TL;DR
Base blockchain Layer2 protocol exhibits two notable features – low gas fees and cross-chain interoperability to render a more accessible blockchain solution for users.
Base blockchain, though built on Ethereum, Coinbase partnered with Optimism to resolve system congestion issues and perform thousands of transactions within seconds. Hence, it can accommodate decentralized applications designed for payment operation, DAO, Bridging, etc.
Introduction
The blockchain space is known for notable innovations focusing on improving technology efficiency. One of the significant events in this regard is the introduction of Layer-2 blockchains and the transition of existing Layer-1 protocols to Layer-2. In line with this development, Coinbase introduced a Layer 2 blockchain called “Base” to solve issues of low transaction speed, high cost, and system congestion that remain the leading concerns among blockchain users and cryptocurrency market participants.
Understanding Coinbase L2 Blockchain
Base Blockchain is a layer-2 scaling solution designed to enhance the performance and usability of the Coinbase cryptocurrency exchange platform. Built on the foundation of Ethereum, it features the adoption of efficient tech tools to resolve the scalability challenge and high transaction fees that come with the Ethereum blockchain.
While the Ethereum blockchain features a high scalability challenge, adopting layer-2 solutions has considerably resolved this. The Base blockchain also leverages Optimism rollups to enable faster and cheaper transactions. Each transaction is processed off-chain using a different consensus mechanism to reduce on-chain activities and prevent system congestion.
Transactions do not directly interact with the blockchain; they are created in batches and submitted collectively to the blockchain for validation. This process not only prevents congestion but also ensures that it can perform more transactions than the layer-1 blockchain.
Base mass adoption
According to the crypto research company L2Beat, there were already $139 million of deposits locked into apps and protocols on the new Base network before it even became public.
This TVL (Total Value Locked) makes Base the fifth-largest layer-2 blockchain, according to. With roughly $6 billion, Arbitrum One leads, followed by OP Mainnet ($2.9 billion), zkSync Era ($430 million), and dYdX ($336 million).
The issue of Centralized Validation Node
Validation or confirmation of off-chain transactions must be done securely to ensure asset safety and prevent the blockchain from getting compromised. However, Base operates with only the Coinbase Sequencer node to validate and finalize transactions, and this approach has been considered to centralize transaction processing and ordering power in a single entity. This approach raises considerable concern about modifying fees and other activities in the ecosystem. However, Coinbase has discussed the readiness to integrate third party nodes soon to resolve this issue.
Base Blockchain and Decentralized Applications
Aside from the fact that Base Blockchain is an EVM-compatible blockchain, it adopts a layer-2 solution to enhance its compatibility with decentralized applications in different spaces. Its use Cases and impacts include the following:
Payment and Trading dApps
Base Layer-2 Blockchain has broad application compatibility across the cryptocurrency ecosystem, one of which is its suitability for payment or trading applications. A decentralized application built on the Base blockchain will provide users with high speed and cost-efficiency for trading, transferring assets between wallets, and facilitating payment. Among other wallets and payment applications built on Base are Beam and Ambire wallet
DAO
The usability of Base blockchain for a more seamless Decentralized Autonomous Organization launched on blockchain to foster transparency and users’ interest has been showcased in its adoption by many DAO protocols. API3 DAO and Angle Protocol adopt the Base blockchain to provide users with a decentralized and community-governed protocol that allows users to participate collectively and effectively in decision-making.
Decentralized Exchanges
Base blockchain has been considered suitable for decentralized exchanges for apparent reasons. The blockchain boasts an improved security system that can ensure asset safety, and it is claimed to be 10x cheaper than a regular Ethereum blockchain, making it a preferable option for token swapping and other crypto-related transactions on DEXs.
Pros
- Scalability and Security- Base provides a scalable and secure environment for dapps, supported by the security of Ethereum and the best practices of Coinbase. This guarantees trust and dependability for users switching from chains like Ethereum L1 and Coinbase.
- Low transaction fees- Similar to various other advanced blockchain scaling solutions, Base is engineered to offer economical gas fees, aimed at substantially lowering transaction expenses and improving transaction speed.
Cons
- Centralized- A prominent concern regarding Base revolves around its centralization level. As the only sequencer node currently operating within the Base network, Coinbase has a significant amount of influence on transaction processes. In order to organize and complete transactions in a predetermined sequence and maximize transaction throughput, sequencer nodes are essential.
Due to this centralized management, Coinbase is able to choose and alter the fees for the Coinbase Sequencer. Additionally, Coinbase has raised the possibility of including outside nodes in the future, which might change how the network processes transactions.
- Delay withdrawal- The Base blockchain’s long withdrawal times, which take around 7 days, are one of its biggest drawbacks. The fraud-proof system created by Optimism, which allows users to contest transactions and submit suspected fraud evidence within the specified window, is responsible for this delay.
Conclusion
The introduction of Base blockchain represents another step toward a scalable and accessible cryptocurrency ecosystem. Its compatibility with different applications and protocols like trading activities, stablecoin, game, NFT, and others underscores the industry-wide shift toward adopting efficiency and improving the overall usability of cryptocurrencies.
