In an article published by Bloomberg News on April 2, 2024, the explosive growth of Coinbase’s Base blockchain has been attributed to the memecoin frenzy that has taken the platform by storm. Base, designed to be the cornerstone of Coinbase’s expansion into decentralized finance (DeFi) and non-fungible tokens (NFTs), has seen an influx of activity, with the total value of cryptocurrencies sent to the blockchain surpassing $1.24 billion, according to data from DeFiLlama.
Source: DefiLlama
Bloomberg News reports that the driving force behind the surge in activity on Base is the popularity of memecoins, the highly speculative tokens that are not typically available on Coinbase’s main exchange. It mentions that among the most actively traded tokens on Base are ANIME, a self-described “no utility” token focused on art, and DEGEN, a reference to the nickname given to traders who embrace the riskiest tokens in the market. Analysis by Michael Silberling of OP Labs suggest that the wallets paying the highest Base transaction fees likely belong to trading bots capitalizing on the memecoin craze.
So, the rush seems to be from more automated actors, targeting memecoins / likely arbitrage.This group is far less fee sensitive than normal users (i.e. you'll pay as much as you have to gain).So fees stayed up, because there was still plenty of demand at those rising prices. pic.twitter.com/heqgrbLyUQ
— Michael Silberling (@MSilb7) March 21, 2024
The article highlights the irony of the situation, as Coinbase had initially promoted Base as a “bridge” connecting its users to the wider crypto ecosystem, including DeFi, blockchain-based games, and NFTs. However, the memecoin frenzy underscores the reality that online casinos remain the most significant use case for cryptocurrencies.
Anil Lulla, co-founder of crypto research firm Delphi Digital, commented on the attention and credibility Base has garnered due to its association with Coinbase and the potential for distribution. Lulla also expressed concern that becoming a casino should not be the sole focus and goal of these blockchain platforms.
Bloomberg News attributes the recent growth in activity on Base to the Dencun software upgrade on Ethereum, which took place in March. The upgrade has significantly reduced the costs of trading on Layer 2 (L2) blockchains like Base, making them competitive with other chains such as Solana. According to a Coinbase spokesperson, Base was prepared for the Dencun upgrade from the outset, resulting in a decrease in average fees from approximately 10 cents to 1 cent or less.
The spokesperson emphasized Base’s mission to onboard the next billion users to the blockchain, stating that the company is encouraged by the recent surge in activity. Coinbase’s focus remains on making blockchain technology accessible to people worldwide, in part by enabling cheaper on-chain transactions.
While some may criticize Coinbase for the memecoin frenzy on Base, Ryan Watkins, co-founder of Syncracy Capital, points out that the exchange has no control over what is launched on the platform. Watkins estimated that Base is already generating around $2 million in daily fees and suggested that if the platform can attract more applications beyond memecoins, it would be a significant win for Coinbase if Base becomes one of the most widely used blockchains.
Trend is admittedly early and we all know how volatile execution fees can be.Still the revenue is already substantial with barely any activity in the grand scheme of things.
— Ryan Watkins (@RyanWatkins_) March 28, 2024
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