The long-awaited Coinbase L2, Base, is finally here and with it the start of “Onchain Summer”. First introduced on February 11, 2023, Base mainnet officially kicked-off on August 9, 2023 though the network had been live for several days prior. Base is an Ethereum Layer 2 network built on the OP Stack (in collaboration with Optimism), as part of the Optimism Superchain, a network of L2 chains that “share bridging, decentralized governance, upgrades, a communication layer and more[.]”
In the last week of Base’s launch, the network captured headlines with memecoin frenzy spearheaded by a token by the symbol BALD. Compared to previous L2 and sidechain launches, Base has one critical and very particular advantage it can leverage: the experience of others.
Here we look at the start of some key networks leading up to Base’s launch:
Ethereum was launched in July 2015 with the native cryptocurrency Ether (ETH), which has since claimed the second highest market capitalization after Bitcoin (BTC). Ethereum has undergone several changes since launch – most of them planned protocol upgrades – including a contentious hard fork as a result of the first-ever DAO on the network getting hacked (creating Ethereum Classic ETC in turn). Since then Ethereum has undergone several upgrades including most recently a move from proof-of-work to a proof-of-stake consensus mechanism resulting in Ethereum 2.0 (Eth2).
In its current form, Ethereum’s design consists of Ether (ETH) being the main currency used for gas and as a reward to validators in its proof-of-stake block mechanism. The network consists of two account types: user accounts (also known as externally owned accounts or EOAs) and smart contracts. The network utilizes the Ethereum Virtual Machine (EVM) runtime environment for transaction execution.
Daily block production on Ethereum has historically been far higher than other networks like Bitcoin, Bitcoin Cash, Litecoin, and ZCash.
Duration (a measurement of block confirmation speed) has been far lower on Ethereum than other networks – transactions are confirmed far quicker on this network than on others.
Faster transactions – with no change in blocksize – have often come with a trade-off: significantly higher transaction fees. With the introduction of Layer 2s and side-chains, new networks have been looking to build on top of Ethereum’s time-tested EVM and security benefits (not to mention large user base) while improving in areas such as (and not limited to) transaction speed, transaction fees, community features, and partnerships.
The Polygon network launched in June 2020 (rebranded as Polygon Technologies in February 2021), but its history started back in 2017 under the name of the Matic Network. Polygon is a proof-of-stake network utilizing its’ native token MATIC (its version of ETH used for gas and rewards). Polygon is often regarded as one of the first L2’s launched for the Ethereum network, though technically it’s a combination of an L2 and a side-chain given that it has its own consensus mechanism (a side-chain) but also uses the Ethereum network for consensus on several features (an L2).
Polygon’s first 100,000 blocks were slow to say the least. Despite the network having existed in a different form for some years prior, Polygon mainnet didn’t launch until its rebranding in 2020 (Block 1 occurred on May 30, 2020).
Transactions per block on Avalanche for blocks 50,000 to 100,000
In fact, traction on the network didn’t occur until almost a year later once the network officially rebranded itself in February 2021.
The current BNB chain was launched by Binance in April 2019 under the name Binance Smart Chain to facilitate decentralized (non-custodial) transactions. Binance has long been one of the largest centralized exchanges in the world, and the BNB network was significantly boosted by Binance’s stature and the BNB token which was launched in 2017 – the token name stands for “Build and Build” and was formerly known as Binance Coin. Since the network launch, BNB (the token) has become the gas token for the network as well as a governance token; BNB (the network) has been inching closer toward decentralization.
The network, similar to Avalanche, is a multi-chain network: BNB Beacon Chain (formally Binance Chain) for governance, staking, and voting, and BNB Smart Chain (BSC) (formally Binance Smart Chain) which is an EVM-compatible consensus layer. The network aims to be a Layer 1 with Layer 2 networks built on top of BSC to expand its capabilities. Moreover, it is a proof-of-stake network, though unlike other POS tokens the supply of BNB is non-inflationary (and may even decrease over time) due to Binance’s coin-burn process.
BNB’s transaction volume hit the ground running from the start, with the network seeing no less than 3 transactions per block. Compared to a more organic network launch like Arbitrum, these transaction counts showcase the immediate power of branding and integrated communities. It is difficult to compare this network launch from a heavily incentivized L1 launch like Avalanche though the differences are starkly obvious.
Average blocks per minute (in groups of 1,000 blocks)
In addition to stable transactions per block, BNB also had the fortune of consistent block production. While it couldn’t match Polygon’s production, BNB far outperformed Ethereum in its infancy. Future challenges for the network included a hard fork in October 2022 after a $100 million exploit (though for much different reasons than the Ethereum hard fork) and a network pause.
In late 2020, Avalanche launched as a new L1 competing with Ethereum as a blockchain solution aimed at addressing scalability and latency. Led by Emin Gün Sirer, a professor at Cornell University, the Avalanche team introduced a novel consensus protocol enabling parallel transaction processing and achieving a high throughput of 4,500 transactions per second.
