In the fiercely competitive L2 (Layer 2) arena, the previously unchallenged positions of Arbitrum and Optimism seem to be facing unprecedented changes.
According to L2BEAT data as of July 23rd (see the chart below), Base’s Total Value Locked (TVL) has surged to nearly $7.5 billion, successfully surpassing Optimism’s $6.87 billion, and securing the second spot, making it the second-largest L2 network next to Arbitrum.
Reflecting on Base, a superchain built on the OP Stack, one can’t help but feel a sense of inevitability in its success story of “the student surpassing the master.” So, what exactly has propelled Base to prominence? What are its ties with Web3 giants like Coinbase? And which projects within the current Base ecosystem deserve attention?
Base: The OP Stack-Based L2 “Newcomer”In a nutshell, Base can be summarized as: backed by Coinbase, relying on the OP Stack, and rising from the wealth myths of Meme and the traffic of social applications.
Previously, Forbes introduced seven influential figures from Coinbase, among whom Jesse Pollak, the founder of Base, was prominently featured (represented by the PUNK avatar below). Joining Coinbase in 2017, Pollak is a true “veteran.”
According to an exclusive interview with Fortune, in 2021, while responsible for Coinbase’s consumer products, Pollak had the idea of starting his own venture. To retain him, Coinbase’s CEO, Brian Armstrong (center in the picture below), tasked him with bringing Coinbase onto the blockchain, which became the initial impetus for Base’s creation (this might also explain Base’s innate consumer application genes).
Source: Forbes
On August 9, 2023, Coinbase officially launched the Base mainnet. Technologically, Base relies on Optimism’s open-source modular toolkit, the OP Stack. The OP Stack allows developers and projects to customize Layer 2 networks according to their needs, thereby connecting to the Ethereum network and sharing its security and resources.
As a result, Base and Optimism jointly introduced a governance and revenue-sharing framework:
2.5% of Base sequencer’s total revenue or 15% of Base on-chain sequencer’s net revenue (L2 transaction revenue minus L1 data submission costs), whichever is greater, will be allocated to the governance system Optimism Collective.The Optimism Foundation has also provided Base the opportunity to earn up to approximately 118 million OP Tokens over the next six years.
In less than a year, Base has not only stood out within the OP Superchain ecosystem but has also surpassed a number of Ethereum L2 networks, including Optimism, to become the second most prominent, making it a significant success.
Therefore, even though there is no executive title within Coinbase currently, the Base launch, being one of the most successful products Coinbase has introduced in recent years in the cryptocurrency field, has made a considerable impact within Coinbase.
Additionally, as the only sequencer on the Base network, Coinbase has profited substantially. For example, in the first quarter of 2024, users paid $27.4 million in transaction fees to Base (all fees included), of which Coinbase received $15.5 million.
According to statistics from Coin98, Base has not only seen a surge in TVL, second only to Arbitrum, but its daily transaction volume has also surpassed Arbitrum, making it a standout. As of July 22, Base’s daily transaction volume reached a historical high of over 4 million transactions, nearly double that of the second-place Arbitrum!
Source: Coin98 Analytics
Such active on-chain performance is actually not a castle in the air.If we take a closer look at Base, we will find that its consumer genes are very mature, and it has developed unparalleled competitiveness on the two roads of “Meme” and “SocialFi”, allowing it to become an L2 even without the expectation of issuing Tokens. A highly competitive network in the field.
Meme, SocialFi walks on two legsThe first is naturally the layout of the Meme field.If we sort out the hot events of Base in the past year, we will find that the myth of Meme making money every now and then has become the main force to promote the large inflow of funds and users into Base. It can almost be regarded as a clever trick by Base officials. “Marketing Newcomer Strategy”.To put it bluntly, from TYBG, Degen to Brett, etc., almost every once in a while, there will be a “magic disk” on Base that is full of wealth effects, which directly attracts a large number of on-chain traffic to crowd up Base in a short period of time, so that the Ethereum mainnet Many Meme projects have even migrated their contracts to Base.And because various Memes with strong wealth creation effects have broken out of the circle one after another, they have attracted the attention of the community with increases of hundreds or even thousands of times., which also makes a large part of the funds pouring into Base revolve around MemeCoin’s troubled layout, which to some extent further forms a “self-certifying” logic.
Source: OneKey
In addition to making Meme a constant strategy, another hallmark of Base is its focus on “SocialFi.”
