bitcoinmarketjournal.com
Key Takeaways:
- Base, an Ethereum scaling solution developed by Coinbase, is one of the fastest-growing Layer-2 networks in 2024.
- Popular projects on Base include Friend.tech, Farcaster, and Moonwell.
- While Base doesn’t have a native token, investors can get exposure through Coinbase’s $COIN stock.
Layer-2 blockchains are revolutionizing crypto, improving the scalability and performance of L1s like Ethereum. Among L2 blockchains, Base leads the pack, growing rapidly due to its low cost and high speeds.
(Plus, being launched at Coinbase doesn’t hurt.)
Base aims to boost scalability on Ethereum, cut transaction costs, and improve user and developer experiences across decentralized applications (dApps).
Coinbase’s stated goal for Base is to bring the next billion users on-chain.
In our new guide, we’ve researched the top projects currently building on Base, looking for interesting investing opportunities. (And since there is no BASE token, the underlying investment opportunity is $COIN stock itself.)
What is Base?
Base is a decentralized scaling solution for Ethereum.
It was developed by Coinbase, which operates the largest centralized crypto exchange in North America. Coinbase is a publicly traded company listed on Nasdaq under the ticker $COIN.
Although developed by a corporate entity, Base remains a decentralized network where Coinbase doesn’t intervene. Base consolidates Ethereum transactions into batches, settling them separately before recording the batch on-chain, which is significantly faster and cheaper than recording each transaction separately.
Growth and User Adoption
Launched in August 2023, Base has been one of the fastest-growing L2s, driven by surging demand for Ethereum scaling solutions.
While the L2 competition has intensified, Base has attracted users by offering developer-friendly tools and integrating with Coinbase’s large user base.
In March and April 2024, Base was often the L2 with the largest number of daily active users; however, as of this writing, it has lost that position to Arbitrum.
Data from Token Terminal shows that the number of daily active users on Base has been hovering above the 350k mark since the end of March 2024. Some of Base's most popular use cases are memecoins, decentralized finance (DeFi), and social dApps.
Base has been gaining traction in DeFi, with its total value locked (TVL) increasing from $437 million at the beginning of 2024 to over $1.6 billion at the end of April. The top two DeFi apps by TVL are decentralized exchanges: Aerodrome and Uniswap. This can be explained by the surging popularity of memecoins on Base, which has been driving trading activity on DEXs.
Daily transactions on the L2 soared from less than 500k in March 2024 to over 3 million the following month.
One of the main drivers behind the surging activity on Base and other L2s was Ethereum’s Dencun upgrade. This upgrade allows L2s to store data more efficiently, reducing transaction fees by up to 95%.
Base doesn’t use a native token. Instead, it relies on Ethereum for gas fees. The network’s revenue from fees peaked at over $2.3 million at the end of March.
Top Projects in the Base Ecosystem
Base prioritizes community engagement, positioning itself as a blockchain network for the people. Many social dApps and DeFi protocols are building on Base due to its performance, scaling capabilities, and a large user base coming from Coinbase. Let’s look at some of the leading projects currently building on Base.
Farcaster is an Ethereum-based social dApp ecosystem. It offers an infrastructure for censorship-resistant social apps where users can discuss various topics.
Farcaster was founded in 2020 by two former Coinbase employees, Dan Romero and Varun Srinivasan. Its flagship product is Warpcast, a Twitter-like app where users can post “casts,” follow other users, and like or “recast” posts.
Farcaster is associated with a memecoin, Degen, which has acted as the platform’s native token since its recent launch in 2023. Degen is an ERC-20 token on Base, but it is migrating to its proprietary Layer-3 chain, which still relies on Base as its Layer-2 infrastructure. Base is by far the most popular chain among Farcaster users.
Friend.tech is a decentralized social dApp that enables creators to monetize their influence, connecting to their followers in a personalized way.
Since its launch in 2023, the Web3 app has attracted several crypto influencers and NBA players. The social dApp was more successful towards the end of 2023, but it started to recover in the second quarter of 2024.
Moonwell is the most popular DeFi lending app on Base. As of this writing, it has a TVL of about $97 million, $69 million of which is on Base and the rest on Moonbeam.
The most popular markets on Moonwell are stablecoins, Ethereum, and liquid staking tokens. Moonwell activity continues to gain traction in Q2 2024.
Seamless Protocol is the first DeFi lending protocol native to Base. Its governance token, SEAM, operates the protocol, which functions similarly to Aave and Compound.
SeamlessFi’s TVL has dropped over 70% since its record high reached in December 2023, but the number of active users continues to increase.
Echelon Prime is a Web3 gaming ecosystem that enables games to leverage blockchain features. The platform creates tools to encourage the adoption of decentralized gaming and blockchain-based economies. Echelon’s token, PRIME, is leveraging the Base network. PRIME has a market cap of over $640 million.
Grand Base is the first decentralized market for synthetic real-world assets (RWAs). It allows investors to be exposed to tokenized RWAs. For example, users can trade the tokenized version of Amazon stock as an ERC-20 token.
The Future Outlook for Base
As of this writing, Base has been around for less than a year, but has already emerged as a leading blockchain scaling solution, overcoming more popular L2s like Polygon and OP.
Thanks to Coinbase's support, the L2 network has attracted more users. Base plans to expand its decentralization further and improve interoperability with other chains, which should help it consolidate its leading role among L2s.
While Base doesn’t have a native token, investors can get exposure to its growing ecosystem through Coinbase’s $COIN stock.
Investor Takeaway
Base represents a significant tech advancement in the cryptocurrency ecosystem. It enhances Ethereum's scalability, reduces transaction costs, and improves the user and developer experience.
With its rollup technology, Base efficiently handles transactions, attracting more users to its network, reflected by its rapid growth and a TVL that has surged to over $1.6 billion.
As Base continues to increase its ecosystem of dApps, especially in DeFi and social platforms, it holds considerable potential for investors. While Base itself does not have a native token, investment opportunities may arise through associated projects and Coinbase's stock, $COIN, providing indirect exposure to its success.