Base, Coinbase’s Layer-2 network, shocked the crypto market last week with a surge in its total value locked (TVL), exceeding $4 billion for the first time. Interestingly, This week it has become a significant contributor to the company’s profits, estimated at $26 million in net profit since its launch in July 2023. Base’s robust transaction volumes and fees, driven by project listings and high demand, have boosted its growth, with transactions comprising over 60% of all Ethereum activity in Q3 2023.
Base’s Profitable Journey
According to the coinShares report, the surge in gas fees on Base due to high demand has led to strong earnings for Coinbase, with 85% of the profits going to Coinbase and 15% to competitor Optimism. This growth has positioned Base as a formidable player in the Layer-2 space, eating into the market share of competitors like Arbitrum and Optimism. VanEck analysts predict a $1 trillion market cap for layer-2 scaling ecosystems by 2030.
Coinbase plans to further innovate the Base platform by allowing users to store their USDC balance within the network, enhancing efficiency and security while reducing fees and settlement times.
Competition from OKX’s X Layer
However, Coinbase now faces new competition from OKX, which recently launched its Ethereum-based Layer-2 scaling network, X Layer.
X Layer, built using Polygon’s CDK and incorporating zero-knowledge proofs, offers users faster and more cost-effective transactions compared to Ethereum’s mainnet. With the introduction of X Layer, OKX enters direct competition with Coinbase’s Base, adding further dynamism to the Layer-2 ecosystem.
In comparing Base with Layer X, one notable difference is Layer X’s integration of zero-knowledge (ZK) proofs into its architecture. This cryptographic feature allows for the verification of statements without disclosing the actual statements, a key aspect of Polygon’s updated design. This move underscores Polygon’s aim for improved interoperability among various blockchain networks.
Current Optimism
Based on data from L2Beat, Base is currently ranked third in terms of total value locked (TVL), just behind Arbitrum One and ahead of Optimism. At the time of this writing, Base has $5.29 billion in TVL and 14.17% of the market.
