Base’s TVL increased significantly in March. Thanks to the recent meme craze, Base TVL exceeded US$700 million. As of the publication of this article (March 31), the total TVL exceeded US$1.14 billion, reaching a record high. Backed by Coinbase, Base seems to be becoming a new dynamic growth point for the Ethereum ecosystem. The increased activity on the Base chain has been questioned by the community as being a robot and there are not many real active users. The answer may not be that, because no chain needs real users and on-chain activity more than Base. Base launched its mainnet in August last year. Jesse Pollak, the head of the protocol, made it clear on the Bankless podcast that Base will not issue tokens and has no plans to issue tokens. As the only chain built by Coinbase, a listed CEX, Base's token issuance expectations are indeed very low, so it requires real users to contribute fee income as the source of income for the entire ecosystem. As we all know, the encryption market is a place of extreme speculation and pursuit of capital efficiency. So why do users on the chain enter Base? What does Base rely on to gain more users? And how much room does Base have for growth?
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The ecological logic of Base does not have token expectations, which makes Base a unique existence in Ethereum Layer 2. It seems that there will be a magic disk on Base every once in a while, bringing real income and traffic to the entire ecosystem. From the TVL trend chart, it can be seen that Base has experienced three major increases in TVL since its launch.
The first time was when the social app Friend Tech became popular, driving Base TVL up sharply on its own.
The second time was in February this year, when the social protocol Farcaster launched a new feature, frames, the community meme coin DEGEN, and a series of airdrop expectations brought about a comprehensive reaction;
The third time was recently with the implementation of the Cancun upgrade, Coinbase helped the Base ecosystem DeFi project to promote the increase of on-chain liquidity and the synergy of the increase of hot money in the market. These three increases also show that Base's genes carry different development factors from other Layer 2.
1) Focus on user growth "VC chain" Do you remember the market heat brought by the emergence of Friend Tech last year? Although it seems a bit messy now, the market was still in a bear market cycle at that time, and the emergence of Friend Tech, a social protocol built on the Base chain, was like a bolt from the blue. From the product launch in early August to mid-October, the Friend Tech protocol had accumulated revenue of 21 million US dollars, with a maximum daily cumulative revenue of about 1 million US dollars, far exceeding the mainstream DeFi protocol or NFT market at the time.
Solve the pain points of industry sharing through social fission, achieve cold start through speculative effect at the right time, and rely on rapid iteration and bundling Paradigm to consolidate development expectations. In addition, release Airdrop expectations to deepen user stickiness. It can be said that Friend Tech gave the Web3 market at that time a good lesson in product management. In this spiral chain, the early stage relied on invitation codes and well-known KOLs to pull people for social fission, but the emergence of Paradigm was a key factor. A research report from Folius Ventures stated that Friend.Tech refused to contact all VCs except Paradigm, which shows that it is highly bound to paradigm. But if you want to say who benefited the most from this SocialFi craze, I think it is undoubtedly Base.
In addition to Friend Tech, Base also has FrenPets, which focuses on the electronic pet market, Unlongly, a Web3 live broadcast platform, sound.xyz, which focuses on collecting music, PartyDAO, a fundraising platform, Zora, which collects art, Drakula, a Web3 Tiktok, and more. After the Base meme smoke, many people asked what else is on Base. Jesse Pollak, the head of the Base protocol, mentioned a long list of projects, all of which are consumer applications focused on serving Web3 users. Jesse said that Base is currently brewing a trend called Build-2-Earn, or "building influential new on-chain products and winning respect, appreciation, and financial rewards."
