Base, Coinbase’s Layer-2 network, shocked the crypto market last week with a rise in total value locked (TVL), which exceeded $4 billion for the first time. Interestingly, it made a significant contribution to the company’s bottom line this week, 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 the fueled growth, with transactions comprising more than 60% of all Ethereum activity in Q3 2023.
Base’s profitable journey
According to the CoinShares report, the increase in gas costs on Base due to high demand has led to strong revenues for Coinbase, with 85% of profits going to Coinbase and 15% to rival Optimism. This growth has positioned Base as a formidable player in the Layer-2 space, eating into market share from competitors like Arbitrum and Optimism. VanEck analysts predict a market cap of $1 trillion 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, improving 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.
Built using Polygon’s CDK and with zero-knowledge proofs, X Layer provides users with 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.
When comparing Base to Layer This cryptographic feature enables the verification of statements without revealing the actual statements, a key aspect of Polygon’s updated design. This move underlines Polygon’s goal for improved interoperability between different blockchain networks.
Current optimism
Based on data from L2Beat, Base currently ranks third in terms of total value locked (TVL), just behind Arbitrum One and ahead of Optimism. As of this writing, Base has $5.29 billion in TVL and 14.17% of the market.