Coinbase launches Base Testnet: Why Aiming at Eth L2?


On February 23, 2023, Coinbase announced the launch of the Base testnet. Base is an Ethereum Layer 2 (L2) network based on OP Stack, designed to provide a secure, low-cost, and developer-friendly method to build on-chain DApps. Coinbase and Base aim to attract 1 billion users into the crypto economy.

01 Summary


The base is an Ethereum L2 network based on the optimistic hypothesis-fraud proof principle, which can provide users with a lower-cost Dapp interaction mode without reducing the security of the network consensus.

As an L2 network, the Base itself does not need to issue token to work properly. Its potential business models include earning Gas and extracting MEV, etc.

At this stage, Base does not adopt too many industry-leading “dark technologies”, but it directly uses technology solutions of the Optimism Rollup technology stack, which is relatively mature. Base copies a product that already exists in the market.

However, Base provides a new idea for Web 2.0 giant companies to enter the Web 3.0 infrastructure direction. In the L2 network scheme, through the consensus of “renting” the underlying public chain, the network state security can be guaranteed even without the issuance of token. Due to the regulatory policies, listed companies are faced with many compliance problems when launching the underlying public chain, and the L2 network scheme can just avoid some restrictions.

Ethereum’s scaling capacity will face the “inflection point”, which may be a good opportunity to go into Rollups.

02 What is the Base?

In terms of product, Base is a universal Ethereum L2 network, and its user experience is basically the same as Optimism and Arbitrum. Developers can deploy smart contracts and build Dapps on Base, and users can interact with these Dapps using an Ethereum account.

Technically, Base used the Optimism team to develop OP Stack, building an Optimism Rollup based on the optimistic hypothesis-fraud proof principle.

In essence, Base consists of smart contracts deployed on the ETH network and off-chain centralized servers.

The server provides an EVM-compatible execution layer, efficiently processes transactions through centralized ways, and uploads the calculated results of status change to the smart contract of the ETH mainnet for consensus to obtain finalization.

The smart contract of the ETH mainnet is responsible for the arbitration of the results of status change. During the challenge period, if someone can provide evidence that the uploaded change result is wrong, then the wrong result is corrected, the informer is rewarded, and the party uploading the wrong result is punished. After the challenge period, if no one’s challenge is successful, the contract will be “optimistic” and uploaded the result on the mainnet.

03 What can Base be used for?

For developers: Base is compatible with EVM. The experience of developers deploying smart contracts on Base is similar to the mainnet, and the migration cost of existing contracts is relatively low.

For users: Base is compatible with the Ethereum account. Users only need to switch the network in the wallet and can interact with the Dapp on Base. The interactive experience is the same as the mainnet, and the Gas fee is greatly reduced.

04 Base’s business model

Unlike many other Rollups, Base won’t issue its own Token to make profits.

The base has yet to announce its business model. However, as an L2 network, there are two potential commercialization paths:

Gas price differences. The Gas paid to Base by users may be higher than the Gas consumed by Base in the ETH mainnet consensus, and the difference between them can be the profit room of Base.

Extracting MEV. The order in which users submit transactions to Base is entirely determined by Coinbase and could theoretically earn MEV.

05 What can the Base bring to the Coinbase

Keep users in the Coinbase ecosystem and vitalize other products of Coinbase, such as Coinbase Wallet, NFT Marketplace, etc.

Strategic preparation, to avoid missing opportunities for the next bull market.

Invest Dapps of good quality on Base.

In the last bull market, one of the important reasons restricting the development of Ethereum was that the performance of the mainnet could not meet the needs of users. As the feasibility of the L2 solution to increase Ethereum scaling capacity is initially proven, even as a top centralized exchange, Coinbase has to worry about being replaced by a more decentralized version of the Dapps.

Therefore, for exchanges, the launch of public chains and Rollup is a strategic decision. This includes Binance, OKX,, and Huobi et al. Coinbase also admitted that it had the idea of launching a public chain in both 2018 and 2020, but failed to achieve it. Compared to the L1 public chain, Rollup can run without token, solving many compliance concerns; and the Optimism team will give open-source Rollup technology solutions, which solves many engineering problems for Coinbase.

06 What can Web2.0 giants learn from the Base model

Even without Token, the Base can go into the public-chain-level infrastructure track. In the L2 network scheme, by “renting” the consensus of the underlying public chain, even without issuing Token, the network security can be guaranteed. The Base model offers new ideas for listed companies that want to enter the public chain but don’t want to issue Token.

Ethereum’s scaling capacity is close to the “inflection point”, which may be a good opportunity to enter the Rollup.

Optimism and Arbitrum mainnet has preliminarily verified the feasibility of the L2 network scheme. Currently, sending a transaction on Rollup costs less than a tenth of the main site. In the future, with the implementation of other Optimism solutions such as EIP-4844, the cost of sending transactions may require only one-thousandth of the cost of the mainnet. Dapps with a billion users on Rollup may become a reality.

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