Article reproduced from: Frontier Lab
Introduction
The Base chain is a project incubated by Coinbase, aiming to become a part of the Optimism superchain, and its launch is part of Coinbase's long-term planning. The Base chain has developed rapidly; according to Defilama's data, its TVL has now surpassed that of established Layer 2 projects like Arbitrum and Optimism, becoming the number one Layer 2 project in terms of TVL at this stage.
Overview of the Base chain
The Base chain is a Layer 2 solution built on the standardized, shared, and open-source OP Stack development toolkit supported by Optimism. Optimistic Rollups are more compatible with Ethereum, allowing numerous decentralized applications (dApps) to migrate directly while possessing lower computational complexity, making it more suitable for executing general smart contracts and complex calculations. However, there are still areas for improvement when using Optimistic Rollups, such as further enhancing decentralization and optimizing on-chain governance architecture, as users have high demands for the availability of sorting services. Through continuous technical iterations, these shortcomings will ultimately be improved.
To increase the degree of decentralization, the Optimism Rollup plan aims to enhance the original on-chain governance by adopting the OP Stack, an open-source Layer 2 architecture toolkit, to introduce multiple sorting nodes and reduce reliance on a single sorting service. Currently, the OP Stack maintained by the Optimism Collective ultimately aims to build a superchain that easily integrates different Layer 2s, creating an interoperable integrated system. To this end, the OP Stack provides a series of standardized modules and interfaces, making the process of building Layer 2 applications simpler and more efficient. The OP Stack is divided into six layers: data availability layer, sorting layer, derivation 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 has joined as the second core development team in the OP Stack and Superchain development, working alongside OP Labs and Optimism Collective to enhance the activity of the superchain, add value to it, and promote the growth of the developer ecosystem. Base aims to create a highly integrated chain network, providing users with a seamless experience so that protocols built on Base can be smoothly integrated into the final superchain and interact with users across multiple chains. Close cooperation with Optimism Collective on its various projects will assist developers in easily structuring new Layer 2s and Rollups and distributing their applications across the entire superchain.
Data on the Base chain
TVL
Figure-1 TVL of Base (Source: https://defillama.com/chain/Base)
According to the data from Figure-1, the TVL of the Base chain experienced a massive increase after September, rising from 1.419 billion USD to 2.388 billion USD, with a growth rate of 68.28%. TVL is a key analytical factor for any public chain, and among all ETH-Layer2 projects, Base has the highest growth rate in TVL, indicating that Base has been developing rapidly recently.
On-chain address count
Figure-2 Number of addresses on the Base chain (Source: https://dune.com/watermeloncrypto/base)
From Figure-2, we can see that the number of on-chain addresses of Base experienced a massive increase after August 2024, rising from 24.55 million to 74.88 million, with a growth rate of 205.01%. It is evident that the number of users on the Base chain has more than doubled in the past three months. This indicates that on-chain users are very optimistic about the development of Base and that the Base chain has created a certain wealth effect, thus attracting many users to participate in activities on the Base chain.
We can observe that by combining the growth value of Base chain's TVL with the number of addresses on the Base chain: the average new capital per household on the Base chain is only 1.97 USD, generally belonging to small amount users. Combined with the fact that after June, the Base chain successfully attracted a large number of users utilizing its social characteristics and the popularity of MEME culture, we can conclude that the spread effect of meme culture and the enhancement of social interaction have made the Base chain a popular social platform, further driving user growth.
Base chain income
Figure-3 Income on the Base chain (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 was 19.78 million USD, and as of now, the income has reached 76.55 million USD. Thus, we can calculate that the income on the Base chain experienced a total increase of 287% from March to October, with an average monthly increase of 41%. It is evident that with the increase in on-chain users and activities, the income of Base has maintained a relatively high growth rate.
Weekly transaction volume
Figure-4 Weekly transaction volume on the Base chain (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 started to grow continuously in May 2024, with a weekly transaction volume of 13.45 million in May 2024, and as of now, the weekly transaction volume has reached 47.06 million. We can calculate that the weekly transaction volume on the Base chain experienced a total increase 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 continuous growth.
On-chain performance
Figure-5 Daily average transaction volume on-chain per second (Source: https://l2beat.com/scaling/activity)
From Figure-5, we can see that Base's TPS is 66.28, outperforming other chains and making it the best performer in the entire Ethereum ecosystem.
