Introduction
The Base chain is a project incubated by Coinbase, aiming to become part of the Optimism superchain, and its launch is part of Coinbase's long-term planning. The Base chain is developing rapidly; according to Defilama data, its TVL has now surpassed that of established Layer 2 projects like Arbitrum and Optimism, making it the current number one Layer 2 project in terms of TVL.
Introduction to the Base chain
The Base chain is a Layer 2 solution built on the standardized, shared, open-source OP Stack development tool stack supported by Optimism. Optimistic Rollups are more compatible with Ethereum, allowing many decentralized applications (dApps) to migrate directly, while having lower computational complexity, making it more suitable for executing general smart contracts and complex computational tasks. However, there are still some areas that need improvement when using Optimistic Rollups, such as further enhancing decentralization and optimizing on-chain governance structure, as users have a high demand for the availability of ordering services. Through continuous technological iterations, these shortcomings will eventually be addressed.
To increase the degree of decentralization, Optimism Rollup plans to enhance existing on-chain governance by adopting the OP Stack, an open-source Layer 2 architecture tool stack, thereby introducing multiple ordering nodes and reducing reliance on a single ordering service. Currently, the ultimate goal of the OP Stack maintained by Optimism Collective is to build a superchain that can easily integrate different Layer 2s, achieving an interoperable integration system. To this end, OP Stack provides a series of standardized modules and interfaces, making the process of building Layer 2 programs simpler and more efficient. OP Stack is divided into six layers: data availability layer, ordering layer, derivative layer, execution layer, settlement layer, and governance layer. Each layer has customizable open-source modules, allowing developers to design customized blockchain networks based on specific use cases.
Base, as the second core development team, joined the development of OP Stack and Superchain, working together with OP Labs and Optimism Collective to enhance the activity of the superchain, increase its value, and promote the growth of the developer ecosystem. Base aims to build a highly integrated chain network, providing users with a seamless experience, allowing protocols built on Base to smoothly integrate into the ultimate superchain and interact with users across multiple chains. Close cooperation with Optimism Collective on its transformation projects will assist developers in more conveniently structuring new Layer 2 and Rollups, and distributing their applications throughout the superchain.
Data on the Base chain
TVL
Figure 1 TVL of Base (Data Source: https://defillama.com/chain/Base)
According to data statistics from Figure 1, the TVL of the Base chain experienced a massive increase after September, rising from $1.419 billion to $2.388 billion, an increase of 68.28%. TVL is a critical analysis factor for a public chain, and among all ETH-Layer 2s, Base's TVL growth ranks first, indicating that Base is developing very rapidly in recent times.
Number of on-chain addresses
Figure 2 Number of addresses on the Base chain (Data Source: https://dune.com/watermeloncrypto/base)
From Figure 2, we can see that the number of addresses on the Base chain experienced a massive increase after August 2024, rising from 24.55 million to the current 74.88 million, an increase of 205.01%. We can observe that the number of users on the Base chain has more than doubled in the past three months, indicating that users are very optimistic about the development of Base and that the Base chain has created a certain wealth effect, thus attracting a considerable number of users to participate in activities on the Base chain.
By combining the growth value of TVL on the Base chain with the number of addresses on the Base chain, we can observe that the average new funds added per household on the Base chain is only $1.97, generally belonging to small amount users. After June, the Base chain successfully attracted a large number of users by leveraging its social characteristics and the popularity of MEME culture. Therefore, we can conclude that the propagation effect of Meme culture and enhanced social interaction have made the Base chain a popular social platform, further driving user growth.
Revenue of the Base chain
Figure 3 Income on the Base chain (Data Source: https://dune.com/watermeloncrypto/base)
From the income chart of the Base chain, we can see that the total income of the Base chain in March 2024 is $19.78 million, and the current income is $76.55 million. Thus, we can calculate that the income on the Base chain has increased by 287% from March to October, with an average monthly increase of 41%. This indicates that as the number of users and activities on the chain increases, Base's income has maintained a relatively high growth rate.
