What is Base: the Ethereum Layer-2 challenger

Layer-2 (L2) solutions help to enhance Ethereum's scalability, making it more accessible to a larger audience. Two notable L2 options are Optimistic Rollups (OP) and Plasma (POL). OP allows fast off-chain transactions by assuming their validity unless challenged.

At the same time, Plasma boosts scalability via child chains (which are smaller copies of the Ethereum mainnet) linked to the main Ethereum chain, batching transactions offchain and committing them periodically to the primary chain. Both aim to augment Ethereum's capacity while maintaining its inherent security.

Another option that's attracted plenty of attention is Base, an advanced L2 solution designed to provide a secure, economical, and developer-centric platform for onchain construction. It's been developed in collaboration with Optimism on the OP Stack framework.

TL;DR

• Built on Ethereum's OP Stack, Base is an L2 that offers a faster, cheaper, and more secure transaction environment for DApps.

• Base addresses Ethereum's scaling challenges of high fees and slow speeds. Its popularity is largely due to its association with the crypto exchange Coinbase, whose backing instills user confidence and fosters adoption since Base integrates seamlessly with Coinbase products and its user base.

• By adopting the inherent security of Ethereum while remaining open-source and developer-friendly, Base L2 offers significantly lower gas fees compared to Ethereum's mainnet.

• Financially backed by Coinbase, the Base Ecosystem Fund specifically targets early-stage DeFi projects with promising ideas. This focus encourages innovation by incubating DApps in areas like DEXs, lending platforms, and flatcoins (stablecoins pegged to inflation).

• Base has quickly gained traction, ranking second in total value locked despite only being launched in July 2023. Its mainnet already boasts over 100 integrated DApps and the ongoing "onchain summer" campaign incentivizes user engagement with the network's DeFi platform.

What is Base?

Imagine a bustling city that only has a single main highway. As more people move to the city and buy cars, this highway becomes congested. That's Ethereum Layer-1 (L1) – the main Ethereum blockchain.

To deal with the traffic, the city constructs overhead express lanes that are faster and can accommodate more cars, but they're still part of the city's road network. These express lanes are what we refer to as Ethereum L2.

What is Ethereum Layer-2?

Ethereum L2 refers to a secondary framework or protocol built on the existing Ethereum blockchain (L1). The purpose of this layer is to increase the network's capacity, thereby allowing for more transactions per second, reducing fees, and alleviating congestion on the primary layer.

How does Base fit into this?

Using our highway analogy, Base is like a newly constructed express lane. It's built to be fast, secure, and efficient. Since Base is built as an Ethereum L2, it operates on top of the main Ethereum network, benefiting from its underlying security while providing multiple advantages:

• Increased transaction throughput

• Increased scalability

• Lower gas fees

• Improved privacy and security

Base launched its testnet back in February of this year, and with the 'on-chain summer' event in full swing, the mainnet has recently launched. There are currently over 100+ decentralized applications (DApps) and service providers in the Base ecosystem.

However, be aware of potential scammers. Base doesn't have its own network token and there are no intentions to release one in the future. While some L2s have their own tokens, Base stands out with its tokenless design, made possible largely due to backing from Coinbase. Always stay vigilant and avoid falling for fraudulent claims or schemes related to a so-called Base token.

What are Base's main features?

Now that we've explored Base's role in the L2 ecosystem, here's a breakdown of the advantages Base brings.

Leveraging Ethereum's robustness

Base is meticulously engineered to align seamlessly with Ethereum's primary network. This allows developers to deploy any Ethereum Virtual Machine (EVM) codebase onto Base, paving the way for existing DApps to transition or work in tandem without hitches.

Collaborative spirit

With its open-source DNA, Base isn't just a platform — it's a collaborative endeavor. Its partnership with Optimism underscores its commitment to pushing the boundaries of what's possible in DApps.

Economical and efficient

Just like express lanes designed for rapid cross-city commuting, Base offers the extensive capabilities of Ethereum but without the hefty price tag. It serves as a haven for DApps, delivering a full EVM experience at a fraction of the customary Ethereum fees.

Pioneering additions

Base doesn't just emulate Ethereum's capabilities — it elevates them. Developers are equipped with new and inventive Ethereum tools such as Account Abstraction (ERC4337), gasless transaction APIs, and sophisticated smart contract wallets.

Solidifying ties with Coinbase

Base is uniquely positioned to streamline the transition of users and assets from traditional finance to Ethereum's decentralized realm. This integration offers unparalleled access to Coinbase's products, user base, and tools.

A commitment to decentralization

True to the core values of the crypto sphere, Base champions the cause of decentralization. While tied to Coinbase, Base is charting a course towards a progressively decentralized architecture, underscoring its dedication to trust, transparency, and inclusivity.

Security as a priority

Drawing strength from Ethereum's impeccable security features, coupled with the tried and tested best practices of Coinbase, Base stands as a fortress in decentralized applications.

Cost-effective evolution

By achieving full EVM equivalence, Base offers the richness of Ethereum's environment but in a more cost-effective manner — a testament to its commitment to accessibility and affordability.

Why Base?

For some, the crypto and blockchain ecosystems can be daunting, hindering widespread adoption of DApps for daily use. With Base, as an L2 solution, DApps can become both user-friendly and economical. It makes sure of lower transaction fees, especially compared to the high fees seen during peak periods on their L1 counterparts.

