Author: @lazyvillager1, crypto KOL
Compiled by: zhouzhou, BlockBeats
Editor's note: Since Trump's election victory, COIN and BTC have risen significantly, but the author leans towards ETH and is optimistic about the development of the Base L2 ecosystem. Base is expected to stand out in competition, attracting MEME, consumer dApps, and more on-chain activity. 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 run without relying on traditional token incentives. The activity and TVL of the Base ecosystem continue to grow, proving its great potential in ETH-L2.
The following is the original content (for ease of reading and understanding, the original content has been reorganized):
Fundamental judgment of future development
Since Trump's election victory on November 5, COIN and BTC have surged, rising 70% and 16%, respectively. I personally still lean towards ETH, and based on the theme I wrote in October regarding MEME coins, I believe several favorable factors are converging for the Base L2 ecosystem:
1. 'Win' the competition with other L2s, and even ETH mainnet, to become the preferred ecosystem for accommodating MEME, consumer dApps, and attracting attention
2. In competition with SOL's 'full-featured' integrated casino model, aiming to compete as a top EVM-compatible ecosystem
My core point is simple: ETH remains the key center of the digital asset ecosystem, and all derivative projects to date rely on two core principles to drive network effects:
a. 'Underlying' coins must perform strongly relative to their competitors;
b. 'Underlying' coins must possess 'scarcity'
Therefore, in this competition for attention, in most cases, you are actually choosing a certain coin (even if this is just a simplified way) to embody its advantages. In the coming weeks (this trend has already started), the CT community will discuss why a certain coin may win (for example, SOL's competitors, or MEME coins) or why an application supporting a certain coin may win (such as utility tokens, DeFi governance, etc.).
What I would like to propose is that starting today, a choice with a better risk-adjusted advantage is to bet on an ecosystem without a coin. In my view, the organization of Base creates the strongest potential for its continued adoption, while the double-edged sword is that it may rely on the resurgence of ETH.
However, given that I believe the current potential of ETH is underestimated—if/when the relative value between BTC, ETH, and SOL increases in the coming weeks, there will inevitably need to be a 'reservoir' to accommodate this newly generated and circulating wealth.
I believe Base is likely to win this position
1. The 'tap' interconnectivity on Base has greatly improved this year but has not received enough attention.
2. Base has significant strategic value for COIN and has a concrete balance sheet to support it.
3. Base has gone through multiple tests this year and performed quite well.
I have adjusted my layout accordingly and will detail 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 upcoming tweets.
memecoins and their typically successful environments
The key is that low market cap memecoins usually offer unrelated returns, while on-chain activity tends to heat up before and after major uncertainties.
(The power of resilience: MEME coins and their role in portfolio construction)
Reflect on the strength of major assets and their driving effect on on-chain activity
Based on the above views, I believe that on-chain activity will show very strong performance in the coming weeks.
The performance of major assets supports this trend—buying pressure is mainly driven by spot, and the open contracts (OI) for ETH and BTC have mostly reset to pre-election levels, with the rise in financing rates mainly stemming from the lack of new shorts being established (and the levels that broke through in recent days—the amount of short liquidations has reached $1 billion, the highest this year), rather than the use of excessive leverage.
Therefore, based on the view that there is support within the existing price range, I believe on-chain activity will become a convergence point for off-market funds, new funds, and recycled funds. The capital created in the past week contrasts with the funds from 3-4 weeks before the election. The latter witnessed a significant rise in financing and open contracts, but aside from BTC, other assets find it difficult to genuinely attract what I call 'mercenary funds'.
In the past week, capital flow has not only appeared widely in assets outside of BTC (all selected assets have generally risen globally), even including DOGE—this is a very important indicator that reflects the characteristics of these 'buyers': willing to use leverage, willing to speculate, and trading 24 hours. These buyers are not limited to US trading hours, which is similar to the rise of BTC in October.
In this price environment, we have been under a week—there is a significant misalignment in the market: capital takes time to assess whether these funds are irrational or substantive. During this period, projects able to fluctuate significantly on the margin should produce the most notable re-rating effects.
Base is already 'winning'—even though it has not issued tokens
Base may be one of the most misunderstood ecosystems currently, as its unique construction lacks typical crypto-native investors/KOLs to manage and disseminate information. However, from various indicators, Base is 'winning'. The attention Base attracts compared to its user/wallet/TVL growth may be the most disproportionate among all projects.
Please see the figure below, which captures the attention of elfa ai towards Base; in terms of collective mentions, there have been about 18 mentions on CT in the past 7 days, which is 10 times lower than ARB and roughly equivalent to the mentions of STARKNET, BLAST, and OP.
It is the only ETH-L2 whose TVL has continued to grow throughout the year, even without setting user incentives like other L2s (such as BLAST GOLD). With a TVL of $3 billion, its TVL even surpasses ARB (which hosts the very popular HyperliquidX, which has about $1 billion in TVL).
In October, Base also achieved the highest revenue in its developing ecosystem (this was a month where TRON declined while Base and ETH grew). Currently, Base also has the most independent active wallets and transaction numbers (actual data may need to be treated with caution, but this is the only picture we can draw).
Base evokes memories of SOL from the fourth quarter of last year—a environment that attracts builders when attention is low.
