Original Author: @lazyvillager 1, encrypted Kol
Original Compilation: zhouzhou, BlockBeats
Editor's Note: Since Trump's victory, COIN and BTC have risen significantly, but the author is more inclined towards ETH and is optimistic about the development of the Base L2 ecosystem. Base is expected to stand out in the competition, attracting MEME, consumer dApps and more on-chain activities. ETH remains the core of the digital asset ecosystem, and Base, as Coinbase's on-chain leverage, benefits from Coinbase's resources and support, has scarcity and innovation, and can attract users in the long run without relying on traditional token incentives. The activity and TVL of the Base ecosystem continue to grow, proving its great potential in the ETH-L2 space.
The following is the original content (edited for easier reading):
Basic Judgment of Future Development
Since Trump's victory on November 5, COIN and BTC have been leading the rise, up 70% and 16% respectively. I personally still lean towards ETH, and based on the topic of MEME coins I wrote about in October, I believe that multiple advantageous factors are converging for the Base L2 ecosystem:
1. "Win" the competition with other L2s, even the ETH mainnet, to become the preferred ecosystem to accommodate MEME, consumer dApps and attract attention
2. Compete with SOL's "full-featured" casino-like model as a top-tier EVM-compatible ecosystem
My core view is simple, ETH remains the key center of the digital asset ecosystem, and all derivative projects to date have been driven by two core principles to drive network effects:
a. The "underlying" token must outperform its competitors;
b. The "underlying" token must have "scarcity"
Therefore, in this competition for attention, in most cases you are actually choosing a particular token (even if this is a simplified way) to reflect its advantages. In the coming weeks (a trend that has already begun), the CT community will discuss why a particular token may win (e.g. SOL's competitors, or why an app supporting a particular token may win (e.g. utility tokens, DeFi governance, etc.).
What I want to propose is that from today, a more risk-adjusted choice is to bet on an ecosystem without a token. In my view, the way Base is organized creates the strongest potential for continued innovation, and the double-edged sword is that it may depend on the resurgence of ETH.
However, given that I believe the potential of ETH is currently underestimated - if/when the relative value between BTC, ETH and SOL rises in the coming weeks, there will inevitably need to be a "reservoir" to absorb this new and circulating wealth.
I Believe Base is Poised to Win This Position
1. The "faucet" connectivity on Base has seen tremendous growth this year, but has not received enough attention.
2. Base has strategic value to COIN and has an actual balance sheet to provide support.
3. Base has gone through multiple tests this year and performed quite well.
I have accordingly adjusted my positioning, and will discuss my logic and the risks and mitigation measures involved in redirecting on-chain traffic to what I believe is the most vibrant "playground" - Base, in my upcoming tweets.
Memecoins and Their Typical Successful Environment
The key is that low market cap memecoins typically provide uncorrelated returns, and on-chain activity usually heats up around major uncertainties.
"The Power of Resilience: Memecoins and Their Role in Portfolio Construction"
Reflecting on the Strength of Major Assets and Their Driving Force for On-Chain Activity
Based on the above views, I believe on-chain activity will show very strong performance in the coming weeks.
The performance of major assets supports this trend - the buying is mainly driven by spot, with ETH and BTC's open interest (OI) largely reset to pre-election levels, and the rise in funding rates is mainly due to the lack of new short positions (and the levels broken in the last few days - the amount of short liquidations has reached $1 billion, the highest this year), rather than the use of excessive leverage.
Therefore, based on the view that the current price range is supported, I believe on-chain activity will become a gathering place for off-market capital, new capital and recycled capital. The capital created in the past week contrasts with the capital in the 3-4 weeks before the election. The latter witnessed a significant rise in leverage and open interest, but apart from BTC, other assets struggled to truly attract what I call "mercenary capital".
The capital flow in the past week not only appeared broadly across assets other than BTC (all the chosen assets saw widespread global gains), but even included DOGE - a very important indicator reflecting the nature of these "buyers": willing to use leverage, willing to speculate and trade 24/7. These buyers are not limited to US trading hours, similar to BTC's rise in October.
