Discover more from Your Crypto Community
Coinbase goes after your DeFI money. Here's their plan. #13
With the launch of #Base, Coinbase has big dreams with your money. Is this the future of DeFI or a hostile takeover?
If you are not already living on the moon you may have read about the latest development in the Ethereum ecosystem. Coinbase, one of the leading centralized exchanges in the USA, has launched its own Layer-2 network on top of Ethereum called #Base.
This is extremely bullish for ETH’s price on a fundamental basis and will bring a lot of fresh users to crypto and DeFI (Decentralized Finance). Coinbase aims to onboard the next billion users to web3 with Base. I must admit, it’s bold.
Let’s see if this has legs to stand on. In what follows I will highlight:
#Base technical details in simple terms
What is the end game for Coinbase?
How this impacts Ethereum and its price
Why Real Yield matters and how you can benefit (a thread)
Think of #Base like the Binance Smart Chain (BSC) of Binance. The difference here is that Coinbase did not choose to launch its own blockchain or token (like BNB), but rather to build on top of Ethereum via a Layer-2 (L2) solution.
What’s a L2?
It’s a separate network that will process - faster and cheaper - all the computations that would normally take place on Ethereum. This eases the pressure on Ethereum’s network space and only the results are posted back on Ethereum. This has the added value of having the network security of Ethereum with the low gas fees of a L2 (also paid in ETH, but 10x cheaper according to Coinbase).
Obviously, this has a caveat = centralization.
You can’t have 10x cheaper fees and speed unless you compromise on security and decentralization. It’s also known as the trilemma of crypto. You can read more on that in my previous newsletter.
Why didn’t Coinbase launch its own blockchain and token?
They could not. As a US company, any token would have been deemed a security. Plus, Coinbase is already on NASDAQ with the ticker #COIN. That’s their token. 😅
What is their end game? Profits. That #COIN stock has to be pumped, right? It only dropped from $430 to $30 in this bear market.
By pushing their users and incentivizing developers to use #Base instead of Ethereum or other competing L2s, Coinbase will accrue hundreds of million per year in fees since they will validate their own network. Expect them to seed a lot of DeFI protocols, decentralized exchanges, lending, and NFTs on #Base. The bigger the ecosystem, the bigger the fees they will accrue.
Not bad. Their bet is on Ethereum and it’s not the wrong bet. They went with the current market leader and winner in DeFI. No matter how you look at it, this is a net positive for the crypto space. Anyone onboarding new users to crypto is a win in my book.
However, I have some concerns.
One of them is that Coinbase may end up transforming #Base into a sort of “Apple App Store” where they would effectively have full control and ownership over any developer or protocol deployed on #Base. This does not sound like the ethos of Bitcoin or crypto. Such centralization is hardly attractive to anyone that wants to maintain their independence.
See my below tweet as well. Tornado Cash was effectively banned from Ethereum. Nothing stops Coinbase to do the same with anyone they won’t like on #Base.
Biggest takeaway? Bullish on Ethereum. Scroll down.
Regardless of how #Base turns out for Coinbase, there is one guaranteed winner: Ethereum. Therefore, your bet should be on Ethereum, more so than on #Base or #COINbase. That is the real alpha out of this.
I expect Ethereum to pump hard in the next bull market. Reaching and maybe exceeding $10,000 / token. Yes. The logic is simple. If Coinbase actually succeeds at onboarding a billion users to Ethereum, then I don’t have to explain what that means for its price. And #Base is just one of many L2 competing for market share.
Instead of betting on who wins the L2 race, you bet on the one that owns all the horses at the end of the game. This brings me to the last topic of this newsletter.
What Coinbase is doing by launching #Base is to create a full ecosystem that will generate real, sustainable returns for their company which will eventually be reflected in their token or should I say stock price of #COIN.
This is basically the definition of Real Yield - tokens that accrue value due to the economic activity on a specific chain, protocol, or network. All those fees go to the token holders (and network validators).
Below is another ETH L2 (Arbitrum) which has some very successful protocols built on it that accrue real value to its token holders. You can be one of those holders. Click on my below thread for more.
To get started on your crypto journey use one of my referrals (scroll down on the link) and then consider becoming a Patron. You can find me on Discord for any questions and if you want to start a collaboration, reach out!
Duo Nine - YCC Founder