Weekly transaction volume
Figure 4 Weekly transaction volume on the Base chain (Data Source: https://dune.com/watermeloncrypto/base)
From the chart of weekly transaction volume on the Base chain, we can see that the weekly transaction volume began to grow continuously in May 2024, starting at $13.45 million in May 2024 and now reaching $47.06 million. We can calculate that the weekly transaction volume on the Base chain has increased by a total of 249% from May to October, with an average monthly increase of 49%, indicating that the transaction volume on the Base chain has consistently maintained rapid and sustained growth.
On-chain performance
Figure 5 Average daily transaction volume per second on-chain (Data Source: https://l2beat.com/scaling/activity)
From Figure 5, we can see that the TPS of Base is 66.28, outperforming other chains, making it the best-performing in the entire Ethereum ecosystem.
Weekly active address count
Figure 6 Weekly active addresses on the Base chain (Data Source: https://dune.com/watermeloncrypto/base)
From Figure 6, we can see that the weekly active users on the Base chain have maintained a good growth momentum. For a public chain, the increase in active users on-chain is a key factor in evaluating whether a chain is developing healthily.
In summary, we can determine from the above data that the Base ecosystem is currently in a vigorous upward development trend. The two most crucial factors in assessing whether an ecosystem is healthy and sustainably developing are funds and traffic. In these two areas, the Base chain outperforms all ETH-Layer 2s. The funds aspect is reflected in TVL, trading volume, and on-chain revenue, all of which show a rapidly upward trend in the Base chain, with an average monthly growth rate exceeding 40%, indicating that a large amount of funds is continuously entering the Base ecosystem. Analyzing from the perspective of traffic, it is mainly reflected in the number of on-chain addresses and weekly active addresses. In these two aspects, we can clearly see from the charts that the number of users and active users on the Base chain is continuously increasing. Coupled with the excellent on-chain performance of the Base chain, it is poised for very good development in the ETH-Layer 2 track.
Circle (USDC) support for Base
Figure 7 Number of stablecoins on the Base chain (Data Source: https://defillama.com/chain/Base?stables=truetvl=falseinflows=false)
From Figure 7, we can see that the stablecoins on the Base chain have been in a rapid growth trend since March of this year, with stablecoins on the Base chain reaching $319 million in March 2024, and the current weekly transaction volume being $3.771 billion. We can calculate that the number of stablecoins on the Base chain has increased by a total of 1082.13% from March to October, with an average monthly increase of 216.42%, indicating that the number of stablecoins on the Base chain has consistently maintained rapid and sustained growth.
Although the overall number of stablecoins on the Base chain is increasing, including stablecoins like USDT and USDC, the majority of users who use USDC are American users, so we can consider the increment of USDC as the increment of funds from American users. Furthermore, this year, the U.S. Securities and Exchange Commission (SEC) has successively approved the spot ETFs for BTC and ETH, and various asset management institutions and listed companies in the U.S. have actively purchased BTC, indicating that the current focus of the crypto market has shifted to the U.S. market. Since the Base chain mainly relies on the support of Coinbase, which is the first listed cryptocurrency exchange in the U.S., we will focus on the support of USDC for the Base chain.
First, in September 2023, Circle's official announcement supported the Base chain, issuing USDC on the Base chain. USDC is now natively available on the Base network, which means users and developers can use USDC without bridging, greatly simplifying operations and enhancing efficiency. Circle accounts and Circle API have also fully supported USDC on Base, making access to USDC liquidity more convenient. Moreover, Circle has developed the CCTP, a permissionless on-chain tool that enables secure USDC transfers across different blockchains. Through CCTP, USDC can be natively burned and minted on the Base chain, providing greater convenience and accessibility for platforms like ChainPort.
Secondly, Coinbase partnered with Stripe to bring USDC to the Base platform, enabling faster and cheaper cross-border transfers and quick conversion from dollars to cryptocurrency. This not only improves transaction speed and reduces costs but also further promotes the practicality of cryptocurrencies. This includes:
Stripe adds USDC to its cryptocurrency payment products: Stripe has integrated USDC into its cryptocurrency payment system, allowing the Stripe platform to send remittances to over 150 countries/regions faster and cheaper.
Adding USDC on Base as a fiat currency entry point to cryptocurrency: Stripe has added USDC on Base to its fiat to cryptocurrency entry point, enabling U.S. customers to convert fiat currency to cryptocurrency faster than ever before.
