As 2024 marks the 15th birthday for Bitcoin, we are at a stage similar to the 1990s, where crypto, like the internet, is crossing the chasm between early adoption to mainstream acceptance thanks to the improvements in blockchain performance.

We believe the critical next step to onboard the next billion users depends on blockchains’ ability to attract and retain users. To this point: Base, the Ethereum Layer 2 developed by Coinbase, has emerged as a frontrunner with impressive growth this year.

You're reading Crypto Long & Short, our weekly newsletter featuring insights, news and analysis for the professional investor. Sign up here to get it in your inbox every Wednesday.

Source: Token Terminal, April 2024

What Factors are Driving Base’s Success?

Leveraging Coinbase for user acquisition: Base is developed by Coinbase to seamlessly bridge their users to the crypto economy. It is integrated into the Coinbase mobile and web applications, with easy fiat on and off ramps from the exchange. With 110 million users at Coinbase and 7 million on Base, there is much room to grow.
User experience: Coinbase is launching major UI improvements addressing the biggest hurdles for mainstream adoption. The Smart wallet simplifies the login process without the need to remember lengthy recovery phrases while Magic Spend uses smart contracts to abstract away the complications of gas payments, allowing dApps to pay gas fees on behalf of their users. Furthermore, Coinbase is going to store more customer USDC balances on Base, making it easy to deploy cash on-chain.
Strong community: Jesse Pollack, the creator of Base is also the biggest influencer within the Base community. We have also seen early success in social dApps building on Base such as Friend.Tech and Farcaster, demonstrating the benefits of Web3 social and building a loyal community.

Although Base does not have its own token, it uses ETH for gas, OP for governance, and AEVO, the token of the largest DEX on Base, functions as the Base ecosystem's incentive token through its vote escrow mechanism. The Base ecosystem fund is acquiring AERO to give out as incentives to projects so they can lock up AERO to incentivize liquidity.

While several established DeFi projects have deployed on Base, the native projects on Base have garnered a significant market share. Aerodrome, the largest DEX on Base by TVL, has generated almost the same amount of fees as Uniswap recently, a notable achievement considering Uniswap is deployed on 16 chains.

Source: Token Terminal, April 2024

Moonwell, the leading borrowing and lending protocol on Base, boasts a TVL that nearly matches those of AAVE and Compound on Base combined and has seen 4X user growth since the beginning of the year. Through the USDC Anywhere program, Moonwell can tap into USDC stored on any chains supported by Circle, in addition to the USDC stored on Coinbase.

Source: Gauntlet, April 2024

Degen, initially a meme token but now utilized by Farcaster as the de facto in-app currency, has experienced a five-times increase in users within a month, exceeding the growth record set by BONK, the famous Solana meme coin.

Source: Dune Analytics, April 2024

With Coinbase's support and the rapid development of its ecosystem and community, Base is poised to be forebear to bring blockchain technology closer to mainstream adoption.

Opinion Crypto Long & Short Coinbase Base Web3 layer 2

Kelly Ye

Kelly Ye is a portfolio manager and head of research at Decentral Park Capital, a liquid venture fund specializing in digital asset investments. She invests in both liquid and early-stage deals across various crypto sectors, employing a thesis-driven approach supported by in-depth fundamental and quantitative analysis. Prior to joining Decentral Park Capital, Kelly served as the Head of Product at Fidelity Digital Asset Management and as the Head of Research at CoinDesk Indices. In these roles, she played a pivotal role in the growth of the digital asset businesses at both companies. Before venturing into the digital asset space, Ms. Ye accumulated 15 years of experience in traditional finance, focusing on research and product development across different asset classes. She led teams at esteemed institutions such as New York Life Investment, Goldman Sachs, GSAM, and BNP Paribas. Ms. Ye has received numerous industry accolades and awards since entering the financial services industry in 2008. Ms. Ye holds a Bachelor of Science in Applied Mathematics from Peking University and a master’s degree in operations research MIT. Kelly is a CFA® and has served on the board of CFA New York and co-chaired the Women in ETF Speakers’ Bureau committee.