Author: @lazyvillager1, encrypted Kol
Compiled by: zhouzhou, BlockBeats
Editor's note: Since Trump's victory, COIN and BTC have risen significantly, but the author leans more towards ETH and is optimistic about the development of the Base L2 ecosystem. Base is expected to stand out in the competition, attracting MEME, consumer dApps, and more on-chain activities. ETH remains the core of digital assets, while Base, as Coinbase's on-chain leverage, benefits from Coinbase's resources and support, possessing scarcity and innovation, capable of attracting users in the long term without relying on traditional token incentives. The activity level of the Base ecosystem and the continuous growth of TVL prove its immense potential in ETH-L2.
The following is the original content (for readability and understanding, the original content has been reorganized):
Fundamental judgments for future development.
Since Trump’s victory on November 5, COIN and BTC have led the rise, increasing by 70% and 16% respectively. Personally, I still lean towards ETH, and based on the theme I wrote in October about MEME coins, I believe multiple advantageous factors are converging for the Base L2 ecosystem.
1. 'Winning' against other L2s and even ETH mainnet to become the preferred ecosystem for MEME, consumer dApps, and attracting attention.
2. Competing with SOL's 'fully functional' integrated casino model as a top EVM-compatible ecosystem.
My core point is simple, ETH remains the key center of the digital asset ecosystem, and so far all derivative projects rely on two core principles to drive network effects:
a. 'Underlying' coins must have strong performance relative to their competitors;
b. 'Underlying' coins must possess 'scarcity'.
Therefore, in this competition for attention, most of the time you are actually choosing a specific coin (even if this is just a simplified way) to embody its advantages. In the coming weeks (this trend has already begun), the CT community will discuss why a particular coin might win (e.g., a competitor to SOL, or MEME coins) or why an application supporting a coin might succeed (such as utility tokens, DeFi governance, etc.).
And what I want to propose is that from today, a more risk-adjusted option is to bet on an ecosystem without a coin. In my view, the way Base is organized creates the strongest potential for its continued adoption, while the double-edged sword is that it may rely on ETH's resurgence.
However, given that I believe ETH's potential is currently underestimated - if/when the relative values between BTC, ETH, and SOL rise in the coming weeks, there will inevitably need to be a 'reservoir' to accommodate this newly created and circulating wealth.
I believe Base is poised to win this position.
1. The 'faucet' interoperability on Base has greatly improved this year but has not received enough attention.
2. Base has significant strategic value for COIN and possesses a real asset balance sheet to provide support.
3. Base has undergone multiple tests this year and performed quite well.
I have accordingly adjusted my layout and will discuss my logic and the risks and mitigations involved in redirecting on-chain traffic to Base, which I believe is the most vibrant 'playground', in the following tweets.
memecoin and its typically successful environment.
The key is that low market cap memecoins usually provide unrelated returns, while on-chain activities tend to heat up before and after major uncertainties.
(The Power of Resilience: The role of MEME coins in portfolio building)
Reflecting on the strength of major assets and their driving force on on-chain activity.
Based on the above views, I believe that in the next few weeks, on-chain activity will show very strong performance.
The performance of major assets supports this trend - buying pressure is mainly driven by spot trading, and the open interest (OI) in ETH and BTC has mostly reset to pre-election levels, with the rise in financing rates mainly stemming from a lack of new short positions being established (and the levels that broke through in recent days - the amount of short liquidation has reached $1 billion, the highest this year), rather than excessive leverage usage.
Therefore, based on the existing price range having support, I believe on-chain activity will become a gathering place for off-market funds, new funds, and recycling funds. The funds created in the past week contrast with those from 3-4 weeks before the election. The latter witnessed a significant rise in financing and open interest, but aside from BTC, other assets find it hard to truly attract what I call 'mercenary capital'.
In the past week, capital flows have not only broadly appeared in assets outside of BTC (all selected assets have generally risen globally) but even included DOGE - which is a very important indicator reflecting the characteristics of these 'buyers': willing to use leverage, willing to speculate, and trading 24 hours a day. These buyers are not restricted by US trading hours, similar to the rise of BTC in October.
