A week ago, the leading US cryptocurrency exchange Coinbase launched its own Layer-2 blockchain. Base is built on the scalability stack of the Optimism platform and aims to enable the exchange to easily integrate blockchain solutions into its existing offerings. Here's an overview.
In February 2023, Coinbase first announced the Base platform. As a core developer of the open-source "Optimism Stack," a developer tool for the decentralized Layer-2 network, the cryptocurrency exchange aimed to play a central role in supporting the scalability ecosystem. The proprietary Base blockchain is comparable to the leading "Optimistic Rollups" Arbitrum and Optimism, which enable faster and cheaper transactions across the Ethereum network.
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What is the Base blockchain?
Coinbase entered into a strategic partnership with Optimism to bring forth new solutions in the cryptocurrency space. The collaboration focuses on the development of Base, as well as the overall advancement of the scalability ecosystem. Base is its own Layer-2 scaling platform for Ethereum, based on Optimism's technology. Therefore, Base is what's known as an Optimistic Rollup, distinguishing it from zkRollups and other scaling solutions.
In general, Layer-2 platforms refer to applications designed to overcome the scalability limitations of underlying blockchains (Blockchain Trilemma). These protocols facilitate delegating certain transaction processing tasks to secondary networks, resulting in faster and more cost-effective transactions. Popular Layer-2 solutions for Ethereum include Optimistic Rollups, zkRollups, and Plasma. The Base blockchain falls into the first category.
Differences between optimistic rollups and zkRollups
Optimistic Rollups aggregate a significant number of transactions and submit them to the main blockchain as a single transaction. The transaction bundle (Rollup) is then forwarded to the main chain. Optimistic Rollups like Base fundamentally assume that all transactions are valid, hence the name. If an observer spots a fraudulent transaction, they can submit a proof of fraud. Currently, Arbitrum and Optimism dominate this space.
In contrast, "Zero Knowledge" Rollups validate each transaction individually by submitting a validity proof alongside the transaction bundle directly. This makes zkRollups much more computationally intensive than their optimistic counterparts. However, developers consider them the "holy grail" of Ethereum scaling. Examples of launched zkRollups include Polygon zkEVM and zkSync. In a conversation with CVJ.CH, the Head of Engineering at the company behind zkSync explained the nuances between Optimistic and Zero Knowledge Rollups.
Base ecosystem expands despite rocky start
Several protocols have already announced their launch on Base, with over 30 projects live. Even larger names outside the blockchain world, such as Coca-Cola, have expressed interest in the Base blockchain. With a valuation of $20 billion USD and nearly 10 million monthly active users, Coinbase possesses both the financial means and user base to support Base in the long term.
Currently, the Base blockchain has a Total Value Locked (TVL) of $165 million USD. About 100,000 addresses perform nearly half a million transactions per day - compared to other blockchains, Base is in the middle range. However, the platform faced some challenges even before its official launch. A rapidly rising memecoin named "BALD" (a reference to the bald head of Coinbase CEO Brian Armstrong) with a short-term market capitalization of $100 million USD turned out to be a rug pull scam, and both of the two largest decentralized exchanges on the Coinbase blockchain (Rocketswap and LeetSwap) fell victim to an exploit.
