the race to build a decentralized platform and take advantage of the infrastructure they already have to develop it.

The birth of CBDC

CBDCs are currencies issued by governments on distributed ledger technology, but it is still in the process of testing and development. With CBDC, users will not need to go to CEX exchanges to transfer assets to the Crypto market, they can transfer directly or through another decentralized portal.

The current situation of underlying Blockchains

The position of exchanges is building their own underlying blockchain

Currently, most exchanges develop their own Blockchain platform and issue Tokens. The table below will give you a more general perspective.

The position of the underlying Blockchains at the present time

The current position of the underlying Blockchain is that it has an extremely large user base and a market capitalization of billions of dollars. Please look at the table below to get the most general perspective!

Where is Coinbase’s position?

Coinbase is a market-leading CEX licensed and operating in the United States. And other CEX exchanges have joined the race to build decentralized platforms. Leading the way is Binance with the BNB Chain ecosystem, the second largest ecosystem after Ethereum. That success is thanks to the platforms already available from Binance Exchange. And now BNB Chain’s position is very stable in the decentralized world and where is Coinbase?

Perhaps Coinbase underestimated decentralization in the past, or their position was too big to fail, or for whatever reason Coinbase decided not to build a decentralized platform. And now they are just starting to build from the most basic things of a platform. Although we don’t need to discuss the basis of Coinbase, when Coinbase started building the Base, BNB Chain was standing near the finish line.

The current problem is not Coinbase’s potential, but it must be admitted that building a platform takes a lot of manpower, money and time. Not simply, but to develop a platform that stands top in the Crypto market.

In fact, Coinbase has enough human resources and money, but time is not enough for Coinbase to build and develop a new platform on its own. As we have seen how many years it took Optimism or Arbitrum to get to where they are now, or worse yet zkSync, StarkNet has not yet finished developing the technology. The worst is Cardano, which has been here for many seasons but its ecosystem only has about 20 dApps.

So if Coinbase builds a platform from the very basics with some new technology, there is a high possibility that in the upcoming cycle we will not see Base launch Mainnet yet. And for the next cycle, Base was ready for everything, but its market share was taken over by other platforms such as BNB Chain, Solana, Optimism, Arbitrum,… So will Base be able to succeed then?

But technology is not the decisive point, because it can be improved during the development process, and without the community, the platform will not be able to develop. Perhaps realizing that and this time is very appropriate, the Coinbase team developed Base based on Optimism’s available technology.

Why did Coinbase build Base as a Layer 2?

Overview of Layer 2

Layer 2 is a platform built on Layer 1 like Ethereum, and takes advantage of existing infrastructure from Layer 1. Currently, Layer 2 only develops strongly on Ethereum, helping Ethereum solve the problem. on expansion, transaction speed and transaction fees using Rollup, Validium, Sidechain, State Channel, Plasma technologies.

But currently the most prominent is Rollup with Arbitrum’s Optimistic Rollup, Optimism.

Advantages of Layer 2

Becoming Layer 2 of Ethereum helps Layer 2 platforms gain the following resources:

• Inherits security and decentralization from Ethereum.
• Inherit network effect from Ethereum.

Why did Coinbase build L2

• Layer 2 is at the center of the recent Downtrend market.
• Ethereum is still the leading smart contract platform, so building on Ethereum is safe and accessible to the community.
• High scalability and easy access to Ethereum as well as other Layer 2.

Why did Coinbase choose Optimistic Rollup

Because the market has recently proven that Optimistic technology has developed very well, bringing much success to platforms like Arbitrum and Optimism.

Starting out slower than other Layer 2s, to quickly catch up with the market, the only way is to take advantage of the OP Stack toolkit to build as quickly as possible. As a result, Base opened a Testnet bridging asset transfer on the Goerli network between Ethereum and Base.

Born later than other Layer 2s but launching Testnet now, this is a quite wise step. Instead of focusing on technology like Zksync or Starknet, Base focuses all resources on developing the ecosystem. to be ready to catch the wave that is considered very strong and important for projects in the coming cycle.

Base Potential

Has Coinbase’s back

With the position of being the TOP trading platform in the market and having issued shares listed on the Nasdaq exchange. Strong in both finances and relationships with the US government, especially having 110 million users and assets worth more than $80 billion in the Coinbase ecosystem.

Cash flow can be poured directly from Coinbase to Base. In addition, thanks to the good connection, Base can also receive cash flow from Ethereum and Layer 2s such as Arbitrum and Optimism.

The Base ecosystem is supported by big names

Just launched Testnet, but Base’s ecosystem already has many big names such as LayerZero, Chainlink, The Graph, Aave, 0x,… That is the initial success and Base’s development strategy has shown that effectiveness.

But most of them are Multichain projects, Base is also making efforts to build Native projects of the ecosystem such as BaseDex, BaseLend,… and other new projects.

Does Base Issue Governance Tokens?

Personally, in the future, Base will issue Tokens for the community to participate in Base governance as well as create many strategies to promote network development.

The benefit of issuing Tokens is to decentralize the network and easily access the community with Airdrop strategies, stimulate ecosystem building,… to promote Base as well as its ecosystem to develop. In addition, a portion of the Tokens can be distributed to reward the Team and advisory team or the Coinbase exchange.

The risk when issuing Coinbase Tokens is related to legal issues. Coinbase is headquartered in the United States and has issued stock codes, so it will be governed by US law, more specifically the SEC. Therefore, Coinbase must comply with the law to avoid affecting Base, especially directly affecting Coinbase. Only when everything is clear and there are specific laws applicable to Crypto will Base be able to launch Tokens.

Personal Projection

This is probably the right step for Coinbase to develop Base as a Layer 2 on Ethereum and develop based on the OP Stack toolkit. Helps complete Base quickly, devoting resources to developing the ecosystem instead of technology. Easy interoperability with Ethereum and other Layer 2s is a huge advantage for the Base ecosystem.

With Coinbase’s potential and infrastructure, Base will definitely be a top platform in the market in the future.

Summary

This article provides an overview of Base and the reasons Coinbase built Base. Because of its subjective nature, we know that there will be assessments that are not objective. People should only consider this article as a further reference article. Hopefully this article contributes a new perspective to readers.