Not issuing Token is Base’s weapon

Author: Block Rhythm Kaori

Base's TVL rose significantly in March. Thanks to the recent meme craze, Base's TVL exceeded $700 million. As of the time of writing (March 31), the total TVL exceeded $1.14 billion, reaching a record high.Backed by Coinbase, Base seems to be becoming a new growth point for the Ethereum ecosystem.

Base's increased on-chain activities have been questioned by the community as robots and there are not many real active users.The answer may not be so, because no chain needs real users and on-chain activity more than Base.

Base launched its mainnet in August last year. Jesse Pollak, the head of the protocol, once made it clear in the Bankless podcast that Base would not issue tokens and had no plans to issue tokens. As the only chain built by Coinbase, a listed CEX, Base's expectations for issuing tokens are indeed very low, so real users are needed to contribute to the fee income as a source of income for the entire ecosystem.

As we all know, the crypto market is a place of extreme speculation and pursuit of capital efficiency. Why do users on the chain enter Base, what does Base rely on to gain more users, and how much room for growth does Base have?

01 Base's ecological logic

There is no token expectation, which makes Base a unique existence in Ethereum Layer 2, and Base seems to have a magic disk every once in a while, bringing real income and traffic to the entire ecosystem. As can be seen from the TVL trend chart, Base has experienced three major increases in TVL since its launch.

The first time was when the social application Friend Tech exploded, driving Base TVL straight up on its own;

The second time was in February this year, when the social protocol Farcaster launched a new feature, frames, the community meme coin DEGEN, and a series of airdrop expectations brought about a comprehensive reaction;

The third time was the recent landing of the Cancun upgrade, Coinbase helped the Base ecosystem DeFi project to promote the increase in on-chain liquidity and the synergy of the increase in market hot money.

And these three increases also respectively illustrate that Base carries different development factors in its genes from other Layer 2s.

1) Focus on user growth "VC chain"

Do you still remember the market heat brought by the emergence of Friend Tech last year? Although it seems a bit messy now, the market was still in a bear market cycle at that time, and the emergence of Friend Tech, a social protocol built on the Base chain, was like a thunderbolt.

From the product launch in early August to mid-October, the Friend Tech protocol revenue accumulated 21 million US dollars, with a daily maximum cumulative revenue of about 1 million US dollars, far exceeding the mainstream DeFi protocol or NFT market at the time.

Through social fission to solve the pain points of industry sharing, it is just in time to achieve cold start through speculative effects, and rely on rapid iteration and bundling Paradigm to consolidate development expectations, and release Airdrop expectations to deepen user stickiness. It can be said that Friend Tech gave the Web3 market at that time a good lesson in product management.

In this spiral chain, the early stage relied on invitation codes and well-known KOLs to pull people for social fission, but the emergence of Paradigm was a key factor. A research report from Folius Ventures stated that Friend.Tech refused to contact any VC except Paradigm, which shows that it is highly bound to paradigm. But if you want to say who has benefited the most from this SocialFi craze, I think it is undoubtedly Base.

In addition to Friend Tech, Base also has FrenPets, which focuses on the electronic pet market, Unlongly, a Web3 live broadcast platform, sound.xyz, which focuses on collecting music, PartyDAO, a fundraising platform, Zora, which collects art, and Drakula, a Web3 Tiktok, etc.

After the Base meme smoke, many people asked what else is on Base. Jesse Pollak, head of the Base protocol, mentioned a long list of projects, all of which are consumer applications focused on serving Web3 users. Jesse said Base is currently brewing a trend called Build-2-Earn or "building influential new on-chain products and winning respect, appreciation and economic rewards."

Behind these consumer applications are a group of well-known VC institutions in the crypto market, such as Paradigm, a16z, Multicoin, DragonFly, Variant Funds, and 1confirmation. And these VC institutions have different investment styles, and have differentiated two characteristics in the Base ecosystem. One side is the "gambler culture" assembler headed by Paradigm, and the other side is the long-termist faction centered on a16z. But they all have only one goal - to bring more real users to Base and create an active and prosperous on-chain ecosystem.