Behind these consumer applications are a group of well-known VC institutions in the crypto market, such as Paradigm, a16z, Multicoin, DragonFly, Variant Funds, and 1confirmation. Due to their different investment styles, these VC institutions have differentiated into two characteristics in the Base ecosystem. On one hand, there are the "gambler culture" organizers headed by Paradigm, and on the other hand, there are the long-termists centered on a16z. But they all have only one goal - to bring more real users to Base and create an active and prosperous on-chain ecosystem. In contrast to the Friend Tech model is the long-term low-key social protocol Farcaster. After receiving $30 million in financing from VCs such as a16z and 1confirmation, Farcaster was regarded as the ceiling of decentralized social protocols after its launch. It was not in a hurry to increase user growth at the beginning. It was not until February this year, after the launch of the frames framework function, that it gained large-scale popularity through the introduction of major institutions or KOLs. DAU (daily active users) hit a record high, which also brought a short-term wave of trading boom to Base.
At present, Farcaster and its largest front-end protocol Warpcast have become the back garden of the Base ecosystem, and ecological assets represented by DEGEN are also becoming the main hype targets on the Base chain. Although there is still a certain threshold to enter Warpcast, the Base ecosystem and even the Ethereum ecosystem have established their own social circles and culture on it. This seems a bit elitist, but as the project continues to break through the circle and is adopted by a wider range of users, these "elites" seem to be compromising with the gambler culture.
2) Ecological linkage, sharing what is available with OP The reason why Base is lucky is that in addition to the VC's passion to create a growth plan, it is also due to its close cooperation with the Ethereum ecosystem. The most representative of these is joining the OP super chain vision. In August last year, Base and Optimism jointly announced a governance and revenue sharing agreement, which stipulates different governance collaboration modes between Optimism and Base in the short and long term, as well as the economic interaction between the two parties. In other words, the two Ethereum Layer 2s that were originally in a competitive relationship joined hands to build an ecosystem. In addition to reaching an agreement on the strategic route, Base and OP also have good cooperation in the development of specific ecological projects. Many people think that since Base has so many consumer applications, perhaps no one pays attention to DeFi, the core configuration of most blockchains. But Base, which has top resources, tells you that it can not only build a real consumer application chain, but also do a good job of liquidity management and create excellent DeFi applications, and this also relies on the synergy brought about by ecological linkage. Currently, the liquidity protocol Aerodrome occupies half of Base TVL. It is a forked protocol deployed on Base by OP head protocol Velodrome Finance. Its native token is AERO, which is distributed to liquidity providers through emission. After Base was launched at the end of August last year, it attracted nearly $200 million in TVL in just 24 hours, and its liquidity mining income was close to 1000% annualized without compounding.
On January 25, Coinbase added Aerodrome Finance (AERO) to its token roadmap. On February 27, Aerodrome announced that it had received an investment from the Base Ecosystem Fund led by Coinbase Ventures. The specific amount was not disclosed, and the investment method was to purchase Aerodrome's native token AERO. As of the time of writing, AERO briefly broke through $0.83,
From listing on Coinbase to investing in it, Aerodrome, which is already a liquidity center of Base, has once again taken advantage of the favorable situation. The price of the coin has continued to rise, with a monthly increase of nearly 700%. As of the time of writing, Aerodrome's TVL has reached 317 million US dollars, transaction fees have reached 14.52 million US dollars, and it has more than 33,000 active users.
3) It is good to enjoy the shade under the big tree of Coinbase. But Coinbase is the key to Base becoming a naturally lucky Layer 2. As mentioned above, Coinbase is the best CEX for some projects on Base to deploy tokens. As the saying goes, it is good to enjoy the shade under the big tree. In fact, it is not only the flow from Base to CEX, but also the flow from Coinbase to Base. Recently, Coinbase launched a new smart wallet. The core function Magic Spend allows users to transfer funds on the chain "in a timely manner". When signing/paying a transaction, users can choose to withdraw funds from the Coinbase account, and the funds are only withdrawn when the transaction is signed/paid. In addition to having funds in the Coinbase account, users do not need to perform any other operations, nor do they need to download wallet extensions or bridge. Smart wallets further break through the barriers between the chain and the off-chain, and Base is undoubtedly the chain that benefits the most. This not only lays the foundation for the Base chain to attract users and funds on a large scale, but also makes the existing consumer applications on Base more widely adopted. In addition to empowering the Base ecosystem, Coinbase's compliance management also reduces risks for Base in the longer term.