Coinbase adds Stripe's fiat-to-cryptocurrency purchasing entry in its wallet: Coinbase has integrated Stripe's fiat-to-cryptocurrency entry into its wallet, allowing users to purchase cryptocurrency instantly using credit cards and Apple Pay.
The collaboration between Coinbase and Stripe primarily revolves around integrating the USDC stablecoin into the Base chain and promoting global adoption of cryptocurrency through this cooperation. By adding support for USDC on the Base chain to Stripe's cryptocurrency payment functionality, it facilitates faster international fund transfers. Coinbase integrates Stripe's fiat-to-cryptocurrency entry into Coinbase Wallet, further simplifying the user's purchasing process. The partnership between Coinbase and Stripe is beneficial for expanding the global acceptance and use of USDC. Additionally, USDC plays an important role in the Base chain; as of October 2024, the transaction amount of USDC on the Base chain DEX has exceeded $20 billion, making significant contributions to the prosperity of the Base chain ecosystem.
Figure 8 Transaction amount of USDC on the Base chain DEX (Data Source: https://dune.com/obchakevich/usdc-base)
From Figure 8, we can see that in March of this year, the transaction volume of USDC on the Base chain DEX showed a rapid and sustained growth trend, with an increase rate of 5275%, which is quite remarkable.
Figure 9 Number of USDC holders on the Base chain (Data Source: https://dune.com/obchakevich/usdc-base)
From Figure 9, we can see that USDC is becoming increasingly popular on the Base chain, with more and more users choosing to use USDC as the stablecoin on the chain.
In summary, Circle has engaged in comprehensive collaboration with Base, significantly simplifying user operation processes through the issuance of native USDC and the implementation of the CCTP cross-chain transfer protocol; simultaneously, Coinbase's strategic partnership with Stripe further expands the application scenarios of USDC in the Base ecosystem, including supporting cross-border payments for over 150 countries, convenient fiat entry points, and diverse payment methods (such as credit cards and Apple Pay). These initiatives have not only driven the DEX trading volume of USDC on the Base chain to exceed $20 billion but, more importantly, built a bridge connecting traditional finance and the crypto economy, laying a solid foundation for the future development of digital payments.
Ecological situation of the Base chain
According to data from the Base chain's official website, we can see that the ecological environment of the Base chain is very comprehensive, including Wallet, Bridge, DeFi, Gaming, Onramp, Dao, Infra, Social, Security, NFT, Other, X-chain, and X-cross multiple tracks, totaling 323 Dapps.
Figure 10 Ecological projects on the Base chain (Data Source: https://www.base.org/ecosystem?utm_source=dotorgutm_medium=nav)
View from the perspective of whether a public chain is developing healthily, we mainly observe the ecology of a public chain from the angles of funds and traffic. From the funds perspective, we can analyze from the traditional DeFi angle; in terms of traffic, we can see from the market trends in 2024 that users' main focus is on the Meme coin track and the SocialFi track. The Meme coin track is filled with wealth creation effects to attract widespread participation from on-chain users, while the SocialFi track can absorb and convert traffic users from the traditional Web 2.
DeFi track
In the DeFi track, the most direct observation tool is TVL, and we can analyze and introduce projects in the DeFi track by observing the TVL on the Base chain.
Figure 11 TVL data on the Base chain (Data Source: https://defillama.com/chain/Base)
From Figure 11, we can see that the TVL of DeFi projects on the Base chain exceeds $200 million, including Aerodrome, Uniswap, and Morpho Blue, with Uniswap being a well-established DEX in the Ethereum ecosystem, which we won't elaborate on here.
