The Ethereum community appears to have a bullish view of Coinbase’s newly announced layer-2 network, Base, which has been described as a “massive confidence vote” and a “watershed moment” for the blockchain network. This has been described as a “massive confidence vote” and a “watershed moment” for the blockchain network.
Protected by Ethereum and driven by Optimism’s layer-2 network, Base’s long-term objective is to evolve into a network that facilitates the development of decentralized applications (DApps) for use on blockchains. According to the chief executive officer of Coinbase, Brian Armstrong, the layer-2 network is now in the testnet phase.
Members of the cryptocurrency community such as Ryan Sean Adams, host of the Bankless Show, are of the opinion that the move “is a massive vote of confidence for Ethereum.” If this is proven to be the case, it could set a precedent for cryptocurrency companies and financial institutions to use Ethereum as their preferred settlement layer.
Since its founding in 2012, Coinbase has amassed roughly 110 million verified users and has worked with 245,000 businesses across more than 100 countries. According to CoinGecko, its cryptocurrency exchange is the second biggest in the world in terms of trading volume. The first place goes to Binance.
“This alone will 10x the overall number of crypto native users,” Adams said, adding that “if Coinbase converts 20% of its 110 million verified users to Layer 2 users in the future years,” this alone will 10x the entire number of verified users.
Adam also praised Coinbase for its decision to open-source Base, and he is of the opinion that the newly introduced layer-2 network would result in an increased demand for block space on Ethereum.
In the meantime, Sebastien Guillemot, co-founder of blockchain infrastructure company dcSpark, suggested that Coinbase made a wise decision to go with a layer 2 as opposed to an independent sidechain, noting that “almost all” cryptocurrency transactions and value locked on Ethereum resides on layer 2s these days. Guillemot was referring to the fact that “almost all” cryptocurrency transactions and value locked on Ethereum resides on layer 2s.
In a tweet dated February 23, Ryan Watkins, co-founder of the cryptocurrency-focused hedge fund Syncracy Capital, referred to the announcement as a “watershed moment” in the ecosystem of Ethereum rollups. He went on to say that there was “probably no one better” positioned than Coinbase to get Ethereum’s next 10 million consumers and institutions on board.
However, there were some bears among the bulls.
Gabriel Shapiro, general counsel of investment firm Delphi Labs, explained in a Twitter post dated February 23 that launching a centralized layer-2 network “opens the door” to unwarranted scrutiny from the SEC. He was referring to the fact that the SEC has the authority to investigate investment firms.
“A centralized L2 that trades lots of tokens any number of which could be alleged securities, or does lots of DeFi transactions that arguably might alleged to be regulated (security swaps etc), opens the door to the SEC making new kinds of secondary market claims,” wrote Shapiro, adding that “imo, this will accelerate the SEC’s “secondary market” agenda re: blockchain securities issues, because they can’t let an SEC registrant “get away with” potential violations and
Concerns raised by Shapiro come at a time when the SEC has lately ramped up its enforcement operations against a number of stablecoin issuers and service providers of staking services.