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Base Deep Dive: Everything You Need To Know About Base Blockchain

Introduction

The Base Blockchain (Base) has experienced a meteoric surge in the past month, marking significant growth across multiple metrics.

For those not yet familiar, Base is an Ethereum layer-2 network pioneered by Coinbase, a global leader in centralized cryptocurrency exchanges. According to Jessy Pollak, a core developer behind Base, the platform represents a pivotal step for Coinbase and its users, aligning with a broader mission to “Onboard the next Billion users into crypto.” With unwavering backing from Coinbase, speculation runs rampant that Base could emerge as a dominant Layer-2 in the upcoming crypto Bull Run.

In this study, we explore the Base Chain, unpacking the metrics behind its recent popularity surge, examining notable projects launching on the platform, and presenting our strategy for optimal gains within the Base ecosystem.

How to Onboard 1 Billion Users into Crypto

In 2016, Brian Amstrong, Founder and CEO of Coinbase, laid out his “Secret Master Plan”.

The plan compared the adoption of the Internet to that of Digital Currencies, breaking them down into 4 phases of growth:

  1. Phase 1 – Protocols. Open-source protocols like Bitcoin and Ethereum allow people to store, transact, and program value on-chain. This stage would onboard about 1 million users.
  2. Phase 2 – Infrastructure. Exchanges would make it easy for people to buy and sell digital currencies. This stage would onboard about 10 million users.
  3. Phase 3 – Wallets. Easy-to-use wallets would make it easy for users to interact with crypto applications. This stage would onboard about 100 million users.
  4. Phase 4 – Apps. A variety of consumer-facing apps allow for payments and financial transactions to be done on-chain.
Base Blockchain | Long term crypto plan

Base long term crypto plan

Source: Coinbase Blog

When this master plan was written 8 years ago, Coinbase was in phase 2, as a simple exchange for digital assets. The image below shows what Coinbase’s UI looked like at the time.

Base old UI

Source: Fortune

Since then, Coinbase has grown into an all-in-one platform with the tools to execute the remaining phases of the master plan above.

The release of the Coinbase wallet moved Coinbase into Phase 3. Now, the adoption and growth of Base Chain are moving Coinbase into the final phase: Phase 4, which aims to see 1 billion and above onboarded into crypto.

Coinbase current products / Services | Base Blockchain

Coinbase current products / Services

 

Coinbase products as of April 2024. Source: Coinbase.com/products

Base Blockchain as a Layer-2 Chain

Traditionally, Blockchains have not been very good at processing large volumes of transactions. However, there are a few ways to fix this problem.  

One Solution is the use of rollups. There are two main types of rollups: ZK (zero knowledge) and Optimistic rollups. ZK rollups achieve scalability by consolidating transaction data into a singular proof, whereas optimistic rollups primarily present proofs solely in cases of fraudulent activity or inaccurate state changes.

As an Optimistic rollup built using the OP stack, Base features low transaction speeds and fast execution speed.

As a Coinbase initiative, the goal is to easily onboard users via the Coinbase exchange and the Coinbase wallet. 

These two factors have the potential to create a powerful hub for new crypto applications to launch, as Coinbase would have already taken care of getting new users and value into these applications. We can already see signs of these beginning to take shape:

  • DeFi applications are inventing new opportunities for yields and ROI.
  • SocialFi applications are bringing new users into crypto.
  • NFTs and Games combine fun and finance.

Why do we need another Layer 2?

Since Base launched in Q1 2023, a lot of people have questioned whether we needed another layer 2 network. 

“Aren’t there already enough Layer 2s?”

Maybe, at first glance, Base might look like just another L2. But as mentioned earlier there are compelling reasons why Base might become a leading Layer-2 chain regardless of how many of them already exist.

Firstly, Base is still being customized to meet the needs of the average users. As Brian Amstrong stated his goal in an interview for the performance of Base to make it cheaper and faster:

“We need to get [base] where probably 99% of transactions are happening on layer-2 to get performance goals of under one cent and one second.”

“We don’t want to make Base a Coinbase thing, but something that’s much broader… We’re trying to do it in a way that’s interoperable with the rest of the crypto community.”

– Brian Armstrong

Moreover, Base already has almost $5 Billion in TVL and is currently placed as the 3rd largest rollup, just behind Arbitrum and Optimism. 