Users can start their journey into the cryptoeconomy through Base, which acts as a bridge to various blockchain ecosystems. The platform offers a default on-chain experience and the ability to interact with multiple chains' products. For broad accessibility, Base emphasizes interoperability with different chains and, aligned to this, Coinbase aims to support multiple chains across its product range.

Collaborative efforts often bolster decentralization. In conjunction with OP Labs, the Base is pooling its engineering expertise to devise features that potentially enhance decentralization. It's anticipated that external contributions will play a pivotal role in augmenting the decentralization of the broader cryptoeconomic platform.

Working collaboratively has profound implications for decentralization. Institutions such as Coinbase, Base, OP Labs, and the Optimism Collective actively pursue avenues to decentralize decision-making and control within the OP Stack and the Superchain.

By jointly establishing key governance structures, the intention is to integrate decentralization into vital segments of the OP Stack architecture, which could influence the decentralization level of associated rollups.

What's the Base Ecosystem Fund?

The Base Ecosystem Fund, backed by financial support from Coinbase, is focused on fostering growth within the DeFi ecosystem. The fund is specifically designed to support early-stage innovations aiming to thrive on the Base platform. Despite many promising ideas in crypto, Base is an incubator for crypto pioneers. It focuses on decentralized exchanges, lending, NFTs, and more.

Base is exploring an interesting niche in flatcoins, which are a type of stablecoin linked to inflation rates. These digital assets aim to provide users with stability in purchasing power and resilience against economic fluctuations. These tokens are becoming increasingly influential in light of current global banking challenges.

Base recognizes the importance of building trust in an onchain environment. The fund supports projects that are developing decentralized identity, reputation solutions, and advanced decentralized exchanges with high throughput.

As DeFi continues to scale, maintaining the security and reliability of platforms and protocols is crucial. As a result, the Base Ecosystem Fund also champions builders who are creating tools and systems to improve DeFi security, with the goal of making onchain storage safer for everyone.

The rise of Base

Source: L2Beat

With a total TVL of $7.92 billion at the time of writing, Base stands shoulders above L2 competition despite only being launched in July 2023. The L2 holds an overall market share of about 18%, at the time of writing.

If we look closer at the underlying data of Base, we'll find that projects like Brett, Aerodrome, and Degen are driving most of the TVL and transaction volume on Base L2. This concentration of activity highlights the importance of these DeFi protocols in bootstrapping the Base L2 ecosystem. The success of these protocols further strengthens Base's position by attracting new users who want to participate in innovative DeFi applications.

The Base blockchain has also grown as part of the DEX ecosystem. It processed over $5.69 billion in transactions in October 2024, making it the third largest network by DEX volume after Ethereum and Solana. Base has surpassed networks like BNB Chain, Arbitrum, and Sui for volume, and has seen an increase in activity among tokens within the ecosystem.

Degen has gained a lot from the growing DEX activity on Base. Recent developments like integration with PancakeSwap and the DEGEN-ETH liquidity pool helped boost its trading volume. In fact, its 24-hour trading volume hit over $43 million, which is the highest since October 11, 2024.

However, it's important to consider some potential challenges that Base L2 might face in the future. The dominance of a few DeFi protocols could lead to centralization concerns within the Base L2 ecosystem. Additionally, as competition in the L2 space heats up, Base will need to continuously innovate and attract new DApps to the Base ecosystem to maintain its leading position.

Why is Base popular: understanding the Base hype

From the backing provided by Coinbase to its rapid ecosystem growth, Base's rise in popularity can be attributed to a few key factors, namely:

• Solving Ethereum's scaling issues: Despite being the leading blockchain platform, Ethereum suffers from slow transaction speeds and high fees. Like other Layer-2 solutions, Base L2 addresses this by processing transactions off the main Ethereum blockchain and then committing them back to the mainnet. This allows for faster and cheaper transactions, attracting users priced out of the Ethereum mainnet.

• Coinbase backing: Being launched by a major cryptocurrency exchange like Coinbase, Base has largely benefitted from the association with a reputable company that's listed on the U.S. stock market. This has instilled confidence in users and developers, giving Base an advantage over other L2 solutions.

• EVM compatibility: Base L2 is fully EVM-compatible. This compatibility allows developers to easily port their existing Ethereum applications to Base L2 without needing major modifications. This ease of use and low barrier to entry further accelerated Base L2 adoption.

• Rapid ecosystem growth: As previously mentioned, the TVL on Base L2 has grown significantly, indicating a thriving ecosystem of DApps built on the platform. This attracts more users and developers, creating a positive feedback loop.

The road ahead for Base

Base launched a new fault proofs feature to enhance decentralization on October 30, 2024. This will allow you to monitor and challenge invalid withdrawals without relying on a trusted third party. Base has said the transition will take three months to be completed. All related contracts will be updated in one transaction, so node operators don’t need to do anything.

The final word

Base, an L2 solution, makes the crypto and blockchain realms more approachable, paving the way for the mainstream adoption of DApps. Addressing the sometimes high transaction costs of L1s, Base offers lower fees and acts as a bridge to multiple blockchains.

It prioritizes chain interoperability, mirroring Coinbase's multi-chain support ambitions. Collaborating with OP Labs, Base augments decentralization features, with external input deemed crucial for the platform's holistic decentralization.

Institutions like Coinbase, Base, OP Labs, and the Optimism Collective emphasize decentralization in decision-making processes. Together, they aim to embed decentralization deeply within the OP Stack framework and related rollups.

Base is now live on OKX Wallet. Start exploring today.