Aerodrome
Aerodrome was launched in 2023 as the first DEX on the Base chain, adopting the Ve(3, 3) model. Its Ve(3, 3) mechanism is based on Curve's veCRV model and OlympusDAO's 3 v3 mechanism, optimized to suit ecological development. This mechanism offers a unique reward model, promoting stable development of the ecosystem by incentivizing long-term holders and active governance users. Aerodrome also helps users optimize asset management and participate in liquidity mining activities through efficient liquidity management tools. After becoming the primary AMM on the Base chain, it provides users with a more efficient and low-cost trading experience. The innovative incentive mechanism encourages more users to participate in governance and liquidity mining. Under this mechanism, participants can not only earn protocol trading fees but also have the opportunity to receive additional voting incentive rewards proportional to the amount of locked AERO Tokens. This design not only encourages active participation from liquidity providers but also grants governance power to the community, making the entire ecosystem healthier and more sustainable. The uniqueness of this incentive and governance strategy lies in its comprehensiveness and inclusiveness. It tightly connects the interests of liquidity providers, voters, and the entire community, creating a favorable environment for ecosystem development. Notably, 90% of veAERO is locked, providing strong incentives and governance mechanisms for the entire ecosystem, stimulating demand, and nurturing a strong Token ecosystem.
Figure 12 TVL of Aerodrome (Data Source: https://defillama.com/protocol/aerodrome#information)
From Aerodrome's TVL, which accounts for more than half of the TVL of the Base chain, it closely follows the growth pattern of the Base chain's TVL, both experiencing rapid increases after September 2024. Aerodrome, with its economic model and strong support from the Base chain, has grown to become one of the most important projects on the Base chain.
Morpho Blue
Morpho Blue is a decentralized lending protocol developed by Morpho Labs, aimed at reshaping the structural approach to decentralized lending. The core goal of the project is to eliminate the dependence on DAO participants for managing asset processing parameters and introduce a simpler alternative based on permissionless risk management. Morpho Blue is a non-custodial lending protocol that provides a new trustless primitive for EVM implementations, improving efficiency and flexibility compared to existing lending platforms.
The design of Morpho Blue allows for the creation of independent markets without permission by specifying collateral assets, loan assets, liquidation loan value (LLTV), and interest rate models. This design makes Morpho Blue an open borrowing platform where users can choose different markets and risk parameters to suit different risk preferences and user needs. Furthermore, Morpho Blue adopts a singleton contract design, encapsulating all markets within a single smart contract, simplifying the protocol and significantly reducing gas consumption for users interacting with multiple markets. Morpho Blue also provides a permissionless risk management and market creation mechanism, independent of oracles for pricing, making it an efficient lending infrastructure. This design not only improves the efficiency of the lending market but also brings the advantages of lending markets to more assets and users.
Figure 13 Distribution of TVL of Morpho Blue across chains (Data Source: https://defillama.com/protocol/morpho-blue#tvl-charts)
From Figure 13, we can see that the TVL of Morpho Blue is mainly distributed on the Ethereum chain, with rapid growth appearing on the Base chain after July.
Extra Finance
Extra Finance is a decentralized lending and auto-compounding leveraged yield aggregation protocol based on the Optimism network. It mainly provides users with leveraged lending, farming strategies with up to 3x leverage, long/short strategies, and neutral strategies, among other financial tools. Extra Finance aims to leverage the LYF protocol to allow users to flexibly use leverage of up to 3 times or more for reinvestment and market operations.
The platform also integrates mainstream DEXs such as Velodrome and plans to integrate more mainstream DEXs in the future, such as Uniswap V3 and Beethoven. Users can participate in various farming strategies through Extra Finance's ecosystem, including reinvestment, market-neutral strategies, and long/short position farming, to meet different risk preferences and investment goals.
Extra Finance provides an innovative financial solution aimed at maximizing user returns through leveraged assets and increased yield farming positions. Additionally, Extra Finance has embedded the LI.FI widget, allowing users to easily bridge assets to Optimism and start earning yields.