L2 Blockchains | Base

L2 Beats

Source: L2Beats

In August 2023, one month after the Base network launch, the chain had about $100M in TVL. Less than 1 year later, it has seen an increase of over 50x or ~ 4,900%. 

Base Blockchain TVL

Base Blockchain TVL over time

Is this a Deja Vu?

In early 2021, the Binance Smart Chain(BSC) was launched with Binance’s full support. 

The chain rapidly grew to challenge even Ethereum itself in terms of adoption metrics. People even thought that it was going to take over Ethereum. The tech wasn’t unique in any particular way, but the support of a major exchange was. Suddenly, Binance users were incentivized to use the chain. BSC became the default chain for deposits and withdrawals on Binance. 

Although BSC’s growth seemed to come from nowhere, its ascent seemed obvious in retrospect. Maybe a year or two from now we’ll look back at Base’s ascent in the same way.

Base Metrics Picking Up

On-chain activity has been picking up on Base lately, hitting All-Time Highs in terms of TVL, transaction volume, and stablecoin inflow. These are usually the best metrics used to determine the adoption of a blockchain network.

Base on-chain activity

Source: Defillama.com

Daily Transactions on Base have also skyrocketed recently, hitting an all-time high.

Base daily transactions

Base daily transaction chart

Additionally,  the developer activity and creativity on Base Blockchain has been wild recently.

Hitting an ATH of over 106,000 unique contracts deployed in April. This surpasses any other network in the space by a significant margin, exceeding the combined activity of Ethereum, Solana, Arbitrum, and Optimism. While not all development is necessarily positive, the substantial interest and experimentation by numerous developers on Base is remarkable.

New smart contracts deployed

New smart contracts deployed by blockchain

This is also a good reminder that when narratives start moving in crypto, it can happen fast. While Base is still relatively low(compared to larger L2 chains like Arbitrum) it definitely has momentum on its side.

Base Ecosystem Projects

To date, over 200 protocols have already been launched on Base Blockchain.

Projects within the Base ecosystem include traditional crypto protocols(Trading, Defi & NFTs) we see on other chains, but there are also several more innovative protocols(SocialFi, Gaming & RWAs) with new use cases attracting new types users than the usual pool of crypto users we are used to seeing. SocialFi in particular is one of the categories that have found a home on Base.

Let’s take a look at some of these projects.

Base Ecosystem

Base Ecosystem – DeFi / SocialFi / NFT&Gaming

SocialFi Projects on Base

SocialFi refers to the combination of a social media-type app with some aspects of finance in them. 

Influencers, content creators, and KOLs can let their users own and monetize a portion of their content. This portion can even be traded or transferred to another owner.

Base blockchain has been the home of most SocialFi projects in the last year.

Friend.tech

Friend.tech is one of the first social apps to gain significant traction within the crypto industry. 

Friend.tech

Friend.tech

It was one of the first apps to launch on Base in August 2023. The concept was simple: It offered creators like influencers and celebrities a platform to connect with their audience using social tokens called ‘keys’. These keys grant access to private chat rooms and exclusive content, with their value fluctuating based on the community’s strength and creators’ popularity. While Friend.tech offers creators unlimited earnings potential, it also poses direct risks as their key prices are tied to content quality, unlike traditional Web2 platforms where revenue mainly comes from subscriptions and ads, with no shared economic upside for subscribers.

When launched, the platform quickly gained popularity and attracted over $50 million in TVL and hit as high as $1 million in revenue within a single day. While the platform isn’t as popular as it was in the early days, it still generates a daily revenue between $8k-$150k.

Friend.tech TVL

Friend.tech TVL & Revenue

Source: Defillama.com

Friend.tech demonstrates a shift in dynamics where power lies not only with creators but also with fans and the community. The concept of tokenized influence means a creator’s impact is measured by the number of keys users possess, symbolizing the tangible value of their influence, available for purchase or sale by anyone.

Farcaster

Farcaster is a decentralized social network that has garnered many influential users from the Ethereum ecosystem. While resembling Twitter superficially, Farcaster distinguishes itself with several notable features:

  • Each account is linked to an on-chain address.
  • Multiple front-ends can utilize the same social graph (currently, the most prevalent front-end is Warpcast).
  • It introduces a novel post format named Frames, akin to apps in your feed, which can be Web3 native, enabling functionalities like direct NFT minting.
Farcaster | Base Blockchain

Farcaster

Circle.Tech

Circle Tech is a brand new socialFi platform on Base, offering the opportunity to engage in direct communication with influencers or followers through questions or private chat rooms. 

