Introduction
The Base chain is a project incubated by Coinbase, aiming to become part of the Optimism super chain, and its launch is part of Coinbase's long-term planning. The Base chain is developing rapidly; according to data from Defilama, its TVL has now surpassed established Layer 2 projects such as Arbitrum and Optimism, becoming the Layer 2 project with the highest TVL ranking at this stage.
Introduction to Base Chain
Base chain is a Layer 2 solution built on the standardized, shared, open-source OP Stack development toolkit 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 for improvement when using Optimistic Rollups, such as further enhancing decentralization and optimizing the on-chain governance structure, where users have a high demand for the availability of ordering services. Through continuous technological iteration, these shortcomings will ultimately be addressed.
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 ordering nodes, thereby reducing reliance on a single ordering service. Currently, the OP Stack maintained by the Optimism Collective has the ultimate goal of building a Superchain that can easily integrate different Layer 2s and achieve an interoperable integrated system. To this end, OP Stack offers 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, ordering layer, derivative layer, execution layer, settlement layer, and governance layer. Each layer has customizable open-source modules, facilitating developers in designing custom blockchain networks according to specific use cases.
Base, as the second core development team to join the OP Stack and Superchain development, collaborates with OP Labs and the Optimism Collective to enhance the activity of the super chain, adding value to it and promoting the growth of the developer ecosystem. Base aims to create a highly integrated chain network, providing users with a seamless experience, ensuring that protocols built on Base can smoothly integrate into the ultimate super chain and interact and merge with users across multiple chains. The close cooperation with Optimism Collective on its projects will assist developers in easily structuring new Layer 2 and Rollups, and conveniently distributing their applications across the entire super chain.
Data on Base Chain
TVL
Figure-1 Base's TVL (Data Source: https://defillama.com/chain/Base)
According to the data in Figure-1, the TVL of the Base chain experienced a massive increase after September, rising from $1.419 billion to the current $2.388 billion, an increase of 68.28%. TVL is a critical analytical factor for a public chain; among all ETH-Layer2, Base's TVL growth rate ranks first, indicating that Base has developed rapidly recently.
Number of On-chain Addresses
Figure-2 Number of Addresses on 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 74.88 million, an increase of 205.01%. It is evident that the user base on the Base chain has more than doubled in the last three months, indicating that on-chain users are optimistic about the development of Base and have seen a certain wealth effect, attracting many users to participate in activities on the Base chain.
By observing the growth value of Base chain's TVL and the number of addresses on the Base chain, we find that the average new funding per household on the Base chain is only $1.97, generally belonging to small amount users. Combining this with the fact that after June, the Base chain successfully attracted a large number of users due to its social characteristics and the popularity of MEME culture, 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 on Base Chain
Figure-3 Revenue on Base Chain (Data Source: https://dune.com/watermeloncrypto/base)
From the revenue chart of the Base chain, we can see that the total revenue of the Base chain in March 2024 was $19.78 million, and as of now, the revenue is $76.55 million. We can calculate that the total revenue on the Base chain has increased by 287% from March to October, with an average monthly increase of 41%. It is evident that as the number of on-chain users and activities increases, the revenue of Base has maintained a high growth rate.
Weekly Trading Volume
Figure-4 Weekly Trading Volume on Base Chain (Data Source: https://dune.com/watermeloncrypto/base)
From the chart of weekly trading volume on the Base chain, we can see that the weekly trading volume on the Base chain began to grow continuously in May 2024, with a weekly trading volume of 13.45 million in May 2024, and the current weekly trading volume is 47.06 million. We can calculate that the total increase in weekly trading volume on the Base chain from May to October is 249%, with an average monthly increase of 49%, indicating that the trading volume on the Base chain has consistently maintained rapid and sustained growth.
On-chain Performance
Figure-5 Average Daily Trading Volume on Chain (Data Source: https://l2beat.com/scaling/activity)
From Figure-5, it can be seen that Base's TPS is 66.28, surpassing the performance of other chains, making it the best-performing in the entire Ethereum ecosystem.
Weekly Active Address Count
Figure-6 Weekly Active Addresses on Base Chain (Data Source: https://dune.com/watermeloncrypto/base)
From Figure-6, we learn that the weekly active users on the Base chain have maintained a decent growth momentum. For a public chain, the increase in on-chain active users is a primary factor in evaluating whether the chain is developing healthily.