In contrast to the Friend Tech model is the long-term low-key social protocol Farcaster. After receiving $30 million in financing from VCs such as a16z and 1confirmation, Farcaster was considered the ceiling of decentralized social protocols after its launch. It was not in a hurry to increase its user base at the beginning. It was not until February this year that it launched the frames framework function and was introduced by major institutions or KOLs to gain a large-scale breakthrough. DAU (daily active users) hit a record high, which also brought a short-term trading boom to Base.

At present, Farcaster and its largest front-end protocol Warpcast have become the back garden of the Base ecosystem, and ecological assets represented by DEGEN are also becoming the main hype targets on the Base chain.Although there is still a certain threshold to enter Warpcast, the Base ecosystem and even the Ethereum ecosystem have established their own social circles and culture on it. This seems a bit elitist, but as the project continues to break through the circle and is adopted by a wider range of users, these "elites" seem to be compromising with the gambler culture.

2) Ecological linkage, sharing what is available with OP

The reason why Base is so lucky is that in addition to the VC's passion to create a growth plan,it is also due to its close cooperation with the Ethereum ecosystem. The most representative of these is joining the OP super chain vision.

Last August, Base and Optimism jointly announced a governance and revenue sharing agreement, which stipulates different governance collaboration modes between Optimism and Base in the short and long term, as well as the economic interaction between the two parties. In other words, the two Ethereum Layer 2s that were originally in a competitive relationship have joined hands to build an ecosystem.

In addition to reaching an agreement on the strategic route, Base and OP also have good cooperation in the development of specific ecological projects.Many people think that since Base has so many consumer applications, perhaps no one pays attention to DeFi, the core configuration of most blockchains. But Base, which has top resources, tells you that it can not only build a real consumer application chain, but also do a good job of liquidity management and create excellent DeFi applications, and this also relies on the synergy brought by ecological linkage.

Currently, the liquidity protocol Aerodrome occupies half of Base TVL, a forked protocol deployed on Base by OP head protocol Velodrome Finance. Its native token is AERO, which is distributed to liquidity providers through emissions. After Base was launched at the end of August last year, it attracted nearly $200 million in TVL in just 24 hours, and its liquidity mining income was close to 1000% annualized without compounding.

On January 25, Coinbase added Aerodrome Finance (AERO) to the Token Roadmap.On February 27, Aerodrome announced that it had received an investment from the Base Ecological Fund led by Coinbase Ventures. The specific amount was not disclosed, and the investment method was to purchase Aerodrome's native token AERO. As of the time of writing, AERO briefly broke through $0.83.

From listing on Coinbase to investing, Aerodrome, which is already the liquidity center of Base, has once again taken advantage of the favorable conditions. The price of the currency has continued to rise, with a monthly increase of nearly 700%. As of the time of writing, Aerodrome's TVL has reached 317 million US dollars, transaction fees have reached 14.52 million US dollars, and it has more than 33,000 active users

3) Leaning on Coinbase for shade

But Coinbase is the key to Base becoming a naturally lucky Layer 2.

As mentioned earlier, Coinbase is the best CEX after some projects on Base deploy tokens. As the saying goes, leaning on a big tree for shade,In fact, it is not only from Base to CEX, but also from Coinbase to Base. It is worth paying attention to.

Recently, Coinbase launched a new smart wallet, the core function of which is Magic Spend, which allows users to transfer funds on the chain "in a timely manner". When signing/paying a transaction, users can choose to withdraw funds from their Coinbase account, and the funds will only be withdrawn when the transaction is signed/paid. In addition to having funds in the Coinbase account, users do not need to perform any other operations, download wallet extensions, or bridge.

The smart wallet further breaks through the barriers between the chain and the chain, and Base is undoubtedly the chain that benefits the most. This not only lays the foundation for the Base chain to attract users and funds on a large scale, but also makes the existing consumer applications on Base more widely adopted.

In addition to empowering the Base ecosystem, Coinbase's compliance management also enables Base to reduce risks in the longer term.