An upcoming CIRCLE token airdrop is scheduled to debut in a few months, while users can presently accumulate points through activities such as questioning, answering, and participating in 1-on-1 chat rooms. 

Circle imposes a 2% transaction fee on all platform transactions. Despite gaining traction among CT(Crypto Twitter) influencers, the platform’s ability to attract and retain users remains uncertain.

circle.tech

a screenshot of the circle.tech app

Family

Family is a mobile crypto wallet that combines additional features like in-app messaging and mobile payments in one place. 

As network fees on Base blockchain continue to drop after the Ethereum Dencun upgrade, Family or a similar app could become appealing micropayments and peer-to-peer transfers(similar to Venmo, Cash App, or Revolut)

Base Family

a screenshot of the Family app on Base Blockchain

Unlonely

Unlonely is a Decentralized video streaming app that incorporates crypto for features on the platform like:

  • Token Rewards
  • Live Bets during streams
  • VIP chats
  • Minting Clips as NFTs
unlonely app

a screenshot of the Unlonely App

Defi on Base

Aerodrome

Many popular Defi protocols on Ethereum have launched a fork on Base. 

However, Aerodrome has been the main liquidity and trading hub on Base. With the growth of Base over the past month, Aerodrome’s TVL has followed going from $100 million at the beginning of the year now sitting around $640 million.

Areodrome TVL on Base Blockchain

Areodrome TVL on Base Blockchain – DeFi Lama

Additionally, AERO, the token of the Aerodrome Dex, followed this trend. It’s gone up by 10x since the beginning of March 2024. It’s gone up by 10x since the beginning of March 2024.

AERO Price Chart

a screenshot AERO Price Chart

Source: Coingecko

Note: Since Base Blockchain doesn’t have a coin of its own, most users are speculating on the tokens of leading protocols on the chain as proxy tokens for Base. AERO, being the leading Dex on the network, is ideally suited for that role.

Extra Finance

Extra Finance is a leveraged yield protocol on Optimism and Base. It comprises professional features like one-click rebalancing and helpful farming profit simulators.

Extra Finance on Base Blockchain

Extra Finance on Base Blockchain

Looking at some of the AERO pools, we can see yields up to 140k%. However, it’s good to remember that these pools are usually very susceptible to impermanent loss.

AERO Pools in Aerodrome

AERO Pools in Aerodrome

Reserve Protocol

Reserve Protocol enables anyone to create yield-bearing, decentralized, and asset-backed currencies. Reserve emphasizes the idea that the real store of value is not the fiat money in our bank accounts but rather the real estate(house), or the portfolio of stocks and crypto that we own. 

The fundamental concept of Reserve revolves around facilitating the existence of numerous stablecoins tailored to individuals’ varying risk thresholds and preferred portfolio distributions.

Reserve has an established presence, with the RSR token being operational for five years.

Recently, the market capitalization of RTokens, a generic term for stablecoins fully backed by any combination of ERC-20 tokens through the Reserve Protocol, has exceeded $75 million.

TVL in Reserve Protocol

TVL in Reserve Protocol – Dune Analytics

The team is pursuing a substantial and intricate challenge, which may entail a lengthy journey to achieve success. Should they succeed, the protocol’s impact could be significant, with total value locked (TVL) potentially reaching billions rather than millions.

Cygnus Finance

Cygnus is the first native RWA(Real World Asset) protocol on Base. Cygnus issues interest-bearing cgUSD against short-term US Treasury Bills as collateral. 

Cygnus employs a daily rebase mechanism to distribute Treasury interest returns to cgUSD holders, increasing their cgUSD balance while ensuring that each cgUSD token remains pegged to $1.

It still has a relatively low TVL but has grown significantly over the past months.

Cygnus Finance TVL on Base

Cygnus Finance TVL on Base Blockchain

NFTs & Gaming on Base

Below are some of the most notable NFT and Gaming projects on Base Blockchain.

Parallel

Parallel is a strategic card game where players aim to diminish their opponent’s life points from 30 to 0. Each game utilizes a 40-card deck, with players initially drawing a hand of 5 cards, which can be expanded to a maximum of 8 through drawings. Before commencing a match, players can opt for a “mulligan,” allowing them to reshuffle any number of cards from their hand into the deck and draw an equivalent number of replacement cards.

