Coinbase (COIN), the largest U.S. cryptocurrency exchange, announced Thursday the launch of Base — a layer 2 network built using Optimism ’s OP Stack.
Base will be incubated within Coinbase, but plans to be fully decentralized in the future. It will join as the second core contributor to the OP Stack, the developer toolkit for the Optimism network. However, Base will not be limited to Ethereum , it will also provide easy and secure access to layer 2 networks such as Optimism, as well as other blockchain ecosystems such as Solana , Avalanche and Polygon The "Buy, Build or Invest" project in the "System" will bring 1 billion people into the crypto space.
Coinbase's diversification strategy attempt
The new announcement comes at a critical time for Coinbase's growth bottleneck, with the company's latest quarterly report showing its core trading volume revenue drying up amid the crypto bear market. At the same time, other lines of business with profitable potential began to grow, such as staking and other services. Base, the protocol that Coinbase intends to “decentralize” over time, could become a cash cow for the company, which has long wanted to diversify its balance sheet.
According to TechCrunch, Base will initially charge fees of 10 to 50 cents — on par with mainstream ethereum layer 2 networks such as Arbitrum and Optimism. And, while still only a testnet, Base doesn't appear to be short of early adopters: established projects including Chainlink , Ethers can, AAVE , Animoca Brands , Dune, Nansen , Magic Eden , and Wormhole have publicly expressed their support. The key point is that Coinbase has made it clear that it has no plan to issue new network tokens, avoiding the way of earning transaction traffic through AirDrop, which is enough to show its sincerity to concentrate on "build".
To spur development, Coinbase and its venture capital arm, Coinbase Ventures, will offer an undisclosed amount to a grant program for Base-based software engineers.
competition
Coinbase has long had a strategy of contributing technology and guidance to the crypto industry, including dedicating 10% of its cash holdings to venture capital, but not all of those strategies have panned out. For example, its non-homogeneous market (NFT) platform has been struggling to carve up market traffic since its launch last year, despite Coinbase's golden name on its head.
The release of Base also coincides with an increasingly fierce and complex competition in the Ethereum scaling market. Earlier this week, data tracked by L2BEAT showed that Arbitrum One processed more transactions than Ethereum, becoming the first Rollup to surpass Ethereum mainnet in daily transaction volume, with parent company Offchain Labs completing a Series B in August 2021. The valuation is $1.2 billion. And Optimism is the second largest Rollup and the main competitor of Arbitrum, which was valued at more than $1.6 billion in the Series B last March.
Meanwhile, several competing projects are working on Ethereum-compatible “zero-knowledge Rollup,” aka zkEVMs that promise to change the Layer 2 landscape, such as Scroll , Polygon, Matter Labs , and ConsenSys . Some industry experts believe that Rollup powered by ZK cryptography are the most promising method of scaling Ethereum, as they have the potential to improve the existing Later 2 blockchain in terms of speed and security.
Polygon said it will release its zkEVM on March 27. Last week, Matter Labs invited developers to register to deploy their applications on its zkEVM zkSync .
Despite the rapid development of zk technology, Jesse Pollak , head of the Coinbase protocol, said in an interview with Blockworks that technical differences do not define products, and how to deploy details is the key. A key goal of Base is to create technology that can be easily upgraded, and this goal is one of the main reasons why Coinbase chose Optimism as its partner, especially the modular solution of OP Stack.
Pollak said: "We believe that in the future, we may launch Rollup that have both zk components and Optimism components. At present, it is important to build the technology stack in a way that can be easily upgraded. The reality is that you need to build the infrastructure so that Blockchain works well."
Pollak also mentioned that since last year, Coinbase has been working on proto-dank sharding (EIP 4844), an upgrade to Ethereum that will reduce Layer 2 network fees to 10-100 times the current level, EIP 4844 is expected to be finalized this summer.
Additionally, growing awareness of the risks that centralized entities pose to decentralized finance ( DeFi ) may hinder the development of Base. It’s not clear how long Base has been planning or developing (Coinbase was the first centralized exchange to launch a layer 2 network), which has pulled out of India and other markets and laid off hundreds of employees in recent months , whether Coinbase has enough developers or resources is unknown.
Coinbase's ultimate vision is to become a "contributor" to the network and hand over governance decisions to the community. How to implement every detail of this will take time to test.
Author: BitpushNews Mary Liu
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