Coinbase Layer 2: Base Blockchain Explained
|— Base is a Layer-2 scaling solution for Ethereum built by Coinbase which aims to make transactions faster while leveraging the security of the Ethereum mainnet.
— The network achieves its primary goals of increased speed and reduced cost, though critics say the network is too centralized.
— Coinbase’s end vision is for Base to become a foundational part of an eventual “Superchain” of fully decentralized and interoperable Ethereum Layer 2 networks.
Over the last decade, the Web3 ecosystem has grown massively thanks to decentralized finance (DeFi), NFTs, and decentralized autonomous organizations (DAOs). This growth has led to increased developer activity, user transactions, and more.
However, Ethereum, the leading smart contract blockchain network on which most decentralized applications (dApps) run, faces scalability issues. While the network is still improving, including pushing multiple upgrades such as the Merge, user activity frequently congests the Ethereum network, leading to slow transaction speeds and high transaction fees.
Ethereum’s scalability limitations are a direct roadblock to the growth and adoption of the network. Scalability improvements would mean faster transactions, lower fees, and a smoother user experience: all critical for mass adoption. That’s where Ethereum scaling solutions, like Coinbase’s layer-2 blockchain Base, come in.
What is Coinbase L2 Base?
Developed by crypto exchange Coinbase, Base is an Ethereum Layer-2 (L2) blockchain designed to make Ethereum more accessible while retaining the security of the main chain.
In short, Layer 2 blockchains are scaling solutions that help carry the traffic load for their parent blockchains. Like all L2s, Base enables faster transaction processing, and, notably, the L2 claims to have transaction fees that are ten times cheaper than Ethereum, based on a 90-day average.
Base markets itself as “developer-friendly” and is fully compatible with the Ethereum Virtual Machine (EVM). This EVM compatibility means that developers don’t need to make major tweaks in their code and tools to deploy their applications on Base. What’s more, users can also easily move assets between Ethereum, Coinbase, other EVM-compatible chains, and the Base network.
Who created Base?
The Base network was developed by the world’s leading cryptocurrency exchange, Coinbase. It’s important to note that Coinbase did not build Base completely from the ground up. Rather, Base is built on top of the OP Stack, an open-source template allowing anyone to build their own Ethereum L2.
Its testnet launched in February 2023, followed by a developer-centric release in July. On August 9, 2023, Coinbase officially launched the Base mainnet through a month-long “Onchain Summer” event.
The Base ecosystem
Although the Base ecosystem is still in its infancy, its fast and cheap transactions, interoperability and smart contract support make it capable of supporting countless blockchain apps and services.
On the Base network, you can access decentralized exchanges and DeFi platforms, manage Ethereum tokens and NFTs, and more. Moreover, since it was built using OP stack and operates as an Ethereum Layer 2, many of the top Ethereum platforms and services now use the Base network, including Aave, Chainlink, Etherscan, and Sushi Swap.
Although there are too many apps and services on Base to name, let’s dive into some of the more popular platforms native to this chain:
Aerodrome is Base’s central automated market maker (AMM) and liquidity pool. It is designed by the same team behind Velodrome, the leading decentralized exchange (DEX) on Optimism. Notably, the protocol aims to provide funding for projects and developers building public goods on the network.
Seamless Protocol is Base’s first native, decentralized lending and borrowing protocol, which forked from the major liquidity protocol, Aave. Besides providing decentralized lending pools, Seamless also allows users an easy, 1-click method to bridge & swap tokens from any blockchain onto Base.
Friend.tech is a decentralized social network, aiming to give users the power to monetize their online network. It does so by allowing users to buy and sell “keys”, which they can use to access private chat rooms. Though the platform has experienced some slowdown in growth since its buzzy, August 2023 launch, it’s one of the more successful attempts at a decentralized social network to date.
How does Base Network work?
