Original author: @lazyvillager1, crypto KOL original translation: zhouzhou, BlockBeats
Editor's note: Since Trump's victory, COIN and BTC have risen significantly, but the author leans more toward 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 to attract users in the long term without relying on traditional token incentives. The activity level and TVL of the Base ecosystem continue to grow, proving its great potential in the 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 been leading the way, rising 70% and 16%, respectively. I personally 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 against other L2s, even ETH mainnet, to become the preferred ecosystem for accommodating MEME, consumer dApps, and attracting attention.
2. Competing with SOL's 'full-featured' integrated casino model, emerging as a top-tier EVM-compatible ecosystem
My core argument 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' cryptocurrencies must perform strongly relative to their competitors;
b. 'Underlying' cryptocurrencies must possess 'scarcity'
Therefore, in this competition for attention, in most cases, you are actually choosing a certain cryptocurrency (even though this is just a simplified way) to reflect its advantages. In the coming weeks (this trend has already started), the CT community will discuss why a certain cryptocurrency may win (e.g., a competitor to SOL or a supporting application for 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 an ecosystem without a cryptocurrency. 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 ETH's potential is currently underestimated—if/when the relative values between BTC, ETH, and SOL rise in the coming weeks, a 'reservoir' will inevitably be needed to accommodate this newly generated and recycled 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 important 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 accordingly adjusted my layout and will discuss my logic and the risks and mitigation measures involved in redirecting on-chain traffic to Base, which I believe is the most vibrant 'playground,' in upcoming tweets.
memecoins and the environment in which they typically succeed
The key is that low market cap memecoins typically offer unrelated returns, while on-chain activity often heats up before and after significant uncertainties.
(The power of resilience: MEME coins and their role in portfolio construction)
Reflecting on the strength of major assets and their driving role in 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 primarily driven by spot, with ETH and BTC's open interest (OI) mostly reset to pre-election levels, and the rise in financing rates is mainly due to a lack of new shorts being established (and the levels that have recently broken— the amount of short liquidations has reached 1 billion dollars, the highest value this year), rather than excessive leverage usage.
Therefore, based on the view that the existing price range is supported, I believe that on-chain activity will become a gathering place for off-market funds, new funds, and recycled funds. The funds created in the past week contrast sharply 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 difficult to attract what I call 'mercenary funds.'
In the past week, capital flows have not only widely appeared in assets other than BTC (all selected assets have generally risen globally), but even include DOGE—this 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 have been in this price environment for less than a week—market dislocations are significant: capital takes time to assess whether these funds are irrational or substantive. During this period, projects that can significantly fluctuate at the margins should generate the most significant re-rating effects.
Base is already 'winning'—even though it has not issued a token
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, based on various indicators, Base is 'winning'. The attention Base attracts relative to its growth in users/wallets/TVL may currently be the most disproportionate among all projects.
Please see the image below, this is the attention captured by elfa ai for Base, in collective mentions, approximately 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 consistently grown throughout the year, despite not setting user incentives like other L2s (such as BLAST GOLD). With a TVL of 3 billion dollars, its TVL even surpasses ARB (which hosts the very popular HyperliquidX, which has about 1 billion dollars in TVL).
In October, Base also recorded the highest revenue in its developing ecosystem (a month when 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 treated with caution, but this is the only picture we can draw).
Base is reminiscent of SOL in the fourth quarter of last year—a builder-attracting environment when attention was low.
Base disrupts and breaks the traditional L1/L2 operation model
Traditional operating models typically look like this:
1. A conception of an ecosystem ideally should have unique variants (faster, more reliable, more decentralized, easier to build, more trustless, etc.)
2. Raising funds by gifting tokens at nearly zero valuations (usually directed towards companies with the best relationships and resources)
3. While building, establish connections with dApp developers—every blockchain typically seeks a local 'bank,' so there may be some type of lending protocol and trading protocol. Developers are rewarded through token incentives for on-chain development.
