Written by: @lazyvillager1, crypto KOL
Compiled by: zhouzhou, BlockBeats
Editor's note: Since Trump's 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 activities. ETH remains the core of digital assets, while Base, as Coinbase's on-chain leverage, benefits from Coinbase's resources and support, possesses scarcity and innovation, and can attract 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 great potential in ETH-L2.
The following is the original content (for ease of reading 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 way, rising 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' the competition with other L2s, and even ETH mainnet, to become the preferred ecosystem for accommodating Meme, consumer dApps, and attracting attention
2. Competing alongside SOL's 'full-featured' integrated casino model as a leading EVM-compatible ecosystem
My core point is simple: ETH remains the key center of the digital asset ecosystem; so far, all derivative projects rely on two core principles to drive network effects:
a. The 'underlying' cryptocurrency must perform strongly relative to its competitors;
b. The 'underlying' cryptocurrency must have 'scarcity';
Therefore, in this competition for attention, in most cases, you are actually choosing a specific cryptocurrency (even if it is merely a simplified approach) to embody its advantages. In the coming weeks (this trend has already begun), the CT community will discuss why a specific cryptocurrency may win (such as SOL's competitors, or Meme coins) or why a specific application supporting a cryptocurrency may win (such as utility tokens, DeFi governance, etc.).
What I want to propose is that starting today, a more risk-adjusted choice is to bet on ecosystems without a cryptocurrency. In my view, the organization of Base has created the strongest potential for its continued adoption, but the double-edged sword is that it may rely on the resurgence of ETH.
However, given that I believe ETH's potential is currently underestimated - if/when the relative value among BTC, ETH, and SOL increases in the coming weeks, there will inevitably need to be a 'reservoir' to accommodate this newly generated and recycled wealth.
I believe Base is likely to win this position
1. The 'faucet' interconnectivity on Base has significantly improved this year but has not received enough attention.
2. Base holds significant strategic value for COIN and has a real balance sheet to provide support.
3. Base has undergone multiple tests this year and performed quite well.
I have adjusted my layout accordingly 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 upcoming tweets.
Memecoins and their typically successful environments
The key is that low market cap Memecoins often provide unrelated returns, while on-chain activities typically heat up before and after major uncertainties.
Reflecting on the strength of major assets and their driving force for on-chain activities
Based on the above view, I believe that on-chain activities will show very strong performance in the coming weeks.
The performance of major assets supports this trend - buying pressure is primarily 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 a lack of new shorts being established (and a level that broke in recent days - the amount of short squeezes has reached $1 billion, the highest this year), rather than excessive leverage usage.
Therefore, based on the perspective that there is support at the existing price range, I believe on-chain activities will become a gathering place for off-market funds, new funds, and recycled funds. The funds created in the past week contrast with the funds from 3-4 weeks before the election. The latter witnessed a significant increase in financing and open contracts, but apart from BTC, other assets struggled to attract what I call 'mercenary funds'.
In the past week, capital flows have not only widely appeared in assets outside of BTC (all selected assets have generally risen globally), including DOGE - which is a very important indicator reflecting the characteristics of these 'buyers': willing to use leverage, willing to speculate, and trading 24 hours. These buyers are not limited by US trading hours, similar to BTC's rise in October.
We are still less than a week into this price environment - the market's dislocation phenomenon is significant: capital needs time to assess whether these funds are irrational or substantive. During this period, projects that can fluctuate significantly on the margin should produce the most significant 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 compared to its user/wallet/TVL growth is perhaps the most disproportionate among all projects.
See the image below, which captures elfa ai's attention to Base, with about 18 mentions in the past 7 days on CT, which is ten times lower than ARB and roughly equivalent to the mentions of STARKNET, BLAST, and OP.
It is the only ETH-L2 whose TVL has consistently grown throughout the year, despite not offering user incentives like other L2s (e.g., 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 recorded the highest revenue in the developing ecosystem (this was a month when 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 taken cautiously, but this is the only picture we can draw).
Base reminds one of SOL in the fourth quarter of last year - an environment that attracted builders when attention was low.
Base disrupts and breaks the traditional L1/L2 operating model
Traditional operating models typically look like this:
1. There is a conception of 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 seeks a local 'bank', so there may be some type of lending protocol and trading protocol. Developers are rewarded with tokens to facilitate on-chain development.
4. Attract users through points/token incentive programs, allowing users to deposit/stake stable capital to earn yield rewards.
5. Users/new TVL provides 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 - pointing to the influx of users/funds.
6. After the blockchain launch, users first receive rewards through non-locked tokens; while investors and team members must wait through locked tokens. (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 yields.
8. Gradually, the hope is to allow organic capital to flow in and retain through certain metrics (such as interoperability, usability, ecosystem richness, etc.) - thereby reducing or eliminating the need for diluted capital.
9. The founding team pays early supporters and employees with tokens - at this time, the tokens essentially become free expenditures (used to pay vendors). Ideally, the ecosystem supports the sustainable development of the chain 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 above measures.
This year, this method of raising capital has clearly failed at multiple levels, with pain points concentrated on:
· Mining incentive mechanisms are usually very unclear; once capital is locked, it becomes 'hostage', allowing teams to disregard consequences and retroactively change terms.
· Investors/team members can stake locked tokens - this allows, even if the original locked tokens lack liquidity, staking rewards to 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 due to the regulatory scrutiny relief brought by Trump's victory (i.e., the improvement of 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? Below is an excerpt from Coinbase's Q3 earnings call that shows how the team views Base:
Base is (the following is just a partial content):
1. Testing the synergy platform with CIRCLE and the development of smart wallets. Coinbase can collect data in real-time, fully creating a truly independent 'Eden' ecosystem (i.e., i. Attract users, ii. Seamlessly guide, iii. Set up smart wallets using access keys 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 can take a longer-term view to 'win'. In other words, the only way Base can make money in the future (since COIN already exists as equity) is by charging applications and users 'rent'.
The most important point is:
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, has been supported by counterparties with financial incentives seeking returns. And these counterparties do not have infinite capital themselves.
Once rewards are gained, these supports (whether financial or community) withdraw. Therefore, other ecosystems have a lifecycle, or a time limit; new support funds will eventually stop flowing in, and products will have to fend for themselves. You will see some ecosystems starting to struggle over the next 12 to 16 months (for example: shutting down platforms).
However, the situation with Base <> Coinbase may not be the same. 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 receive a form of 'evergreen' funding support.
Base has proven its resilience
Base initially emerged as the foundational platform for Friend Tech (which was basically a shell with limited functional options). Since then, it has gone through several important stages:
1. Application migration, such as timedotfun. Please check jessepollak's response: link. This is a very positive attitude and supportive spirit, realizing that each chain has its unique value.
2. The only project that has successfully incubated another L2 - degentokenBase. DEGEN's attention gained during 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 surged 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 done it? Hence, 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 an endorsement of any names mentioned here, but merely 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 been officially launched).
Buying at a moment considered a value bottom
Profiting on Base essentially involves betting on the success of the entire ecosystem, even as an agent of Coinbase. No single token can concentrate demand, so real network effects can be realized overall.
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 selected randomly.
Therefore, I believe Base is the most attractive capital investment position because you are essentially betting on two aspects - and this is independent of leverage or savvy token selection:
1. ETH stabilizes and finds a bottom that can provide on-chain demand (which I have discussed earlier),
2. ETH winners hope to recoup profits somewhere.
Considering the lack of organic options on the main network (these options have shifted to L2) and the sluggish demand in the NFT market this year, I bet that these concerns and funds will concentrate on Base.
In summary - as long as ETH remains hot, Base should also stay hot.
