Base, Coinbase’s Layer-2 network, surprised the cryptocurrency market by reaching a total value locked (TVL) of over $4 billion. This achievement has had a significant impact on Coinbase’s profits, generating an estimated $26 million in net profit since its launch in July 2023. The impressive growth of Base can be attributed to its robust transaction volumes and fees, driven by project listings and high demand. In fact, Base transactions accounted for more than 60% of all Ethereum activity in Q3 2023.
The coinShares report revealed that the surge in gas fees on Base, resulting from high demand, has been highly profitable for Coinbase. The company has received 85% of the profits, while competitor Optimism has received the remaining 15%. This success has solidified Base as a major player in the Layer-2 space, posing a threat to competitors such as Arbitrum and Optimism. Analysts from VanEck predict that layer-2 scaling ecosystems could reach a market cap of $1 trillion by 2030.
Coinbase plans to continue innovating the Base platform by enabling users to store their USDC balance within the network. This improvement will enhance efficiency and security while reducing fees and settlement times.
However, Coinbase now faces competition from OKX, as the platform recently launched its Ethereum-based Layer-2 scaling network called X Layer. X Layer, which incorporates zero-knowledge proofs and Polygon’s CDK, offers users faster and more cost-effective transactions compared to Ethereum’s mainnet. This entry into the Layer-2 ecosystem adds further dynamism and competition to the market.
One notable difference between Base and Layer X is the integration of zero-knowledge proofs into Layer X’s architecture. This cryptographic feature allows for the verification of statements without revealing the actual statements, showcasing Polygon’s aim for improved interoperability among different blockchain networks.
Currently, Base is ranked third in terms of TVL, trailing behind Arbitrum One and ahead of Optimism, according to data from L2Beat. As of now, Base has a TVL of $5.29 billion, accounting for 14.17% of the market.