Base is specifically a Blockchain Rollup L2. In short, Base works by rolling up many Ethereum transactions off-chain and sending them back to the main chain in a single block. Base then submits a summary of the transactions – which includes cryptographic proof that indicates the validity of the off-chain transactions – to the Ethereum mainnet.
As mentioned, it was built with Optimism’s existing OP stack infrastructure. But what is the OP stack exactly?
What is OP Stack?
Released in October 2022, the OP Stack is a collaborative effort from OP Labs and The Optimism Collective. Respectively, these are the development teams behind the Optimism Network – a popular Ethereum L2 – and the DAO that currently oversees it.
In essence, the OP stack provides the necessary components to build a fully functional layer-2 blockchain. One of the key features of the OP stack is that each of these components can be easily replaced and upgraded. This makes networks built on OP Stack highly adaptable.
Coinbase’s belief in the OP Stack was such that it became the second core development team to commit to its development, alongside OP Labs. On a similar note, Base is the second major network to be built using the OP Stack, the first being the Optimism mainnet. Coinbase’s commitment to developing the OP Stack is actually part of a larger vision for an Optimism “Superchain”.
What is the Optimism Superchain?
The Optimism Superchain is a vision for a network of interconnected Ethereum Layer 2 chains, each with its own ecosystem.
Using the same OP stack infrastructure makes these chains interoperable. Much like the Cosmos SDK for IBC blockchains, the Optimism Superchain would allow these networks to share governance and bridging protocols.
Although not yet live, Coinbase is actively working towards this vision alongside the Optimism Collective. Aside from its development work on the OP Stack, a portion of all Base transaction fees goes directly to the Optimism collective.
Does Base Support NFTs?
As a fully EVM-compatible chain, Base supports NFTs and is fully integrated with the major NFT marketplace, Opensea. In fact, the “Onchain Summer” event that launched Base reportedly saw over 700,000 NFTs minted. The event included NFT collections from prominent brands like Coca-Cola and Atari, as well as web3-native names like Friends With Benefits and Coinbase itself.
Similarly to other major L2s like Polygon, Immutable X, and Arbitrum, Base can drastically reduce the fees associated with trading NFTs. All users have to do is transfer ETH to Base using The Base Bridge to be able to purchase Base NFTs. In addition, it’s possible to both mint NFTs on Base, and even develop custom NFT gallery apps using third-party platforms.
Some of the most popular Base NFT collections today include the collectible NFT card game Parallel Alpha, the generative NFT collection NFToshis, and the innovative community art collection BasePaint.
Advantages of Base Blockchain
The key advantages of the Base blockchain are low fees, developer-friendly features, and scalability in the Web3 ecosystem. Let’s look at how these advantages help users.
Like most L2 networks, Base enables users to execute Ethereum transactions at a fraction of the cost. With every Base transaction, you incur two costs: a fee to execute the transaction on the L2 network and a fee to publish the transaction on Ethereum (L1) as part of a block. Naturally, the Ethereum mainnet gas fee is usually higher than the Layer 2 gas fee, though both fees are dynamic and increase during periods of heavy usage.
Since there are minor technical differences between Base and Ethereum, developers can effortlessly deploy their existing codebase on the L2 network without drastic modifications. Plus Base makes it easy for blockchain apps to integrate fiat on-ramps while benefiting from access to Coinbase’s user base and $130 billion in assets.
Thanks to its Optimistic rollup functionality, Base helps solve Ethereum’s scaling issues by moving the bulk of the transaction process off-chain. This allows Base to handle the kinds of everyday transactions its parent chain wasn’t built for. Using Base is a way to keep transaction costs down while benefiting from the security, transparency, and interoperability of the Ethereum network.
Disadvantages of Base Blockchain
While the Base blockchain is a promising scaling solution, it still has some challenges it needs to tackle, namely centralization and security concerns.
Claims that Base is overly centralized mainly stem from the fact that Coinbase is solely in charge of operating the Base network’s sequencer. To clarify, this sequencer is a specialized node that is vital for creating an ordered list of transactions. Similarly, the system also has certain control layers that are permissioned.