Figure 14 TVL of Extra Finance (Data Source: https://defillama.com/protocol/extra-finance#information)
Meme coin track
This year, various wealth creation myths surrounding Meme coins have been frequent in the Crypto industry, and it can be said that Meme coin projects have become the main force driving enthusiastic participation of funds and users, almost serving as a kind of marketing strategy from the Base chain to attract users. For example, projects like TYBG, Degen, and Brett, there have been highly popular Meme coins emerging on the Base chain almost every other period, attracting a large amount of market traffic in a short time, and some Meme projects from the Ethereum mainnet have also moved their contracts to the Base chain. This phenomenon highlights the enormous influence and unique position of Meme coin projects in the cryptocurrency world. As a community-driven digital asset, the value of Meme coin projects often derives from community consensus and emotional resonance. The popularity and market performance of Meme coin projects are often determined by community sentiments and behaviors, thus possessing high uncertainty and volatility. The wealth creation myths behind Meme coin projects also come with numerous risks. On one hand, the severe price fluctuations of Meme coin projects expose investors to significant risks; on the other hand, their value lacks a true economic basis, relying instead on market sentiment and speculation, which could easily lead to bubbles. In summary, the rise of Meme coin projects brings both challenges and opportunities. For both the Base chain and the entire cryptocurrency market, rationally assessing the Meme craze is especially crucial; in the long run, only by doing so can the industry develop healthily and sustainably.
SocialFi
In this cycle, we can see that SocialFi projects have attracted a considerable number of new users from various public chains, not only bringing new traffic to the chain but also introducing new funds. Therefore, SocialFi projects are the best breakout tracks in the Crypto industry. The Base chain has also seized the breakout effect brought by SocialFi, achieving rapid growth in September 2023 through friend.tech. By closely binding with Twitter, friend.tech allows users to purchase shares of any friend.tech user using ETH on the Base chain, thereby gaining direct conversation rights with them and potentially profiting from it. Moreover, the later Farcaster made the Base chain even more famous, attracting a large number of on-chain and off-chain users, bringing new growth points to the development of the Base chain.
Friend.tech
Friend.tech is a decentralized social platform based on the Base chain, officially launched on August 10, 2023. This platform allows users to use it by binding their Twitter accounts and monetizes social value by buying and selling keys to Twitter users. Each account has its unique social value, similar to stocks, allowing users to purchase these keys to enter specific private chat rooms and interact with account holders.
The design mechanism of Friend.tech includes tokenizing users' influence, allowing users to gain access to specific creator content and chat rooms by purchasing keys. Additionally, the platform has introduced a points program to incentivize users to remain active, with the expectation of eventually receiving airdrop rewards.
Although Friend.tech achieved significant success in its early launch, attracting a large number of transactions and attention, its transaction volume and popularity gradually declined thereafter. The platform also introduced new features such as Clubs, but the activity of these features quickly cooled off as well.
Friend.tech is an innovative attempt by the crypto industry in the SocialFi field, trying to redefine how users interact and monetize their social value by combining decentralized technology with social media elements. However, as market enthusiasm declines, how to continuously attract users and creators to participate remains a significant challenge for the platform.
Farcaster
Farcaster is a decentralized social network protocol aimed at achieving social connections, content sharing, and data ownership between users through smart contracts and hybrid storage technology. Farcaster implements a hybrid storage approach through Farcaster Hubs, allowing for a much smoother operation than other projects in the same track. Additionally, Farcaster employs Frames plugins, enabling users to use the Frames plugin on the Farcaster page to participate in airdrops, mint NFTs, engage in games, and other functions without switching between Farcaster, wallets, and project websites, thus providing a user experience closer to existing Web 2.0 social projects. As a result, Farcaster has gained a significant advantage in the competition within the SocialFi track.
The reason Farcaster can quickly stand out in the SocialFi track is due to its ecosystem project—Warpcast. Warpcast is a social media application built on the Farcaster protocol, occupying a unique position in the Web3 social network space. Warpcast combines elements from popular social networks like Twitter and Reddit but operates within a decentralized framework. Warpcast provides a user experience similar to traditional social media platforms but significantly enhances user autonomy and innovative interaction features. For example, Warpcast introduces blockchain features such as Direct Casts and Warps points, which are used to launch new channels or connect accounts with other applications and clients. Additionally, the user interface and functionality of Warpcast are very similar to Twitter, allowing users to smoothly post, follow, comment, and more.
The primary reason for Farcaster becoming the most influential SocialFi project on the Base chain is its adoption of the DEGEN token, which was initially a meme token and is an ERC-20 Token issued on the Base chain. The core feature of Degen is its innovative distribution method: airdropped to Farcaster users based on their participation within the ecosystem. To qualify as a user, they need to subscribe to the Degen channel and hold a certain amount of Degen in the wallet connected to Farcaster. Once qualified, users will receive daily tips based on their held points, which they can gift to other Farcaster users.