We are not even a week into this price environment - the market's misalignment phenomenon is significant: capital needs time to assess whether this funding is irrational or substantive. During this period, projects that can significantly fluctuate on the margins should produce the most pronounced re-rating effects.
Base is already 'winning' - even though it has not issued tokens.
Base may be one of the most misunderstood ecosystems currently. Due to its unique construction, Base lacks typical crypto-native investors/KOLs to manage and disseminate information. However, from various metrics, Base is 'winning'. The attention Base attracts relative to its user/wallet/TVL growth may be the most disproportionate of all projects right now.
Please see the chart below, which captures elfa ai's attention towards Base. In terms of collective mentions, there were about 18 mentions on CT in the past 7 days, which is 10 times lower than ARB and roughly equivalent to STARKNET, BLAST, and OP's mention counts.
It is the only ETH-L2 with a continuously growing TVL throughout the year, even without user incentives set up like other L2s (such as BLAST GOLD). With a TVL of $3 billion, its TVL even surpassed ARB (which hosts the very popular HyperliquidX with about $1 billion in TVL).
In October, Base recorded the highest revenue in a developing ecosystem (a month where TRON declined while Base and ETH grew). Currently, Base also has the most independent active wallets and transaction counts (actual data may need to be taken cautiously, but this is the only picture we can draw).
Base evokes memories of SOL in the fourth quarter last year - an environment that attracted builders when attention was low.
Base disrupts and breaks the traditional L1/L2 operating model.
Traditional operating models usually go as follows:
1. A concept for an ecosystem, ideally with unique variants (faster, more reliable, more decentralized, easier to build, more trustless, etc.).
2. Raising funds by almost giving away tokens at zero valuation (usually to companies with the best relationships and resources).
3. While building, establish connections with dApp developers - each blockchain typically looks for a local 'bank', which may involve some type of lending protocol and trading protocol. Developers are rewarded with tokens to facilitate on-chain development.
4. Attracting users through points/token incentive programs, where users deposit/stake stable capital to earn yield rewards.
5. Users/new TVL provide a foundation for the founding team to raise funds from a new round of investors and conduct a second round of financing at a higher valuation - while indicating the inflow of users/funds.
6. After the blockchain launches, users are first rewarded through non-locked tokens; while investors and team members need to lock tokens and wait. (But the ratio must be much larger.)
7. Lending protocols typically establish partnerships with market makers and investors to store and maintain on-chain capital through committed returns.
8. Gradually, the hope is to attract and retain organic capital through certain indicators (such as interoperability, ease of use, richness of the ecosystem, etc.) - thus reducing or eliminating the need for diluted capital.
9. The founding team pays early supporters and employees with tokens - at this stage, tokens effectively become free expenses (used to pay vendors). Ideally, the ecosystem supports the chain's sustainable development through serialized revenue.
This model has matured and is being disrupted, with HyperliquidX becoming the most typical example of launching without relying on traditional methods and ignoring most of the measures above.
This year, this method of capital raising has clearly failed at multiple levels, with pain points concentrated on:
· The mining incentive mechanism is usually very unclear; once capital is locked up, it becomes 'hostage', which allows the team to disregard consequences and retroactively change the terms.
· Investors/team members can stake locked tokens - which means that even if the original locked tokens have no liquidity, staking rewards can still be sold at TGE (token generation event), severely diluting retail investors.
· New capital is very expensive (the opportunity cost in crypto is extremely high), so if there is no significant dilution or manipulation of supply, users are very pragmatic, and once the rewards are distributed, they often choose to leave.
Why is Base more likely to achieve greater success?
Base is not just an L2, it is Coinbase's on-chain leverage - Coinbase has gained this opportunity by alleviating the regulatory scrutiny brought by Trump's victory (i.e., an improvement in the policy environment).