Parallel on Base

a screenshot of the game Parallel on Base

For a deeper guide on all the details and mechanics of the game check out this article from William Peaster of Bankless. 

Fren Pet

Fren Pet is a realtor game in which users can adopt, upgrade, and compete with virtual pets. It combines features of NFT and gaming in one place, bringing some innovation to the table.

Fern Pet

a screenshot of the game Fern Pet

Astaria

Astaria is a fixed-rate borrowing and lending protocol on Base. It allows users to borrow and lend any fungible token or NFT. 

Astaria is unique in that it does not require a price oracle, and loans can be of unlimited duration. 

Astaria Lending protocol

screenshot of Astaria lending protocol on Base

Land, Labor, Capital (LLC)

LLC is an economics-inspired game. It’s reminiscent of Farmville or Roller Coaster Tycoon. The game allows users to buy and improve plots of land within the game.

Land, Labor, Capital (LLC) on Base Blockchain

a screenshot of Land, Labor, Capital (LLC) on Base

BasePaint

BasePaint is a unique type of project launching on-chain. It allows painters to connect their wallets, mint a paintbrush, and collaborate by drawing on a daily public canvas.

Base Paint

a screenshot of Base Paint

At the end of the day, painters receive a pro-rata cut of ETH from the painting’s NFT drop based on the painter’s contribution. For a detailed overview, check out William Peaster’s write-up on the project.

Other “Cool” Protocols on Base Blockchain

Avantis

Avantis is a perpetual Dex exchange on Base, allowing users to trade Crypto, Forex, and Commodities with up to 100x leverage.

Avantis DeX on Base

a screenshot of Avantis DeX

Blackbird

Blackbird is a novel type of eat-to-earn, restaurant rewards program. The app allows users to eat at participating restaurants to earn points and receive rewards in return.

Blackbird App on Base

a screenshot of Blackbird App on Base

Meme Market

Meme market brings an innovative but cool concept on-chain. 

Meme Market on Base

a screenshot of Meme Market on Base

It allows users to create their memes which are then added to a liquidity pool. Other users can then purchase the meme based on a Bonding curve.

Will Base Blockchain have a Token?

The answer is not clear.

While Brian Amstrong clarified that they were not planning to launch a token for Base Blockchain, Paul Grewal, Coinbase’s Legal Officer, said in an interview in September 2023 that “I think a token could be viable at some point in the future… It’s not something we’ve ruled out entirely.”

So, it’s not very clear at the moment whether Base will have a token in the future. Nonetheless, it would still be worthwhile to perform some activities on the chain. As we have seen in the past(Optimism, Arbitrum, etc), should they launch a token early participants would usually qualify for an airdrop.

What The Future Holds for Base?

Base is anticipated to become a prominent Layer-2 (L2) solution due to its cost-effective transactions, expansive user base, and reputable status, potentially becoming the preferred network for Ethereum Virtual Machine (EVM) projects and decentralized applications (dapps).

Gas fees - pre / post Dancun Upgrade

Gas fees – pre and post the Ethereum Dancun Upgrade

Source: Twitter.com

Base boasts the most popular SocialFi ecosystem among all chains, likely attracting further SocialFi projects drawn by the prospect of accessing a larger user pool and enjoying lower transaction costs compared to other EVM-compatible chains. 

There’s optimism that a SocialFi application could achieve widespread adoption, with Base positioned as a favorable hosting chain. 

Consequently, there’s a plan to engage more with SocialFi apps on Base, alongside exploring new applications and closely monitoring the ecosystem, with a keen interest in innovative solutions addressing genuine needs.

Base Blockchain: Summary

The Base blockchain, spearheaded by Coinbase, has witnessed remarkable growth, signaling its potential to emerge as a dominant Layer-2 solution in the crypto space. 

With its focus on scalability and user accessibility, Base aligns with Coinbase’s mission to onboard a billion users into the crypto sphere. Notable projects across SocialFi, DeFi, NFTs, and gaming have found a home on Base, showcasing its diverse and vibrant ecosystem. 

While the prospect of a native token remains uncertain, Base’s trajectory suggests a promising future as a preferred network for Ethereum-based projects, with a robust SocialFi landscape poised for further expansion.

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