4. Attracting users through points/token incentive programs, where users deposit/stake stable capital to earn yield rewards.
5. User/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 out the influx of users/funds.
6. After the blockchain launch, users first receive rewards through non-staking tokens; while investors and team members must wait by locking up tokens. (But the proportion 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 attract and retain organic capital inflows through certain indicators (such as interoperability, ease of use, richness of the ecosystem, etc.)—thus reducing or eliminating the need for dilutive capital.
9. The founding team pays early supporters and employees through tokens—this time the tokens essentially become free expenses (used to pay vendors). Ideally, the ecosystem supports the sustainable development of the chain through serialized income.
This model has matured and is being disrupted, with HyperliquidX becoming the most typical example of launching without relying on traditional methods and neglecting most of the above measures.
This year, this method of capital raising has clearly failed across multiple segments, with pain points concentrated in:
· Mining incentive mechanisms are usually very unclear, and once capital is locked up, it becomes 'hostage', which allows the team to disregard the consequences and retroactively change the terms.
· Investors/team members can stake locked tokens—this allows for staking rewards to be sold at TGE (token generation event), severely diluting retail investors even if the original locked tokens lack liquidity.
· New capital is very expensive (the opportunity cost in the crypto space is extremely high), so users are very utilitarian; once the rewards are distributed, they typically choose to leave unless there is significant dilution or manipulation of supply.
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 brought about by Trump's victory (i.e., 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? Here is an excerpt from Coinbase's third-quarter conference call illustrating how the team views Base:
Base is (the following is just part of the content):
1. Testing platform for synergy 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. 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 shifts towards a subscription-based service (e.g., through Coinbase One), rather than relying on volatile trading fees, the team's vision is to attract the most retail users in the long run, rather than charging as many fees as possible in the short term.
The latter is precisely a reflection of the extractive value capture model followed by each blockchain—due to the creation of tokens and their inherent nature. By separating the ecosystem from the token, Base is able to take 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.'
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 balance sheet. Any other ecosystem, at least at some point, is supported by counterparties with financial incentives seeking returns. These counterparties do not possess unlimited capital themselves.
Once returns are obtained, these supports (whether financial or community-based) will withdraw. Therefore, other ecosystems have a lifecycle or a time limit, and new supporting funds will eventually stop flowing in, and products will have 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 that an important part of Coinbase has failed (which also means a failure of the overall strategic vision). Since Coinbase itself creates traffic and revenue 'where the price is', we can speculate that Base may receive a kind of 'evergreen' funding support.
Base has proven its resilience
Base originally emerged as the foundational platform for Friend Tech (which was essentially a shell with limited functional options). Since then, it has gone through several important phases:
1. Application migration, e.g., timedotfun. Please check jessepollak's response: link. This reflects 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 received attention over a weekend earlier this year, quickly boosting its valuation to 600 million dollars, comparable to the self-built rise of apecoin this month.
3. The only chain capable of accommodating AI-related applications like SOLANA—VIRTUAL, which went from 0 to 500 million dollars during the AI and memecoin frenzy in October this year.
In my view, no other ecosystem can withstand such a degree of attention and drive such a scale of capital inflow. Therefore, the question is: If other ecosystems can do this, why haven't they? 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 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 officially launched).
Buying at a moment deemed to be the bottom of value
Profiting on Base essentially means betting on the success of the entire ecosystem, even acting as an agent of Coinbase. No single token can concentrate demand, hence true network effects can be realized as a whole.
Currently, most of the tokens on Base are at cyclical lows—and I will not provide any token names or recommendations, but you can see examples of some graphs, which I have selected at random.
Therefore, I believe Base is the most attractive capital investment position, because you are essentially betting on two aspects— which has nothing to do with leverage or clever token selection:
1. ETH stabilizes and finds a bottom that can provide on-chain demand (as I have discussed before),
2. ETH winners want 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 funding will concentrate on Base.
In summary— as long as ETH remains hot, Base should also maintain its heat.
"Original link"
