Decoding DeFi Metrics! How does Base rise to the top tier of Layer 2?

According to L2 Beat, on Ethereum Layer 2, the TVL of the Base chain has now ranked second. It holds about 18% of the total across 74 active Layer 2s, while Arbitrum, which ranks first in TVL, accounts for approximately 40%. Base is an Ethereum Layer 2 launched by the U.S.-based compliant exchange Coinbase utilizing OP Stack technology, and it now even surpasses Optimism in market share.

Can Base, a non-issuing platform, compete in the market?

The design of Layer 2 aims to execute transactions off-chain and record the results on the main chain. Although there are many differences in the details, such as whether to adopt Optimistic Rollup or ZK Rollup, and even the centralization of the sequencer, in reality, as in many industries, users may not truly care about the so-called technical details. In the competition for market share, marketing strategy plays a significant role.

As a Layer 2 supported by Coinbase, Base has seized many opportunities. For example, in the recent Onchain Summer event, Base allocated two million US dollars to invigorate activities on the chain. According to reports, during the three-month event period, Onchain Summer added two million unique addresses to the Base chain, while in 2023, Base added 268,000 unique addresses, bringing creators five million US dollars in minting income.

A spokesperson for Coinbase stated, "The results really surprised us. The participation of 2.2 million unique wallets is about 8 times the number we saw last year, more than twice what we internally expected."

We can observe the effectiveness of this strategy from the on-chain data. The latest chart from on-chain data provider Token Terminal shows that Base's active users have been growing rapidly in recent months, while other Layer 2 solutions are declining.

Base's Counterattack: The Only Layer 2 Riding the Meme Craze

Since Coinbase is a publicly traded company in the US, we can find some clues from the latest quarterly report. In the second quarter of 2024, the cryptocurrency exchange's sales and marketing expenses exceeded 165 million US dollars, more than twice the amount spent in the same period last year. In the first quarter of 2024, Coinbase reported "other" transaction revenue of 52.5 million US dollars, including the so-called sequencer fees charged by Base.

In addition to marketing, Base has another secret weapon: the convenience of transferring tokens from Coinbase, which is done through smart contracts without the need for mnemonic phrases, private keys, and other relatively complex operations. An issue currently receiving much attention in the blockchain startup space is chain abstraction and account abstraction, in short, user-friendliness. Base is simplifying the entry point to the blockchain to migrate users to the chain.

With the frenzy in cryptocurrency trading, Robinhood's impressive financial report, could Coinbase be the next to rise?

Finally, since the beginning of the year, chains like Solana, TRON, and BNB have experienced meme crazes, with users enthusiastic about participating in meme coins on the chain, bringing vitality to on-chain transactions. Besides some hype around the Ethereum mainnet, Base is the only Layer 2 with a meme craze, making it one of the hottest meme chains this year.

Researching Aerodrome Finance, the largest DeFi protocol on Base, reveals that excluding stablecoins, the most popular trading pairs are related to meme coins.

Rob Hadrick, a partner at the well-known venture capital firm Dragonfly, said, "Look at Uniswap on Base, it's the same situation, two of the top five tokens in terms of trading volume are memecoins." He added, "It's no different from Solana; they are fiercely competitive in these long-tail token trading markets as more and more young users start speculating on memecoins."

"Base has surpassed other Layer 2 solutions in terms of daily active addresses (DAU) and daily transactions, and has entered the top five in many important DeFi metrics such as TVL and sequencer fees," Rob Hadrick added.