There are a few important things to note about these centralized aspects of Base. For one, many Layer 2 chains operate in this same way. Then there is Base’s roadmap, which outlines the network’s many plans for further decentralization, including splitting up control of its smart contract upgradability through a layered, Multisig structure.
Another key point is that Coinbase’s Head of Protocols, Jesse Pollak, has directly rebutted some of these centralization claims. Notably, Pollak maintains that Coinbase does not have the power to modify or reverse transactions on Base.
Above all, Coinbase has been vocal about its commitment to the decentralization of the chain, thus building Base with the open-source OP stack. Alongside OPLabs, Base is also working to make OP Stack even more decentralized, including working on the scalability, security, and decentralization of its client.
While there aren’t necessarily security concerns unique to Base, the blockchain does require bridging assets to another network which can inherently introduce some security concerns.
Blockchain bridges rely primarily on code. The problem is, that code can contain bugs and vulnerabilities. Unfortunately, these weaknesses can result in lost funds as the bridges often contain huge amounts of coins or tokens.
Indeed there have been some high-profile bridge hacks in the past resulting in losses stacking up into the millions. To address this issue, Base is working alongside the Optimism collective to develop Pessimism, a monitoring stack that will improve the security of the OP stack, including its bridges and infrastructure.
Does Base have a native token?
Interestingly, Coinbase has maintained that it has no plans to issue a native token on Base. Instead, users can pay gas fees for transactions on Base with ETH. While Base is still working to achieve Stage 1 decentralization, which it describes as including “limited training wheels,” it has not yet opted to incentivize more validator nodes.
Of course, native tokens can have many important functions, most notably relating to the governance of a blockchain and as a reward for network validator nodes. Thus, in the future, as the blockchain becomes more decentralized, a native governance token could be useful for validators to earn rewards.
How to Access Base Network from a Ledger
To access the Base Network from a Ledger device, your device should have an Ethereum app installed. If you already have an Ethereum app, use the following steps to create a Base account:
- Navigate to “Accounts” on the menu in the left sidebar and select “Add account.”
- From the dropdown menu, select Base “(ETH)” and click on “Continue.”
- Connect your Ledger device to Ledger Live and unlock it.
- Launch the Ethereum app on your Ledger device and click “Add account” to access the Base network.
If you want a step-by-step guide to this entire process, you can visit the Ledger support page.
You can also send ETH, Ethereum NFTs, and other ERC-20 tokens to your Base account. It’s important to note that NFTs on Base are not displayed in Ledger Live, although you can view Base NFTs in the “Discover” section of the Zerion app.
How to send crypto to a Base account on Ledger
Here’s how to send Base (ETH) using Ledger Live:
- Navigate to the “Accounts” section in the left sidebar menu, select “Base (ETH)” and hit “Send.”
- Input the recipient’s address, carefully double-check it (even a small error in the address could lead to loss of funds), and click “Continue.”
- Specify the amount you wish to send. You could try sending a small amount first to ensure the crypto was received before doing a large transaction.
- Review the transaction summary, including the amount and network fees, and click “Continue.”
- On your Ledger device, confirm and approve the transaction by pressing both buttons simultaneously. Your Ledger hardware wallet balance will be updated once the blockchain confirms the transaction.
The Future of Base Blockchain
Coinbase believes Base is the key to creating an “environment where thousands of actually useful dApps emerge that can bring 1B+ users into the global crypto economy.” As a first step, Base could bring Coinbase’s 100M+ users on-chain.
Without a doubt, Ethereum’s limited scalability is one of the major issues impacting its wider adoption. Luckily, L2 solutions like Base continue to make the network more usable, even at high traffic times. Solutions like this, along with the easeful self-custody that the Ledger ecosystem empowers, make the Ethereum network more usable than it has ever been.
So are you ready to manage your assets on Base with ease? Get yourself a Ledger device to enjoy all the benefits that come with self-custody, security, and full ownership and control over your digital assets.