In summary, we can conclude from the above data that the Base ecosystem is currently in a thriving upward development trend. The two most important factors in determining whether an ecosystem is healthy and continuously developing are funding and traffic. In these two aspects, the Base chain performs the best among all ETH-Layer2s. In terms of funding, it is reflected in TVL, trading volume, and on-chain revenue; all three indicators show a rapid upward trend, with a monthly average growth rate exceeding 40%, indicating that a large amount of funding is continuously entering the Base ecosystem. From the perspective of traffic analysis, it is mainly reflected in the number of on-chain addresses and weekly active address counts. In these two aspects, we can clearly see that the number of users and active users on the Base chain is on a continuous upward trend through charts. Coupled with the excellent on-chain performance of the Base chain, it is expected that the Base chain will have a very promising development in the ETH-Layer2 track.
Circle (USDC)'s Support for Base
Figure-7 Number of Stablecoins on Base Chain (Data 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 this year, with the number of stablecoins on the Base chain being $319 million in March 2024, and the current weekly trading volume being $3.771 billion. We can calculate that the number of stablecoins on the Base chain has increased by 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 using USDC are American users. Therefore, we can consider the increase in USDC as an increase in funding from American users. Moreover, as the U.S. Security and Exchange Commission (SEC) has gradually approved the spot ETFs for BTC and ETH this year, and various asset management institutions and listed companies in the U.S. are actively purchasing BTC, it can be seen that the current focus of the Crypto market has shifted to the American market. As the Base chain relies on the support of Coinbase, which is the first publicly listed cryptocurrency exchange in the U.S., we will focus on the support of USDC for the Base chain.
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, significantly simplifying operations and improving efficiency. Circle accounts and Circle APIs are also fully supporting USDC on Base, making access to USDC liquidity more convenient. Moreover, Circle developed CCTP, a permissionless on-chain tool that allows safe transfer of USDC between different blockchains. Through CCTP, USDC can achieve native burning and minting on the Base chain, providing more convenience and accessibility for platforms like ChainPort.
Furthermore, Coinbase's partnership with Stripe has introduced USDC to the Base platform, enabling faster and cheaper cross-border transfers and quick conversions from fiat to cryptocurrency. This not only enhances transaction speed and reduces costs but also further promotes the practicality of cryptocurrency. This includes:
Stripe has added USDC to its crypto payment products: Stripe has integrated USDC into its crypto payment system, enabling faster and cheaper remittances to over 150 countries.
Adding USDC on Base as a fiat-to-crypto gateway: Stripe has incorporated USDC from Base into its fiat-to-crypto gateway, enabling U.S. customers to convert fiat to cryptocurrency faster than ever.
Coinbase has integrated Stripe's fiat purchase gateway for cryptocurrency into its wallet: Coinbase has integrated Stripe's fiat-to-crypto gateway into its wallet, allowing users to purchase cryptocurrency instantly using credit cards and Apple Pay.
The collaboration between Coinbase and Stripe mainly focuses on integrating the USDC stablecoin into the Base chain and promoting global adoption of cryptocurrency through this partnership. By adding support for USDC on the Base chain to Stripe's crypto payment functionality, faster international fund transfers are achieved. Coinbase has integrated Stripe's fiat-to-crypto gateway into the Coinbase wallet, further simplifying users' purchasing process. The collaboration between Coinbase and Stripe facilitates the acceptance and use of USDC globally. USDC plays a significant role in the Base chain; as of October 2024, the trading amount of USDC on Base chain DEX has exceeded $20 billion, making a vital contribution to the prosperity of the Base chain ecosystem.
Figure-8 Trading Amount of USDC on Base Chain DEX (Data Source: https://dune.com/obchakevich/usdc-base)
From Figure-8, we can see that in March of this year, the trading amount of USDC on the Base chain DEX showed a rapid and sustained growth trend, with a growth rate of 5275%, which is quite astonishing.
Figure-9 Number of USDC Holders on Base Chain (Data 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 users choosing to use USDC as the on-chain stablecoin.
In conclusion, Circle has launched comprehensive cooperation with Base, significantly simplifying user operations through the issuance of native USDC and the realization of the CCTP cross-chain transfer protocol. At the same time, Coinbase's strategic cooperation with Stripe further expands USDC's application scenarios within the Base ecosystem, including supporting cross-border payments in over 150 countries, convenient fiat gateways, and diverse payment methods (such as credit cards and Apple Pay). These measures not only drive the DEX trading volume of USDC on the Base chain to exceed $20 billion but, more importantly, build 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
Figure-10 Ecosystem Projects on the Base Chain (Data Source: https://www.base.org/ecosystem?utm_source=dotorg&utm_medium=nav)
According to data from the official website of the Base chain, we can see that the ecological environment of the Base chain is very comprehensive, including multiple tracks such as Wallet, Bridge, Defi, Gaming, Onramp, Dao, Infra, Social, Security, NFT, Other, X-chain, and X-cross, totaling 323 Dapps.