On March 19, Coinbase CEO Brian Armstrong wrote that "Authorities say that cryptocurrencies have no practical use other than speculation and illegal activity. However, 400 million people worldwide (including more than 50 million Americans) have purchased cryptocurrencies, and third-party data shows that illegal activities account for less than 0.5% of trading volume." As the CEO of CEX, Armstrong often speaks out not only for Coinbase, but also for Base, or to justify the crypto market.
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Which targets are worth paying attention to? With the support of a number of VCs and Coinbase, Base will undoubtedly become the most densely populated place for Alpha in the Ethereum ecosystem. Because of the compliance attributes of Coinbase, Base has the innate attribute of not issuing tokens. This reason also means that if users want to hype Base targets, they can only focus on Base's ecological projects. The native token of Aerodrome mentioned above rose from the bottom of $0.04 to $0.8 after listing on Coinbase, an increase of 1900%. There are many projects in the Base ecosystem, and the community is also increasing its expectations for listing on Coinbase.
1) Moonwell (WELL) Moonwell is an open lending protocol deployed on Base, which was launched simultaneously with the Base mainnet. On February 15, Moonwell launched a tool called "USDC Anywhere" that enables individuals to lend Circle's USDC stablecoin to Moonwell through various Ethereum networks.
The tool supports detecting USDC in user wallets on networks such as Arbitrum, Avalanche, Base, Ethereum, Optimism, and Polygon, and uses Circle's cross-chain protocol to transfer stablecoins to the platform without manually bridging assets, allowing users to use digital assets on Moonwell to send USDC in the Ethereum ecosystem. As the Base ecosystem heats up, Moonwell's users are also gradually growing. Its native Token WELL is currently priced at $0.032, with a 30-day increase of 333%.
2) Avantis On February 4, the oracle-based synthetic derivatives protocol Avantis has completed the mainnet launch on the Base chain. Its protocol allows users to trade crypto assets and real-world assets with leverage. In September 2023, Avantis Labs completed a $4 million seed round of financing, led by Pantera Capital, with participation from Founders Fund, Coinbase's Base Ecosystem Fund, and Modular Capital. At present, Avantis has not issued tokens, and launched trading volume rewards on March 12.
3) InfusionInfusion is a new AMM protocol on Base. It was launched on Base on March 15 and is a rising star of Base's liquidity protocol. Infusion Protocol consolidates on-chain liquidity through a new time lock component called Timefuse. When liquidity is "time-fused", the pool distributes most of the fees to liquidity providers and locks liquidity for a period of time, thereby incentivizing the long-term stability required by DeFi. Infusion Protocol is a community-driven project composed of contributors and consultants from various DeFi and infrastructure projects. Core contributors and consultants come from 1inch, Pendle Finance, Harmony, LI.FI and Thorchain. Infusion has not yet issued a token.
4) BSX BSX is an emerging DEX on Base. It is one of the six crypto projects that Coinbase Ventures' Base Ecosystem Fund invested in in the first round. It adopts a non-custodial system of "off-chain execution and on-chain settlement" and will support commodity and foreign exchange transactions in the future. The core members of BSX come from institutions such as Coinbase, Kraken, FalconX and Jump. BSX is currently in the public testnet stage and will launch the mainnet at the end of the month.
5) Drakula On March 14, the social application Drakula.app stated on the social platform that it has launched the on-chain short video social application Drakula. Users can log in with Farcaster to get 250 BLOOD points, and can also earn points by posting and watching short videos. Creators can also receive commission income from each token transaction. In addition, Drakula also cooperated with Degen to use DEGEN as the main trading token. Degen also provided Drakula with 10 million DEGEN funding. In the official introduction of Drakula, the project party stated that this is a social project invested by Paradigm and DragonFly. Considering the previous craze of Friend Tech, perhaps we can look forward to Drakula's performance in the future.