On March 19, Brian Armstrong, CEO of Coinbase, wrote that "authorities say that apart from speculation and illegal activities, cryptocurrencies have no practical use. However, 400 million people worldwide (including more than 50 million Americans) have purchased cryptocurrencies, and third-party data shows that illegal activities account for less than 0.5% of trading volume." As the CEO of CEX, Armstrong often speaks out not only for Coinbase, but also for Base, or to correct the name of the crypto market.

02 Which targets are worth paying attention to

With the support of a number of VCs and Coinbase, Base will undoubtedly become the most densely populated place for Alpha in the Ethereum ecosystem. Because of the compliance attributes of Coinbase, Base has the innate attribute of not issuing tokens, and this reason also means that if users want to hype Base targets, they can only focus on Base's ecological projects.

The native token of Aerodrome mentioned above rose from the bottom of $0.04 to $0.8 after listing on Coinbase, an increase of 1900%. There are many projects in the Base ecosystem, and the community is also increasing its expectations for listing on Coinbase.

1) Moonwell (WELL)

Moonwell is an open lending protocol deployed on Base, which was launched simultaneously with the Base mainnet.On February 15, Moonwell launched a tool called "USDC Anywhere" that enables individuals to lend Circle's USDC stablecoin to Moonwell through various Ethereum networks.

The tool supports detecting USDC in user wallets on networks such as Arbitrum, Avalanche, Base, Ethereum, Optimism, and Polygon, and uses Circle's cross-chain protocol to transfer stablecoins to the platform without manually bridging assets, allowing users to use digital assets on Moonwell to send USDC in the Ethereum ecosystem.

As the Base ecosystem heats up, Moonwell's users are also gradually growing. Its native Token WELL is currently priced at $0.032, with a 30-day increase of 333%.

Source: https://flipsidecrypto.xyz

2) Avantis

On February 4, the oracle-based synthetic derivatives protocol Avantis completed its mainnet launch on the Base chain. Its protocol allows users to trade crypto assets and real-world assets using leverage.

In September 2023, Avantis Labs completed a $4 million seed round of financing, led by Pantera Capital, with participation from Founders Fund, Coinbase's Base Ecosystem Fund, and Modular Capital.

Currently, Avantis has not issued a token, and launched a trading volume reward on March 12.

3) Infusion

Infusion is a new AMM protocol on Base, which was launched on Base on March 15 and is a rising star of the Base liquidity protocol. Infusion Protocol consolidates on-chain liquidity through a new time lock component called Timefuse. When liquidity is "time-fused", the pool allocates most of the fees to liquidity providers and locks liquidity for a period of time, thereby incentivizing the long-term stability required by DeFi.

Infusion Protocol is a community-driven project composed of contributors and consultants from various DeFi and infrastructure projects. Core contributors and consultants come from 1inch, Pendle Finance, Harmony, LI.FI and Thorchain.

Infusion has not yet issued a token.

4) BSX

BSX is an emerging DEX on Base, one of the six crypto projects invested in the first round by Coinbase Ventures' Base Ecosystem Fund.It adopts a non-custodial system of "off-chain execution and on-chain settlement" and will also support commodity and foreign exchange transactions in the future. The core members of BSX come from institutions such as Coinbase, Kraken, FalconX and Jump.

BSX is currently in the public testnet stage and will launch the mainnet at the end of the month.

5) Drakula

On March 14, the social application Drakula.app stated on the social platform that it had launched the on-chain short video social application Drakula. Users can get 250 BLOOD points by logging in with Farcaster.You can also earn points by posting and watching short videos, and creators can also get commission income from each token transaction. In addition, Drakula also cooperated with Degen to use DEGEN as the main trading token. Degen also provided Drakula with 10 million DEGEN funding.

In the official introduction of Drakula, the project party stated that this is a social project invested by Paradigm and DragonFly. Considering the previous craze of Friend Tech, perhaps we can look forward to Drakula's performance in the future.

03 Summary

In general, although the increase in on-chain activities has aroused doubts from the community, its ecological development is still attracting much attention.