In this price environment, we are not even a week in - the market dislocation is significant: capital needs time to assess whether this capital is irrational or substantive. During this period, projects that can see significant marginal volatility should see the most significant re-rating effects.
Base is Already "Winning" - Even Though It Hasn't Issued a Token
Base may be one of the most misunderstood ecosystems, as its unique construction means it lacks the typical crypto-native investors/KOLs to manage and spread the word. However, by various metrics, Base is "winning". The attention Base attracts is disproportionate to its user/wallet/TVL growth.
Look at the chart below, which is elfa ai's capture of Base's attention, with about 18 collective mentions on CT in the past 7 days, 10 times less than ARB, and roughly on par with STARKNET, BLAST and OP.
It is the only ETH-L2 with continuously growing TVL throughout the year, despite not setting up user incentives like other L2s (e.g. BLAST GOLD). With a TVL of $3 billion, its TVL even exceeds ARB (ARB hosts the very popular HyperliquidX, which has about $1 billion in TVL).
In October, Base also recorded the highest revenue in the emerging ecosystem (a month when TRON declined while Base and ETH grew). Currently, Base also has the most unique active wallets and transactions (the actual data may need to be treated with caution, but this is the only picture we can paint).
Base reminds me of SOL in Q4 last year - an environment that attracted builders when attention was relatively low.
Base Disrupts and Breaks the Traditional L1/L2 Operating Model
The traditional operating model is usually as follows:
1. Have an idea for an ecosystem, ideally with a unique variant (faster, more reliable, more decentralized, easier to build, more trustless, etc.)
2. Raise funds by airdropping tokens at near-zero valuation (usually to companies with the best relationships and resources)
3. While building, connect with dApp developers - each blockchain usually looks for a local "bank", so there may be some kind of lending protocol and trading protocol. Developers are rewarded with tokens to incentivize on-chain development.
4. Attract users through staking/token incentive programs, where users deposit/stake stable capital to earn yield rewards.
5. The influx of users/new TVL provides the founding team with a base to raise funds from new investors at a higher valuation, and point to the inflow of users/capital.
6. After the blockchain is launched, users first receive rewards through non-locked tokens; while investors and team members need to wait through locked tokens. (But the proportion is much larger)
7. Lending protocols usually establish cooperative relationships with market makers and investors to deposit and maintain on-chain capital through promised returns.
8. Gradually, the hope is to attract and retain organic capital through certain indicators (such as interconnectivity, usability, richness of the ecosystem, etc.) - thereby reducing or eliminating the need for capital dilution.
9. The founding team pays early supporters and employees through tokens - at this point the tokens actually become free expenses (to pay suppliers). Ideally, the ecosystem supports the sustainable development of the chain through serialized revenue.
This model has matured and is being disrupted, with HyperliquidX becoming the most typical example of a launch that does not rely on traditional methods and ignores most of the above measures.
This year, this capital-raising method has clearly failed at multiple stages, with pain points concentrated in:
·The mining incentive mechanism is usually very unclear, and once the capital is locked, it becomes a "hostage", allowing the team to change the terms regardless of the consequences and retroactively.
·Investors/team members can pledge locked tokens - this means that even if the original locked tokens have no liquidity, the staking rewards can still be sold at the TGE (Token Generation Event), severely diluting retail investors.
·New capital is very expensive (the opportunity cost in the crypto field is extremely high), so if there is no significant dilution or manipulation of the supply, users are very utilitarian, and once the rewards are distributed, they usually choose to leave.
Why is Base more likely to achieve greater success?
Base is not just an L2, it is Coinbase's on-chain leverage - Coinbase has this opportunity due to the regulatory review relief brought about by Trump's victory (i.e. an improvement in the policy environment).