Weekly active address count
Figure-6 Weekly active addresses on the Base chain (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, and 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 judge from the above data that the Base ecosystem is currently in a vigorous upward development trend. The two most important factors in determining whether an ecosystem is healthy and sustainable are funding and traffic. In these two aspects, the Base chain performs the best among all ETH-Layer2. The funding aspect is reflected in TVL, transaction volume, and on-chain revenue, all of which show a rapid upward trend for the Base chain, with an average monthly growth rate exceeding 40%. It can be concluded that a large amount of capital is continuously entering the Base ecosystem. Analyzing from the traffic perspective, 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 are both on a rising trend. Coupled with the excellent on-chain performance of the Base chain, it will have very good development in the ETH-Layer2 track.
Circle (USDC) support for Base
Figure-7 Number of stablecoins on the Base chain (Source: https://defillama.com/chain/Base?stables=true&tvl=false&inflows=false)
From Figure-7, we can see that the number of stablecoins on the Base chain has been rapidly increasing since March of this year, with the stablecoin amount on the Base chain being 319 million USD in March 2024, and the current weekly trading volume reaching 3.771 billion USD. We can calculate that the total increase in the number of stablecoins on the Base chain from March to October has reached 1082.13%, with an average monthly increase of 216.42%. It is clear that the number of stablecoins on the Base chain has consistently maintained rapid and continuous growth.
Although the total number of stablecoins on the Base chain is increasing, including stablecoins such as USDT and USDC, the users who predominantly use USDC are mainly from the United States. Thus, we can view the increase in USDC as an influx of capital from American users. Furthermore, with the recent approval of BTC and ETH spot ETFs by the U.S. Securities and Exchange Commission (SEC), as well as the active purchase of BTC by various asset management institutions and publicly traded companies in the U.S., it is evident that the focus of the crypto market has shifted to the U.S. market. The Base chain mainly relies on the support of Coinbase, which is the first publicly traded cryptocurrency exchange in the U.S., so we will focus on the support of USDC for the Base chain moving forward.
First, in September 2023, Circle officially announced support for the Base chain, issuing USDC on the Base chain. USDC is now natively available on the Base network, meaning users and developers can use USDC without bridging, which greatly simplifies operations and improves efficiency. Circle accounts and Circle API fully support USDC on Base, making access to USDC liquidity much more convenient. Furthermore, Circle developed CCTP, a permissionless on-chain tool that allows for secure transfers of USDC across different blockchains. Through CCTP, USDC can achieve native burning and minting on the Base chain, providing greater convenience and accessibility for platforms like ChainPort.
Furthermore, Coinbase has partnered with Stripe to bring USDC to the Base platform, enabling faster and cheaper cross-border transfers and quick conversions from dollars to cryptocurrencies. This not only enhances transaction speed and reduces costs but also further promotes the practicality of cryptocurrencies. This includes:
Stripe has integrated USDC into its cryptocurrency payment products, allowing for faster and cheaper remittances to over 150 countries/regions through its crypto payment system.
Adding USDC on Base as an entry point from fiat currency to cryptocurrency: Stripe has added USDC on Base to its fiat-to-crypto entry, allowing American customers to convert fiat currency to cryptocurrency faster than ever.
Coinbase has integrated Stripe's fiat-to-crypto entry point into its wallet, allowing users to purchase cryptocurrencies instantly using credit cards and Apple Pay.
The partnership between Coinbase and Stripe mainly revolves around integrating the USDC stablecoin into the Base chain and promoting the global adoption of cryptocurrencies through this collaboration. This involves adding support for USDC on the Base chain to Stripe's crypto payment features, enabling faster international fund transfers. Coinbase has integrated Stripe's fiat-to-crypto entry point into its wallet, further simplifying the purchase process for users. The collaboration between Coinbase and Stripe is beneficial for expanding the acceptance and usage of USDC globally. Additionally, USDC plays a crucial role in the Base chain, with over 20 billion USD in trading volume on the DEX on the Base chain by October 2024, making a significant contribution to the prosperity of the Base chain ecosystem.
Figure-8 USDC trading volume on Base chain DEX (Source: https://dune.com/obchakevich/usdc-base)
From Figure-8, we can see that in March of this year, the trading volume of USDC on the Base chain DEX showed a rapid and continuous growth trend, with an increase rate of 5275%, which is quite astonishing.