From the perspective of whether a public chain is developing healthily, we mainly observe the ecology of a public chain from the angles of funding and traffic. From the funding perspective, we can analyze it from a traditional Defi angle; from the traffic aspect, we can see from the 2024 market trends that users' primary focus is on the Meme coin track and SocialFi track, where the Meme coin track attracts widespread participation from on-chain users due to its wealth creation effect, while the SocialFi track can draw and convert traffic users from traditional Web 2.
Defi Track
The most direct observation tool in the Defi track 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 Base Chain (Data 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 include Aerodrome, Uniswap, and Morpho Blue, among which Uniswap is an established DEX in the Ethereum ecosystem, which we will not elaborate on here.
Aerodrome
Aerodrome was launched in 2023 as the first DEX on the Base chain, adopting the Ve(3,3) model, which is based on Curve's veCRV model and OlympusDAO's 3v3 mechanism, optimized for ecological development. This mechanism offers a unique reward model that promotes the stable development of the ecosystem by incentivizing long-term holders and active governance participants. Aerodrome also assists users in optimizing asset management and participating in liquidity mining activities through efficient liquidity management tools. As 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 earn not only protocol trading fees but also additional voting incentive rewards proportional to the number of AERO Tokens they lock. This design encourages active participation from liquidity providers and grants governance power to the community, fostering a healthier and more sustainable ecosystem. Notably, 90% of veAERO is locked, providing a robust incentive and governance mechanism 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)
The TVL of Aerodrome occupies more than half of the Base chain's TVL, and it closely follows the growth pattern of the Base chain's TVL, both experiencing rapid increases after September 2024. With its economic model and strong support from the Base chain, Aerodrome has become one of the most important projects on the Base chain.
Morpho Blue
Morpho Blue is a decentralized lending protocol developed by Morpho Labs, aiming to reshape the structure of decentralized lending. The core goal of this project is to eliminate reliance on DAO participants to manage asset handling 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 lending platform where users can choose different markets and risk parameters to suit various risk preferences and user needs. Additionally, Morpho Blue employs a singleton contract design, consolidating 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, and its pricing functionality is independent of oracles, making it an efficient lending infrastructure. This design not only improves the efficiency of the lending market but also brings the advantages of the lending market to more assets and users.
Figure-13 Distribution of Morpho Blue's TVL 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 occurring on the Base chain after July.
Extra Finance
Extra Finance is a decentralized lending and automatic compounding leverage yield aggregation protocol based on the Optimism network. It primarily offers users a variety of financial tools including leveraged lending, farming strategies with up to 3x leverage, long/short strategies, and neutral strategies. Extra Finance aims to enhance yield through leverage within the LYF protocol, allowing users to flexibly use leverage ratios of up to 3 times or higher 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 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 users' returns through leveraged assets and increased yield farming positions. Additionally, Extra Finance has integrated LI.FI's widget, enabling 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
In this year's Crypto industry, various wealth creation myths surrounding Meme coins are frequently seen, and it can be said that Meme coin projects have become a major force driving capital and user participation. They can almost be regarded as a marketing tool of the Base chain to attract users. For example, projects like TYBG, Degen, and Brett, among others, have seen very high popularity of Meme coins on the Base chain appearing almost every short period, attracting a large amount of market traffic, and even some Meme projects on the Ethereum mainnet have begun to migrate 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 typically stems from community consensus and emotional resonance. The popularity and market performance of Meme coin projects are often dictated by community sentiment and behavior, resulting in high uncertainty and volatility. Behind the wealth creation myths of Meme coin projects, numerous risks also exist. On one hand, the drastic price fluctuations of Meme coins expose investors to significant risks; on the other hand, their value lacks a genuine economic foundation and relies on market sentiment and speculation, potentially leading to bubbles. In summary, the rise of Meme coin projects brings both challenges and opportunities. It is crucial to rationally examine the Meme craze for both the Base chain and the entire cryptocurrency market; only in the long run can the industry develop healthily and stably.
SocialFi
In this cycle, it can be seen that SocialFi projects have attracted a considerable number of new users from various public chains from the traditional Web 2 world, not only bringing new traffic to the chain but also bringing in new funding. Therefore, SocialFi projects are the best breakout track in the Crypto industry. The Base chain has also seized the breakout effect brought by SocialFi, achieving rapid growth through friend.tech in September 2023. By closely binding with Twitter, friend.tech allows users to purchase shares of any friend.tech user with Base chain's ETH, gaining the right to communicate directly with them and potentially profiting from it. Later, Farcaster further elevated the reputation of the Base chain, attracting a large number of on-chain and off-chain users and 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 use it by binding their Twitter accounts and monetizes social value by buying and selling keys of Twitter users. Each account has its unique social value, similar to stocks, and users can 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 creators' 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 at its launch, attracting a large volume of transactions and attention, its trading volume and popularity gradually declined afterward. The platform also introduced new features like Clubs, but the activity of these features quickly cooled down.
