Ethereum network speeds can be slow, and the cost of using it can be prohibitively expensive, especially for small transactions.

In 2023, Coinbase stepped in to help solve the problem. Its approach: to build a layer-2 (L2) network atop Ethereum. 

This explainer will quickly get you up to speed on L2s and other projects working to scale Ethereum, and then dive into what Base says it can bring to the table. 

What Are Layer-2s Again?

Layer-2 networks are blockchains that run atop other (layer-1) blockchains, such as Ethereum. Since Ethereum is near its upward limit of roughly 1 million transactions per day, any additional demand on the network results in higher prices for users (i.e., you pay more to get your transaction through) and/or slower speeds (e.g., you wait until congestion ebbs). So, while Ethereum is decentralized and secure, it lacks a third property of a Platonic blockchain: It’s not scalable.

L2s help solve this by moving bunches of transactions to another blockchain, processing them there, and then sending compressed data back to the L1. Popular L2s include Optimism, Arbitrum, and Loopring. [For an overview, check out our quick history of Ethereum scaling.]

What Is Base?

Base is a layer-2 blockchain that’s, er, based on Optimism’s open-source stack of software. Coinbase is working on the network with the OP Labs team that created Optimism. That’s right, instead of taking aim at a competitor, the centralized exchange is collaborating with it—for now, at least.

While Optimism took steps in 2022 to decentralize control of the protocol, Base will be built by Coinbase in-house. Unlike Optimism, Coinbase says it doesn’t “currently” plan to issue its own token. It does say, however, that it will “progressively decentralize the chain.” 

Base has the, ahem, basic setup of many other L2s: 

  • It’s designed to get its security from Ethereum.
  • It’s EVM-compatible, meaning its smart contracts are recognized by computers running the Ethereum software.
  • Transaction costs on the network are generally much lower than on Ethereum alone.

Though Base says it’s “rollup agnostic,” by building off of Optimism’s stack, it’s sticking its flag in the ground for a particular type of rollup. There’s an ongoing battle in L2 land between zk-rollups and optimistic rollups. Protocols using the latter type assume that transactions are valid, but they contain a mechanism for users to prove fraud. The former employs zero-knowledge (zk) proofs to demonstrate that a legitimate transaction took place—without showing their work. [See our guide to zkEVMs for more.]

There’s some disagreement between the groups as to whether zk-rollups are ready for prime time; many optimistic rollup devs assert that the technology isn’t as mature as optimistic rollups.

Base joins Optimism, Arbitrum, Boba, and others in the optimistic rollup camp.

Why Another L2?

It’s clear from Coinbase’s February 2023 introductory announcement that the exchange sees the L2 as a home base for decentralized applications. In other words, L2s can make individual users’ transactions faster and more affordable, but the big money is in getting DeFi, gaming, and NFT applications to integrate. 

To that point, Base is promising developers “access to Coinbase’s products, users, and tools.” 

The Future of Base

Base’s testnet went live in February 2023. The next step is a mainnet launch that would open the platform up to everyone.