Base disrupts and breaks traditional L1/L2 operational models
Traditional operational models usually look like this:
1. There is a conceptualization of an ecosystem, ideally with unique variants (faster, more reliable, more decentralized, easier to build, more trustless, etc.)
2. Raise funds by almost giving away tokens at zero valuation (usually to companies with the best relationships and resources)
3. Establish connections with dApp developers while building—each blockchain typically seeks a local 'bank', hence there may be some type of lending protocol and trading protocol. Developers are rewarded with token incentives to carry out on-chain development.
4. Attract users through points/token incentive programs, where users deposit/stake stable capital to earn reward incentives.
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—and point to the inflow of users/funds.
6. After the blockchain launch, users are first rewarded through non-lockup tokens; investors and team members must wait by locking up tokens. (But the proportion is much larger)
7. Lending protocols usually establish partnerships with market makers and investors to store and maintain capital on-chain through committed yields.
8. Gradually, the hope is to let organic capital flow in and stay through certain metrics (such as interconnectivity, 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 time, tokens essentially become free expenses (used to pay suppliers). Ideally, the ecosystem supports the sustainable development of the chain through serialized revenue.
This model has matured and is being disrupted, with HyperliquidX being the most typical example of launching without relying on traditional methods and ignoring most of the aforementioned measures.
This year, this method of capital raising has obviously failed at multiple stages, with pain points concentrated on:
· Mining incentive mechanisms are often very unclear; once capital is locked, it becomes 'hostage', allowing the team to disregard consequences and retroactively change terms.
· Investors/team members can stake locked tokens—this means that even if the original locked tokens lack 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 the crypto space is extremely high), so if there is no significant dilution or manipulation of supply, users are very utilitarian; once the rewards are distributed, they usually 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 seized this opportunity through the regulatory scrutiny alleviated by Trump's election victory (i.e., improvement in the policy environment).
In other words, Base does not intend to win through the traditional 'fat tail' approach I mentioned above; what does that mean? The following is an excerpt from Coinbase's Q3 conference call showing how the team views Base:
Base is (this is just part of it):
1. Collaboration testing platform with CIRCLE, along with the development of smart wallets. Coinbase can collect data in real time, comprehensively creating a truly independent 'Eden' ecosystem (i.e.: i. Attract users, ii. Seamlessly guide, iii. Set up smart wallets using a passphrase instead of traditional secret phrases, iv. Provide a 'playground' for speculation)
2. As Coinbase transitions to a subscription-based service model (such as through 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 collecting 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 the tokens, Base is able to take a longer-term perspective to 'win'. In other words, the only way Base will make money in the future (since COIN already exists as equity) is by having applications and users pay 'rent'.
The most important point is:
The biggest difference between Base and other blockchain projects is that it is supported by a corporation with a real balance sheet. Other ecosystems, at least at some point, have been supported by counterparties with financial incentives seeking returns. And these counterparties themselves do not possess unlimited capital.
Once returns are obtained, these supports (whether financial or community-based) will withdraw. Therefore, other ecosystems have a lifecycle, or say a time limit, where new support funds will eventually stop coming in, and products will have to cope alone. You will see some ecosystems starting to struggle in the next 12 to 16 months (for example: shutting down platforms).
However, the situation of Base <> Coinbase may not be the same. If Base stops receiving support, it means an important part of Coinbase has failed (thus also meaning the failure of the overall strategic vision). Since Coinbase itself generates traffic and revenue through 'where the price is', we can speculate that what Base might receive is a kind of 'evergreen' funding support.
Base has proven its resilience
Base initially emerged as the foundational platform for Friend Tech (at that time basically a shell with limited functional options). Since then, it has gone through several important stages:
1. Application migration, such as timedotfun. Please check Jesse Pollak's response: link. This is a very positive attitude and spirit of support, understanding that each chain has its unique value.
2. The only project that successfully incubated another L2—degentokenBase. The attention DEGEN gained over a weekend earlier this year quickly pushed its valuation to $600 million, comparable to apecoin's self-building and 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 boom in October this year.
In my view, no other ecosystem can withstand such a level of attention and drive such a scale of capital inflow. Therefore, the question is: if other ecosystems can do this, why haven't they? Thus, Base clearly demonstrates 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 rather a snapshot of the extremely diverse creative projects established on Base since its last iteration, especially during the Friend Tech era (when most of these applications had not yet officially launched).
Buy at a moment that is considered a value bottom
Profiting on Base is essentially betting on the success of the entire ecosystem, even acting as an agent for Coinbase. No single token can concentrate demand, therefore, true network effects can be realized on an overall basis.
Currently, most tokens on Base are at cyclical lows—and I will not provide any token names or recommendations, but you can see some chart examples, which I have randomly selected.
Therefore, I believe Base is the most attractive capital investment position because you are essentially betting on two aspects— and this has nothing to do with leverage or savvy token choices:
1. ETH stabilizes and finds a bottom that can provide on-chain demand (which I have previously discussed),
2. ETH winners hope to recoup profits somewhere.
Given the lack of organic options on the main network (which have been moved to L2) and the sluggish demand in the NFT market this year, I bet that this attention and capital will concentrate on Base.
In summary— as long as ETH remains hot, Base should also maintain its heat.