Friend.tech is an innovative attempt by the Crypto industry in the SocialFi field, aiming to redefine user interaction and revenue models in social networks by combining decentralized technology and social media elements. However, with the reduction of market heat, how to continuously attract users and creators to participate remains a significant challenge the platform faces.
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 achieves hybrid storage through the adoption of Farcaster Hubs, making its operational fluidity far superior to other projects in the same track. Additionally, Farcaster employs the Frames plugin, allowing users to use the Frames plugin directly within the Farcaster page without switching between Farcaster, wallets, and project websites, enabling functionalities such as participating in airdrops, minting NFTs, and participating in games, closely resembling the user experience of existing Web 2.0 social projects, thus giving Farcaster a significant advantage in the SocialFi competition.
The reason Farcaster was able to stand out quickly 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 while significantly enhancing user autonomy and innovative interaction features. For example, Warpcast introduces blockchain features such as Direct Casts and Warps points, which can be used to launch new channels or connect accounts with other applications and clients. Moreover, Warpcast's user interface and functionalities closely resemble Twitter, allowing users to post, follow, comment, and more seamlessly.
The main reason for Farcaster becoming the most influential SocialFi project on the Base chain is its adoption of the DEGEN token, which was originally a Meme token, an ERC-20 Token issued on the Base chain. The core feature of Degen is its innovative distribution method: airdropping to Farcaster users based on 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 their Farcaster-connected wallet. Once eligible, users will receive daily tip balances based on their held points and can donate these tips to other Farcaster users.
In summary, the Farcaster project itself, through its unique project framework, has completely transformed the traditional data storage methods of SocialFi projects, and the introduction of the Frames plugin significantly enhances its application effectiveness and efficiency compared to other SocialFi projects, helping it to become a leader in the Social industry.
Coinbase's Innovations on the Base Chain
In recent years, with the growing popularity of AI narratives in traditional markets, the concept of AI + Crypto has also sparked an unprecedented wave in the Crypto industry, evolving from widespread adoption of AI in the SocialFi track to on-chain Defi users, gradually leading to the emergence of the AI agent concept. 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 pathway for AI to gain financial autonomy. Through crypto wallets and smart contracts, AI can autonomously set expenditures and manage funds and transactions.
Recently, Coinbase has also entered the AI agent niche by launching Based Agents, which provides users with the opportunity to create AI agents on the Base chain in just three minutes, and these agents will have crypto wallets. Users can even choose to authorize these agents to conduct transactions, transfers, and 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 more easily in the cryptocurrency market without worrying about cumbersome processes and real-time supervision. This will significantly enhance user experience. Currently, within the Base chain, Virtuals Protocol is the most popular AI agent product.
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 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 mainly comes from community participation and narratives 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 AI agents' behavioral characteristics 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. The Virtuals Protocol hopes to build an easy AI Agent launch for games and consumer applications through a fair launch platform, and to generate income by assigning token value through the market.
On the Virtuals Protocol, the hottest AI agent currently is LUNA's digital human IP, which is an agent under AI-DOL, having amassed hundreds of thousands of followers early on TikTok. LUNA aims to ensure that its token market value reaches $40.9 billion and become the most valuable asset globally. To achieve this goal, it will either repurchase tokens with its wealth or inspire confidence in people's vision to purchase and hold its tokens. In a short period, the market responded to its wishes, rapidly pushing the market value of the LUNA token to $240 million, but it quickly fell back within a few days.
The development of the Virtuals Protocol provides a new ownership layer construction method for AI agents in the gaming and entertainment fields. Through tokenization channels, agents can interact more directly and flexibly with the market to achieve their individual or group goals. In this process, agents can accumulate wealth through their own efforts to support the token's value while also relying on the market's recognition and support for their vision and capabilities.
Summary
Base, as an Ethereum Layer 2 network launched by Coinbase, is built on the Optimism OP Stack and has rapidly developed 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 covers various popular tracks including DeFi, Meme coins, and SocialFi, with 323 Dapps. Particularly in its collaboration with Circle, the native USDC support and CCTP cross-chain protocol have greatly 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 technology applications, and a diverse range of ecosystem projects, Base has become one of the most promising Layer 2 solutions in the Ethereum ecosystem, providing strong infrastructure support for the development of decentralized finance and Web3.