SocialFi Strategy
The well-known platform friend.tech brought Base its first wave of explosive community traffic in September 2023. By tightly integrating with X, friend.tech enabled users to purchase shares (Share) of any user on the platform using ETH on the Base chain, granting them the right to direct conversations and the potential to profit from these interactions. This marked Base’s initial significant foray into the social domain.
Subsequently, Farcaster further solidified Base’s status as the “new social darling” of Layer 2 networks. Farcaster not only led in activity within Web3 social applications but also completed a substantial $150 million financing round, attracting top venture capital firms like Paradigm and a16z.
In the article “Overview of Projects and Fields Frequently ‘Liked’ by Ethereum Founder Vitalik,” we mentioned Vitalik’s positive outlook on Base. In September 2023, after Vitalik’s X account was hacked due to a SIM card hijacking, he announced on Farcaster that he had indeed been attacked, had uninstalled Twitter, and had joined Farcaster, where accounts can be controlled via Ethereum addresses.
As of the time of writing, Vitalik appears to have made Farcaster his main social media platform, which has become a favorite among Ethereum OGs (original gangsters).
Leading Projects OverviewBeyond technology and viral hits, ecosystem development is a crucial factor for the long-term sustainability of a Layer 2 (L2) network.
So, to what extent has the L2 ecosystem developed, and which exclusive leading projects in various sectors are worth paying attention to? (Besides friend.tech and Farcaster, let’s set aside multi-chain giants like Uniswap and Aave for now.)
According to DefiLlama data, the current Total Value Locked (TVL) in DeFi on Base is $1.74 billion. Several (semi) native DeFi projects dominate this TVL, including:
Aerodrome: $650 millionExtra Finance: $106 millionMoonwell: $83.25 millionMorpho Blue: $73.26 million
These projects are leading the charge in Base’s ecosystem, contributing significantly to its DeFi landscape.
AerodromeFirstly, Aerodrome stands out as a “MetaDEX” and currently holds the highest TVL on the Base chain, making it the core driver of Base’s ecosystem. With a total locked value exceeding $650 million, Aerodrome leads significantly, more than doubling the TVL of the second-ranked Uniswap, which stands at $282 million.
Aerodrome combines elements from various DEXs such as Uniswap V2 and V3, Curve, Convex, and Votium. Its unique architecture adjusts incentives among different protocol participants, including traders, LPs (liquidity providers), and protocols seeking to provide liquidity for their tokens, all achieved through its Ve governance model.
Participants must lock AERO Tokens to collect fees, and locking these tokens into veAERO allows users to direct the protocol’s token emissions to specific pools. These pools then earn 100% of the fees and emissions. Due to these incentives, voters direct token emissions to the highest volume pools to receive the most rewards, creating a flywheel effect that attracts LPs. This, in turn, provides traders with a low-slippage experience for popular token pairs.
Extra FinanceExtra Finance is a decentralized lending and automated leveraged yield aggregation protocol based on Optimism. It offers users various products, including lending, up to 3x leveraged farming, long/short positions, neutral strategies, and strategy vaults.
Like Aerodrome, Extra Finance employs the veToken economics. Holders of veEXTRA can unlock benefits and features such as annual percentage rate (APR) rewards, higher leverage for liquidity mining pools, access to high-utilization lending pools, and priority access to more upcoming features and benefits.
Other Key DeFi ProtocolsOther notable lending protocols on Base include Moonwell and Morpho Blue, each boasting TVLs in the tens of millions of dollars.
Social and Gaming DAppsBeyond the DeFi sector, Base also hosts noteworthy DApps in the social and gaming consumer fields. These areas are seeing growing interest and development, highlighting Base’s diverse and expanding ecosystem.
WarpcastWarpcast is the client for the decentralized social protocol Farcaster. NFTs on Warpcast support display on Ethereum, Base, and ZORA.
BlackbirdBlackbird is a Web3 platform specifically designed for the hospitality industry, focusing on establishing direct connections with guests through loyalty and membership services.
In October 2022, Blackbird completed a $11 million seed funding round, co-led by Union Square Ventures, Shine Capital, and Multicoin Capital, with participation from Variant, Circle Ventures, and IAC.
ConclusionIn less than a year, Base has risen from nothing to become the second most prominent Layer 2 network, amassing a TVL of $7.5 billion without issuing a native token.
This impressive achievement underscores the unique advantages of Web3 consumer applications like social platforms. It suggests that those who can capture the next big Web3 consumer application may hold the key to explosive growth and widespread adoption in Web3.
As the saying goes, “All that has happened is but a prelude.” For participants aiming to make a mark in the mass adoption of Web3, Base may serve as a valuable reference model.
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