In other words, Base does not intend to win through the traditional 'fat tail' method I mentioned above. What does that mean? Here are excerpts from Coinbase's third-quarter conference call, showing how the team views Base:
Base is (the following is just a part of the content):
1. Collaborative testing platform with CIRCLE, as well as the development of smart wallets. Coinbase can collect data in real-time to comprehensively create a truly independent 'Eden' ecosystem (i.e., i. Attract users, ii. Seamlessly guide, iii. Set up smart wallets using passkeys instead of traditional secret phrases, iv. Provide a 'playground' for speculation).
2. As Coinbase transitions to a recurring service-oriented business (e.g., through subscriptions like Coinbase One), rather than relying on volatile trading fees, the team's vision is to attract the most retail users in the long term, rather than charging as many fees as possible in the short term.
The latter is a microcosm of the extractive value capture model followed by every blockchain - due to the creation of tokens and their inherent nature. By separating the ecosystem from tokens, Base can adopt a longer-term view to 'win'. In other words, the only way Base will make money in the future (since COIN already exists as equity) is by making applications and users pay 'rent'.
Most importantly:
The biggest difference between Base and other blockchain projects is that it is supported by a company with a real asset balance sheet. Any other ecosystem, at least at some point, is supported by counterparties with financial incentives seeking returns. And these counterparties themselves do not possess unlimited capital.
Once returns are achieved, this support (whether financial or community-based) will withdraw. Therefore, other ecosystems have a lifecycle, or a time limit, and new supporting capital will eventually stop flowing in, leaving products to fend for themselves. You will see some ecosystems starting to struggle in the next 12 to 16 months (e.g., shutting down platforms).
However, the situation of Base > Coinbase may not be the case. If Base stops receiving support, it means a significant part of Coinbase has failed (which also means a failure of the overall strategic vision). Since Coinbase itself generates traffic and revenue through 'where the price is', we can speculate that Base may be receiving a form of 'evergreen' funding support.
Base has proven its resilience.
Base initially emerged as the foundational platform for Friend Tech (at that time essentially a shell with limited functional options). Since then, it has undergone several important phases:
1. Application migration, such as timedotfun. Please see jessepollak's response: link. This is a very positive attitude and supportive spirit, understanding that each chain has its unique value.
2. The only project that has successfully incubated another L2 - degentokenBase. DEGEN gained attention over a weekend earlier this year, rapidly boosting its valuation to $600 million, comparable to apecoin's self-built rise this month.
3. The only chain that can accommodate AI-related applications like SOLANA - VIRTUAL, which went from $0 to $500 million during the AI and memecoin craze in October this year.
In my view, no other ecosystem can withstand such a level of attention and drive such scale of capital inflow. Therefore, the question is: if other ecosystems can do this, why haven't they? Thus, Base clearly showcases the ability to support novel and interesting projects/applications, far beyond simple yield cycles or lending applications.
Here are some other examples:
warpcast
BlueSocialApp
OnchainKit
liberoverse
Sofamon xyz
BetBase xyz
dreamcoinswow
ethxy
This is not an exhaustive list, nor is it an endorsement of any names mentioned here, but it merely showcases a snapshot of the highly diverse creative projects built on Base since its last iteration, especially during the Friend Tech era (when most of these applications had not yet launched officially).
Buying at a moment considered to be the value bottom.
Profiting on Base is essentially betting on the success of the entire ecosystem, even as a proxy for Coinbase. No single token can concentrate demand, thus true network effects can be realized as a whole.
Currently, most tokens on Base are at cycle lows - and I will not provide any token names or recommendations, but some chart examples can be seen, which I randomly selected.
Therefore, I believe Base is the most attractive capital investment position because you are essentially betting on two fronts - and this is not related to leverage or savvy token choices:
1. ETH stabilizes and finds a bottom that can provide on-chain demand (which I have discussed before).
2. ETH winners hope to recover profits somewhere.
Given the lack of organic options on the main network (these options have been transferred to L2) and the weak demand in the NFT market this year, I bet that this attention and capital will focus on Base.
In summary - as long as ETH remains hot, Base should remain hot.
