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Coinbase has today unveiled Base, its own Ethereum layer-2 network. The company says Base will be the new home for the Coinbase’s on-chain products and—it hopes—an open ecosystem for millions of new decentralized apps.
Though only publicly announced today, a testnet for Base has actually been live since the start of the month, Coinbase Senior Director of Engineering Jesse Pollak told Decrypt.
“This is a bet that we can help enable the next million dapps, which are going to bring in the next billion users. We think that's going to happen on a five- to 10-year horizon and this is our contribution to making that happen sooner rather than later,” he said. “Our goal is to launch mainnet in the next few months.”
That makes Coinbase, which has traded on Nasdaq under the COIN ticker since April 2021, the first publicly traded company to launch a layer-2 blockchain network on top of Ethereum. On Wednesday, COIN ended the day trading at $61.18 per share, down 1% for the day, after trading as high as $67.17 in the wake of beating analyst predictions on its Q4 earnings.
Layer-2 networks help make transactions faster and cheaper than an underlying blockchain, in this case Ethereum, by processing batches of transactions on a separate chain and then sending receipts back to the mainnet. Base will be “a rollup agnostic superchain powered by Optimism,” according to a blog post that Coinbase shared with Decrypt ahead of its Thursday announcement.
Base is entering a crowded and rapidly growing cohort. As of Wednesday evening, there was more than $6 billion worth of ETH on layer 2s, a 17% increase from a month ago, according to L2Beat.
The website tracks 26 different Ethereum scaling networks, including Arbitrum One and Optimism. Those two networks alone account for 53% and 31% of L2 market share, respectively. But unlike those L2s, Base will not be launching a network token. On other networks, tokens help pay for gas fees and are used to incentivize development.
“We've seen a lot of people kind of use tokens to drive activity. But our thesis is that tokens are not the only way to drive activity,” Pollak said. “Building great products is a great way of driving activity by making things actually useful.”
It's worth noting, however, that both Optimism and Arbitrum initially launched their networks without a token either. Optimism has since airdropped its OP governance token to early adopters of its network and Arbitrum has long been rumored to be planning the same.
Base is launching with dozens of partners who’ve committed to building in and supporting the ecosystem, including oracle network Chainlink, Ethereum block explorer Etherscan, and DeFi protocol Aave.
Coinbase said it intends for the governance of Base to be fully decentralized, although it won’t be that way at the start.
“Coinbase is going to gradually transition into a role where we’re a contributor to Base, we provide services and products that are built on top of Base, and we are not the decision maker for everything in the Base network—that’s being done through more decentralized governance,” Pollak said.
To that end, Coinbase will be joining Optimism as a core developer on the open-source OP Stack. Pollak heads up the small Coinbase team dedicated to working on Base.
“Our goal is to keep the core team really lean and lean into this reality that we can have an outsized impact if we’re building onchain,” he said.