In other words, Base does not intend to win through the traditional "fat tail" method I mentioned above, what does that mean? Here is an excerpt from Coinbase's Q3 earnings call, showing how the team views Base:
Base is (only part of the content):
1. A collaborative test platform with CIRCLE, as well as the development of smart wallets. Coinbase can collect real-time data and build a truly independent "Eden" ecosystem (i.e. i. attract users, ii. seamless guidance, iii. set up smart wallets through the use of access keys rather than traditional secret phrases, iv. provide a "playground" for speculation)
2. As Coinbase transitions to a recurring service business (such as through Coinbase One subscriptions) rather than relying on volatile transaction fees, the team's vision is to attract the most retail users in the long run, rather than charging as many fees as possible in the short term.
The latter is a microcosm of the extractive value capture model followed by every blockchain - due to the creation of tokens and their inherent nature. By separating the ecosystem from the tokens, Base can take a longer-term perspective to "win". In other words, the only way for Base to make money in the future (since COIN already exists as equity) is to have applications and users pay "rent".
The most important point is:
The biggest difference between Base and other blockchain projects is that it is supported by a company with a real balance sheet. Any other ecosystem, at least at some point, is supported by counterparties with financial incentives seeking returns, and these counterparties do not have unlimited capital.
Once the returns are obtained, this support (whether financial or community) will be withdrawn. Therefore, other ecosystems have a life cycle, or a time limit, and new supporting capital will eventually stop flowing in, leaving the products to fend for themselves. You will see some ecosystems starting to struggle (e.g. shutting down platforms) in the next 12 to 16 months.
But the situation for Base and Coinbase may not be the same. If Base stops receiving support, it means that an important part of Coinbase has failed (and therefore the overall strategic vision has failed). Since Coinbase itself creates traffic and revenue through "price location", we can infer that Base may receive a kind of "evergreen" financial support.
Base has proven its resilience
Base initially appeared as the underlying platform for Friend Tech (which was basically an empty shell with limited functionality at the time). Since then, it has gone through several important stages:
1. Application migrations, such as timedotfun. Please check jessepollak's response: link. This is a very positive attitude and supportive spirit, recognizing that each chain has its unique value.
2. The only project that has successfully incubated another L2 - degentokenBase. DEGEN gained attention in a weekend earlier this year, quickly pushing its valuation to $600 million, on par with the self-building and rise of ApeCoin this month.
3. The only chain that can accommodate AI-related applications like SOLANA - VIRTUAL, which went from 0 to $500 million in the AI and meme coin craze of October this year.
In my view, no other ecosystem can withstand such a degree of attention and drive such a scale of capital inflow. So the question is: if other ecosystems can do this, why haven't they? Therefore, Base has clearly demonstrated the ability to support novel and interesting projects/applications, far beyond simple yield cycles or lending applications.
Here are some other examples:
warpcast
BlueSocialApp
OnchainKit
liberoverse
Sofamon xyz
BetBase xyz
dreamcoinswow
ethxy
This is not an exhaustive list, nor an endorsement of any of the names mentioned here, but rather a snapshot of the highly diverse creative projects built on Base since its last iteration, especially in the Friend Tech era (when most of these applications had not yet officially launched).
Buying at a perceived value bottom
Profiting on Base is essentially betting on the success of the entire ecosystem, even as a proxy for Coinbase. There is no single token that can concentrate demand, so true network effects can be achieved overall.
Currently, most tokens on Base are at cycle lows - and I won't provide any token names or recommendations, but you can see some chart examples, which are randomly selected by me.
Therefore, I believe Base is the most attractive capital deployment location, because you are actually betting on two aspects - and this has nothing to do with leverage or savvy token selection:
1. ETH stabilizing and finding a bottom that can provide on-chain demand (which I've discussed before),
2. ETH's winners hoping to recoup profits somewhere.
Given the lack of organic options on the mainnet (which have been migrated to L2) and the sluggish demand in the NFT market this year, I bet that this attention and capital will focus on Base.
In summary - as long as ETH remains hot, Base should also remain hot.