Figure-9 Number of USDC holders on the Base chain (Source: https://dune.com/obchakevich/usdc-base)
From Figure-9, we can see that the adoption of USDC on the Base chain is increasing, with more and more users choosing to use USDC as an on-chain stablecoin.
In summary, Circle and Base have launched comprehensive cooperation, significantly simplifying user operation processes through the issuance of native USDC and the implementation of the CCTP cross-chain transfer protocol. At the same time, the strategic partnership between Coinbase and Stripe has further expanded the application scenarios of USDC in the Base ecosystem, including supporting cross-border payments in over 150 countries, convenient fiat entry points, and diversified payment methods (such as credit cards and Apple Pay). These initiatives not only pushed the DEX trading volume of USDC on the Base chain to exceed 20 billion USD but, more importantly, built a bridge connecting traditional finance with the crypto economy, laying a solid foundation for the future development of digital payments.
The ecological situation of the Base chain
Figure-10 Ecosystem projects on the Base chain (Source: https://www.base.org/ecosystem?utm_source=dotorg&utm_medium=nav)
According to the data on 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 sectors, with a total of 323 dApps.
When we look at the Base chain from the perspective of whether a public chain is developing healthily, we primarily observe the ecosystem from the angles of funding and traffic. In terms of funding, we can analyze from the traditional DeFi perspective. From the perspective of traffic, the current market indicates that users' main focus is on the meme coin track and the SocialFi track, where the meme coin track is filled with wealth creation effects attracting widespread participation from on-chain users, while the SocialFi track can convert traffic users from the traditional Web 2.
DeFi sector
In the DeFi sector, the most direct observation tool is TVL, and we can analyze and introduce DeFi projects on the Base chain by observing its TVL.
Figure-11 TVL data on the Base chain (Source: https://defillama.com/chain/Base)
From Figure-11, we can see that the DeFi projects on the Base chain with a TVL exceeding 200 million USD include Aerodrome, Uniswap, and Morpho Blue, where Uniswap is an established DEX in the Ethereum ecosystem and will not be discussed further here.
Aerodrome
Aerodrome was launched in 2023 and is 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 3v3 mechanism, optimized to fit the ecosystem's development. This mechanism provides a unique reward model, incentivizing long-term holders and active governance users to promote the stable development of the ecosystem. Aerodrome also utilizes efficient liquidity management tools to help users optimize asset management and participate in liquidity mining activities. After becoming the primary AMM on the Base chain, it provides users with a more efficient and cost-effective trading experience. The innovative incentive mechanism encourages more users to participate in governance and liquidity mining. In this mechanism, participants can not only earn protocol trading fees but also receive additional voting incentive rewards proportional to the amount of locked AERO Tokens. This design encourages active participation from liquidity providers and grants governance power to the community, resulting in a healthier and more sustainable ecosystem. The uniqueness of this incentive and governance strategy lies in its comprehensiveness and inclusiveness. It closely links the interests of liquidity providers, voters, and the entire community, creating a favorable environment for the ecosystem's development. It is particularly noteworthy that 90% of veAERO is locked, providing a strong incentive and governance mechanism for the entire ecosystem, stimulating demand and nurturing a robust Token ecosystem.
Figure-12 TVL of Aerodrome (Source: https://defillama.com/protocol/aerodrome#information)
From Aerodrome’s TVL, it occupies more than half of the TVL of the Base chain, and its growth pattern closely follows that of Base chain’s TVL, both experiencing rapid increases after September 2024. Aerodrome, with its unique economic model and strong support from the Base chain, has grown to become one of the most significant projects within the Base chain.
Morpho Blue
Morpho Blue is a decentralized lending protocol developed by Morpho Labs, aimed at reshaping the structure of decentralized lending. The core goal of this project is to eliminate dependency on DAO participants for managing asset handling parameters and introduce a simpler alternative based on permissionless risk management. Morpho Blue is a non-custodial lending protocol providing a new trustless primitive for EVM implementations, enhancing both efficiency and flexibility compared to existing lending platforms.
