Base Is Eating Ethereum's Lunch and Coinbase Is Loving It

Here's a sentence nobody expected to write two years ago: a chain built by a publicly traded exchange is outpacing most crypto-native L2s in daily transactions and user growth.

Base, Coinbase's Ethereum L2, has become a monster. And the implications for the broader Ethereum ecosystem are complicated.

The Numbers

Base regularly processes millions of transactions per day. In terms of daily active addresses, it's consistently in the top 5 across all blockchains, not just L2s. The growth curve has been steep and sustained, not a one-time spike from an airdrop.

AAVE V3 has $700 million in TVL on Base alone. Uniswap, Aerodrome, and dozens of DeFi protocols have deployed there. The chain hosts a thriving ecosystem of social apps, NFT platforms, and increasingly, meme tokens.

All of this, and Base doesn't even have its own token.

Why Base Is Winning

Three words: distribution, distribution, distribution.

Coinbase has over 100 million verified users globally. When those users want to interact with DeFi, NFTs, or any on-chain activity, Base is the path of least resistance. No bridging through a third-party app. No finding a faucet for gas tokens. Just a button in the Coinbase app that takes you to Base.

CoinDesk recently reported that Robinhood is building its own L2. That tells you something. When the world's biggest fintech apps see what Coinbase is doing with Base and decide to copy it, you know the distribution advantage is real.

Compare that to Arbitrum or zkSync, which require users to understand bridging, manage separate wallets, and navigate unfamiliar interfaces. Base makes all of that invisible. For the average crypto user, Base IS Ethereum. They don't know or care about the difference.

Coinbase's Genius Play

Let's be real about what's happening. Coinbase is vertically integrating the entire crypto stack.

On-ramp? Coinbase.com and the Coinbase app. L2 chain? Base. Wallet? Coinbase Wallet. Staking? Coinbase earns a fee on cbETH. Trading? Coinbase exchange.

Every step of the user journey is captured by Coinbase. When you buy ETH on Coinbase, move it to Base, trade on a DEX, and stake the result, Coinbase touches every single transaction. They earn sequencer revenue on Base. They earn exchange fees on the initial purchase. They earn staking commissions on cbETH.

This is what every tech company dreams of: a closed ecosystem where the user never leaves your platform. Apple did it with hardware, software, and services. Coinbase is doing it with exchange, chain, and wallet.

The Centralization Problem

And now the uncomfortable part.

Base is run by Coinbase. The sequencer, the entity that orders transactions and produces blocks, is operated by Coinbase. There's no decentralized sequencer network. There's no credible path to one in the near term.

This means Coinbase can:

• See all transactions before they're included in a block
• Order transactions in whatever sequence they choose
• Censor specific transactions or addresses
• Extract MEV if they wanted to (they say they don't)

For a community that supposedly values decentralization, this is a pretty big deal. A single publicly traded US company controls the most popular L2. If the SEC subpoenas Coinbase for transaction data, they have it all. If a government orders censorship of specific addresses, Coinbase has the ability to comply.

"But It's Still Ethereum"

The counter-argument is that Base is still an Ethereum rollup. Users can force-exit their funds to L1 even if the sequencer goes down. The state is posted to Ethereum, providing data availability. In theory, Ethereum L1 is the escape hatch.

That's technically true. But practically, how many Base users know how to force-exit through the L1 contracts? How many even know what a rollup is? The vast majority of Base users came through Coinbase and would be stranded if Coinbase turned off the chain.

The "just exit to L1" argument assumes users who chose Base specifically because they didn't want complexity are going to successfully navigate complex L1 escape mechanisms. That's a fantasy.

What This Means for the Ethereum Ecosystem

Base's success creates a paradox for Ethereum.

On one hand, Base is the biggest success story for the rollup-centric roadmap. It proves that L2s can achieve massive scale, low costs, and great user experience. It brings millions of users into the Ethereum ecosystem who would never have used L1 directly. It generates demand for ETH (gas is paid in ETH on Base).

On the other hand, Base is absorbing activity that might have gone to Ethereum L1 or to more decentralized L2s. Every user on Base is a user not on Arbitrum, not on Optimism, not interacting directly with L1. The value accrues to Coinbase, not to the broader Ethereum community.

Ethereum becomes the "settlement layer" while Coinbase becomes the "user layer." If you think the settlement layer captures more value, this is fine. If you think the user layer captures more value (as internet history suggests), this is a problem for ETH.

The Robinhood Domino

CoinDesk reported Robinhood building its own L2. If that happens, we'll have another major fintech with a proprietary Ethereum L2 and a massive built-in user base.

This might become the standard model: every major exchange and fintech app builds their own L2, capturing their users within proprietary ecosystems. Ethereum L1 becomes shared infrastructure that nobody directly interacts with, like how nobody interacts directly with TCP/IP.

That's great for Ethereum as a technology. It's less clearly great for ETH as an investment, especially if blob fees stay near zero and L2s capture most of the user-facing value.

My Take

Base is probably the most important thing to happen to Ethereum since The Merge. It's proof that the rollup roadmap works at scale. It's bringing more users on-chain than any crypto-native L2 has managed.

But it's also a warning about what happens when a single company captures the most valuable layer of the stack. Coinbase is building a crypto empire, and Base is its most important asset. The question isn't whether Base will succeed. It clearly already has. The question is whether that success enriches the Ethereum ecosystem or just enriches Coinbase.

Right now, I'd say it's mostly the latter. And that should concern ETH holders more than it seems to.