The leading US cryptocurrency exchange, Coinbase, has announced its own Layer 2 blockchain based on the scaling protocol, Optimism. The company aims to use the Base platform to onboard millions of new users into the Ethereum ecosystem.
Coinbase is participating in Optimism as a core developer of the open-source "OP Stack" - a developer tool for the decentralized Layer 2 network. The in-house Base platform is comparable to the leading "Optimistic Rollups" Arbitrum and Optimism, which allow for faster and more efficient transactions over the Ethereum network. This move by Coinbase is expected to provide a significant boost to Ethereum's scalability and adoption, as well as increase competition in the Layer 2 market.
Optimistic rollups as a popular scaling solution
Layer 2 platforms are a set of solutions built on existing blockchain networks that aim to overcome the scalability limitations of the underlying technology (Blockchain Trilemma). These protocols allow for the delegation of certain transaction processing tasks to side chains or secondary networks, which provides faster and more cost-effective transactions. In the context of Ethereum, Layer 2 protocols offer several benefits, including lower fees and higher transaction speeds while maintaining the security and decentralization of the Ethereum network.
Popular Layer 2 solutions for Ethereum include Optimistic Rollups, zkRollups, and Plasma - with the Base platform falling into the first category. Optimistic Rollups bundle a large number of transactions and submit them to the main blockchain as a single transaction. The validity of each transaction is checked off-chain by a group of validators. If all transactions are valid, the transaction bundle (Rollup) is submitted to the main chain. In the event of fraudulent activity, validators can provide proof to initiate a dispute process.
Potential of a Coinbase Layer 2 Platform
By developing its own Layer 2 solution, Coinbase aims to expand its product offering and provide its less tech-savvy users with direct access to DeFi, NFTs, and other on-chain applications. Additionally, the existing services offered by the cryptocurrency exchange will be partially integrated, and the dApp landscape will be supported with financial resources. Ultimately, this move is expected to benefit the entire crypto ecosystem. According to the exchange, Base is intended to be decentralized, permissionless, and open to everyone. The vision is to create a standardized, modular, rollup-independent superchain that is powered by Optimism.