The design of Morpho Blue allows for the creation of independent markets without permission, achieved through specifying collateral assets, loan assets, liquidation loan value (LLTV), and interest rate models. This design makes Morpho Blue an open lending platform, enabling users to choose different markets and risk parameters to suit their diverse risk preferences and needs. Additionally, Morpho Blue adopts a singleton contract design, with all markets contained 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, with pricing features independent of oracles, making it an efficient lending infrastructure. This design not only enhances the efficiency of the lending market but also brings the advantages of the lending market to more assets and users.
Figure-13 TVL distribution of Morpho Blue across chains (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 a rapid growth occurring on the Base chain after July.
Extra Finance
Extra Finance is a decentralized lending and automated compound leverage 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 various financial tools. The goal of Extra Finance is to maximize production through leveraged yield farming protocols, allowing users to flexibly use leverage ratios of up to 3x or higher for reinvestment and market operations.
The platform has also integrated mainstream DEXs like 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 the Extra Finance ecosystem, including reinvestment, market neutrality, and long/short positions, 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 (Source: https://defillama.com/protocol/extra-finance#information)
Meme coin sector
In the Crypto industry this year, various meme coin wealth creation myths have been frequently observed, indicating that meme coin projects have become the main force driving funds and users to participate actively. They can almost be considered an official marketing strategy of the Base chain to attract users. For example, projects like TYBG, Degen, and Brett are almost always generating highly popular meme coins on the Base chain, attracting a large market flow in a short period, and even some meme projects from the Ethereum mainnet have transferred their contracts to the Base chain.
This phenomenon highlights the immense 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 originates from community consensus and emotional resonance. The popularity and market performance of meme coin projects are frequently determined by community sentiment and behavior, resulting in high uncertainty and volatility. Behind the wealth creation myth of meme coin projects, there are also many risks. On one hand, the price volatility of meme coin projects poses significant risks to investors; on the other hand, their value lacks a real economic foundation and relies on market sentiment and speculation, which can potentially create bubbles. In summary, the rise of meme coin projects brings both challenges and opportunities. Rationally assessing the meme craze is crucial for both the Base chain and the entire cryptocurrency market. In the long run, only by doing so can the industry develop healthily and stably.
SocialFi
In this cycle, we can observe that SocialFi projects have attracted many new users to various public chains from the traditional Web 2 world. They not only bring new traffic to the chain but also new funding, making SocialFi projects the best breakout track in the Crypto industry. The Base chain has also seized the breakout effect brought by SocialFi, experiencing rapid growth through friend.tech in September 2023. By being strongly linked with Twitter, friend.tech allows users to buy shares of any friend.tech user through Base chain ETH, thereby gaining the right to communicate directly with them and potentially profit from it. The later Farcaster further enhanced the reputation of the Base chain, 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. The platform allows users to utilize it by binding their Twitter accounts and monetizes social value through the buying and selling of keys to Twitter users. Each account has its unique social value, similar to stocks, and users can enter specific private chat rooms and interact with account holders by purchasing these keys.
The design mechanism of Friend.tech includes tokenizing users' influence, allowing users to gain access to specific creators' content and chat rooms by purchasing keys. Additionally, the platform has introduced a points system to incentivize users to remain active, with the expectation of ultimately receiving airdrop rewards.
Despite the significant success achieved by Friend.tech in its early stages, attracting a large volume of transactions and attention, its transaction volume and popularity gradually declined afterward. The platform also introduced new features such as Clubs, but the activity level of these features quickly cooled down.
Friend.tech represents an innovative attempt in the Crypto industry's SocialFi space, seeking to redefine how users interact and earn within social networks by combining decentralized technology with social media elements. However, as market enthusiasm wanes, 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 among users through smart contracts and hybrid storage technology. Farcaster adopts Farcaster Hubs to achieve hybrid storage, enabling smoother operations compared to other projects in the same field. Additionally, Farcaster utilizes the Frames plugin, allowing users to use features such as participating in airdrops, minting NFTs, and engaging in games directly within the Farcaster interface without switching between Farcaster, wallets, and project websites, thus providing a user experience that is much closer to existing Web 2.0 social projects and giving Farcaster a significant advantage in the SocialFi competition.
The reason Farcaster stands out rapidly in the SocialFi sector is due to a project within its ecosystem—Warpcast. Warpcast is a social media application built on the Farcaster protocol that occupies a unique position in the Web3 social network space. Warpcast combines elements of 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 instance, Warpcast introduces blockchain features like Direct Casts and Warps points, which are used to launch new channels or connect accounts with other applications and clients. Moreover, the user interface and functionality of Warpcast are very similar to Twitter, allowing users to smoothly post, follow, comment, and more.