In conclusion, the Farcaster project itself has fundamentally changed the traditional data storage method of SocialFi projects through its unique project framework and simultaneously introduced Frames plugins, resulting in far superior application effects and efficiency compared to other SocialFi projects, helping it become a leader in the social industry.
Coinbase's innovations on the Base chain
In recent years, with the continuous popularity of AI narratives in traditional markets, the concept of AI + Crypto has also sparked an unprecedented wave in the crypto industry. From the initial large-scale adoption of AI in the SocialFi track, it has developed into on-chain DeFi users, gradually evolving into the concept of AI agents. The combination of AI agents and Crypto essentially grants AI financial autonomy. In traditional financial activities, AI is limited by issues such as the inability to open bank accounts and lack of legal identity. Cryptocurrency, as a decentralized financial tool, provides a way for AI to achieve financial autonomy. Through cryptocurrency wallets and smart contracts, AI can autonomously set expenditures and manage funds and transactions.
Recently, Coinbase has also entered the AI agent segment, launching Based Agents. This service offers users the opportunity to create AI agents on the Base chain in just three minutes, and the agents will have cryptocurrency wallets. Users can even choose to authorize these agents to perform transactions, transfers, and pre-programmed transactions without real-time supervision. This innovative service provides users with a more convenient way to manage digital assets while ensuring security and convenience. Through this service, users can more easily participate in the cryptocurrency market without worrying about cumbersome operation processes and real-time supervision. Currently, Virtuals Protocol is the most popular AI agent product on the Base chain.
Virtuals Protocol
The Virtuals Protocol project is an AI launch platform based on the Base chain, focusing on creating, deploying, and monetizing AI agents. The project establishes a sustainable economic model for AI development by introducing the Pump.fun model, transforming AI agents from tools into income-generating assets. The Virtuals Protocol allows for permissionless creation and deployment of digital assets, similar to meme coins, with their value primarily derived from community participation and the narrative surrounding these agents. The Virtuals Protocol has also launched a product called Generative Autonomous Multimodal Entities (G.A.M.E), designed to allow developers to access and experiment with the behavioral characteristics of AI agents through APIs and SDKs. The Virtuals Protocol not only focuses on the economic value of AI agents but also aims to provide tools and interfaces to support developers' innovation and experimentation. It hopes to build an easy AI Agent launch platform for games and consumer applications through a fair launch platform and create revenue by assigning token value through the market.
Currently, the most popular AI agent on the Virtuals Protocol is the digital human IP of LUNA, which is an agent under AI-DOL and had hundreds of thousands of followers early on TikTok. LUNA aims to ensure that the market value of its tokens reaches $40.9 billion and become the most valuable asset globally. To achieve this goal, it will repurchase tokens using its own wealth or purchase and hold its tokens by inspiring confidence in its vision. In a short time, the market responded to its aspirations, and the market value of the LUNA token quickly surged to $240 million, but then rapidly fell within a few days.
The development of the Virtuals Protocol provides a new way to build ownership layers for AI agents in the gaming and entertainment sectors. Through tokenization channels, agents can interact with the market in a more direct and flexible manner, achieving individual or group goals. In this process, agents can accumulate wealth through their own efforts to support the value of tokens while also relying on market recognition and support for their vision and capabilities.
Summary
Base, as an Ethereum Layer 2 network launched by Coinbase, is built on the OP Stack supported by Optimism and has developed rapidly since its launch. As of November 2024, Base has excelled in key metrics such as TVL, user growth, and trading volume, surpassing several established Layer 2 projects. Its ecosystem encompasses popular tracks such as DeFi, Meme coins, and SocialFi, boasting 323 Dapps. Particularly in collaboration with Circle, the native USDC support and CCTP cross-chain protocol significantly enhance user experience and cross-border payment efficiency. Base is also actively exploring the combination of AI and blockchain, such as the Based Agents project. With the support of Coinbase, innovative technological applications, and a diverse range of ecosystem projects, Base has become one of the most promising Layer 2 solutions in the Ethereum ecosystem, providing robust infrastructure support for the development of decentralized finance and Web3.