The main reason Farcaster has become the most influential SocialFi project on the Base chain is that it adopted the DEGEN token, which is originally a meme token and an ERC-20 token issued on the Base chain. The core feature of Degen is its innovative distribution method: airdropping based on participation within the ecosystem to Farcaster users. To qualify, users need to subscribe to the Degen channel and hold a certain amount of Degen in their Farcaster-connected wallets. Once qualified, users will receive daily tips based on the number of points they hold and can give these tips to other Farcaster users.
In summary, the Farcaster project itself, through its unique project framework, has completely changed the way traditional SocialFi projects store data, while also introducing the Frames plugin, which greatly enhances its 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 growing heat of AI narratives in traditional markets, the concept of AI + Crypto has also sparked an unprecedented wave in the crypto industry, evolving from the initial large-scale adoption of AI in the SocialFi sector to on-chain DeFi users, gradually leading to the emergence of the AI agent concept. The combination of AI agents and Crypto effectively grants financial autonomy to AI. In traditional financial activities, AI is limited by issues such as being unable to open bank accounts and lacking legal identity. Cryptocurrency, as a decentralized financial tool, provides a pathway for AI to achieve financial autonomy. Through crypto wallets and smart contracts, AI can autonomously set expenditures and manage funds and transactions.
Recently, Coinbase has also entered the niche of AI agents, launching Based Agents, which provides users the opportunity to create AI agents on the Base chain in just three minutes, and these agents will possess crypto wallets. Users can even choose to authorize these agents to conduct transactions, transfers, and pre-programmed trades without real-time supervision. This innovative service offers users a more convenient way to manage digital assets while ensuring security and convenience. Through this service, users can participate in the cryptocurrency market more easily without worrying about cumbersome operation processes and real-time supervision, significantly enhancing user experience. 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 the creation, deployment, and monetization of AI agents. This project introduces the Pump.fun model, transforming AI agents from tools into income-generating assets, thereby establishing a sustainable economic model for AI development. The Virtuals Protocol allows for permissionless creation and deployment of digital assets, similar to meme coins, whose value primarily comes from community participation and narratives surrounding these agents. The Virtuals Protocol also launched a product called Generative Autonomous Multimodal Entities (G.A.M.E), designed to allow developers to access and experiment with AI agents' behavioral characteristics through API and SDK. 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. The Virtuals Protocol hopes to build an easy AI Agent launch platform for gaming and consumer applications through a fair launch platform and generate income by assigning token value through the market.
The most popular AI agent on the Virtuals Protocol currently is LUNA's digital human IP, a proxy under AI-DOL, which early on gained hundreds of thousands of followers on Tiktok. LUNA aims to ensure that its token market value reaches 40.9 billion USD and become the world's most valuable asset. To achieve this goal, it will buy back tokens through its own wealth or inspire confidence in people regarding its vision to purchase and hold its tokens. In a short time, the market responded to its ambitions, and the market value of the LUNA token rapidly surged to 240 million USD, but then quickly fell back within a few days.
The development of the Virtuals Protocol provides a new ownership layer for AI agents in the gaming and entertainment fields. Through tokenization channels, agents can interact more directly and flexibly with the market, thereby achieving their individual or collective goals. In this process, agents can accumulate wealth through their own efforts to support the value of the tokens while relying on market recognition and support for their vision and capabilities.
Conclusion
Base, launched by Coinbase as an Ethereum Layer 2 network, is built on the Optimism OP Stack and has developed rapidly since its launch. As of November 2024, Base has shown outstanding performance in key metrics such as TVL, user growth, and transaction volume, surpassing several established Layer 2 projects. Its ecosystem covers multiple popular sectors such as DeFi, meme coins, and SocialFi, with a total of 323 dApps. Notably, through collaboration with Circle, the native USDC support and CCTP cross-chain protocol have significantly improved user experience and cross-border payment efficiency. Base is also actively exploring the integration of AI and blockchain, such as the Based Agents project. With Coinbase's support, innovative technical applications, and a diverse range of ecosystem projects, Base has become one of the most promising Layer 2 solutions in the Ethereum ecosystem, providing powerful infrastructure support for the development of decentralized finance and Web3.