Avalanche’s network token is AVAX, currently ranked 18th in terms of market capitalization one position away from Bitcoin Cash (BCH), and the network is proof-of-stake. Rather than leveraging EVM for transaction executions, Avalanche introduced its own version known as Avalanche Virtual Machine (AVM). Avalanche is EVM backwards compatible through their C-Chain.
To achieve high transaction throughput and low transaction fees, the network has its own series of Layer 2 networks: X-Chain / eXchange, C-Chain / Contract, and P-Chain / Platform. Responsibilities across Avalanche are distributed across these L2 solutions:
Avalanche’s early history had a relatively large number of transactions per block, compared to other networks’ early starts, hitting 25 transactions per block by around block 75,000.
Notably, Avalanche’s launch did come with several incentives; some examples include Avalanche-X encouraging early developers, Avalanche Rush encouraging liquidity miners, and the Denali Incentivized Testnet which encouraged early validators. These incentives were able to drive early adoption of the network though like many incentive schemes holding onto users when there is little-to-no friction is a bigger challenge. Within the first 100,000 blocks, there were over 3,600 unique transmitting users (users who made an onchain action such as a DEX trade, sending funds, or approving a smart contract function).
Arbitrum was created by Offchain Labs in 2019, founded by Princeton professor Ed Felton and two PhD students Steven Goldfeder and Harry Kalodner. Arbitrum is one of Ethereum’s first true Layer 2 solutions and known as an Optimistic rollup in reference to the mechanism used in which it is assumed that all transactions contained within a rollup are valid. What makes this mechanism unique is speed as the network does not need to spend time confirming the validity of transactions. The trade-off here though is that withdrawals can take around a week, which is the amount of time the network allows fraudulent transactions to be contested. Arbitrum also leverages Ether (ETH) as its primary token, allowing gas to be paid in ETH.
Despite its launch in May 2021, Arbitrum finally released its anticipated ARB token as an airdrop to eligible users in March 2023. The token is used as the networks’ DAO governance token – the same DAO governance that was caught in a mishap in April 2023 when the DAO locked an estimated $770 million (700 million ARB tokens) in a vesting contract prior to a DAO vote which saw the DAO vote against the move. ARB is currently the 37th ranked token in terms of market capitalization with an over $1.45b market cap.
Gas price (in wei) per block on Arbitrum for blocks 0 to 100,000
As the network churned through its early stages after launch, gas fees began to normalize soon after. As we’ll see later in this report, Arbitrum’s average gas price (mainly caused by the first 5,000 blocks) were surprisingly high for the L2 which promised a reduction in gas prices and faster block production over Ethereum. The network continued to improve upon itself and boasted an average 14 cent transaction fee, far lower than Ethereum’s estimated 75 cents during the same timeframe.
Optimism was originally known as the Plasma Group, launching in 2019 to scale Ethereum through “Plasma chains”. The Plasma Group introduced the Optimistic Virtual Machine (OVM), but after several challenges the organization rebranded to Optimism in early 2020, launching the network alpha mainnet in January 2021 – in October 2021 an Ethereum-compatible alpha mainnet was launched, and finally, the open mainnet that continues today was launched in December 2021.
Another highly incentivized launch, Optimism (along with Arbitrum) has become one of Ethereum’s most popular L2 networks. Also an Optimistic rollup, Optimism leverages Ethereum’s security solutions while producing faster transactions and lower transaction costs. Optimism also uses ETH as its gas token and performed the first airdrop of its governance token OP in May 2022 to eligible addresses, after the network’s mainnet went live in December 2021. A second airdrop occurred in January 2023, and future airdrops are rumored or planned. OP is currently ranked #42 in terms of market capitalization, with an over $1.2b market cap.
Optimism’s superchain overview
Another key differentiator for Optimism is the Superchain which aims to be a modular development stack for other chains to build and develop on. Modularity has long been at the core of Optimism and the Superchain supports cross-chain messaging which is often the source of bridge exploits as some users take advantage of message delays, fraudulent proofs, and uncoordinated oracles. New chains added to the Superchain ecosystem include Base and Zora.
Optimism’s transmitting address growth for blocks 0 to 100,000
By the time of its launch, Optimism had already been working with several developers such as Uniswap and was able to support Uniswap v3 early on. This early development and lengthy alpha state of the mainnet likely contributed to the immediate success of the open mainnet release.
Base’s launch is an important milestone for Coinbase, the centralized exchange behind the network. It marks a big shift in priorities for the company which has been facing legal battles with the SEC and has seen revenues declining due to the ongoing crypto bear market in which trading fees have been significantly reduced. The exchange has been moving towards more on-chain products such as the Coinbase NFT platform, Wallet as a Service (WaaS), and in-app dApp store (allowing users to interact with on-chain protocols from the Coinbase app), as well as its heavy investment into Coinbase Wallet to compete with MetaMask. This new chain brings new revenue-generating opportunities such as protocol fees.
Given their main competitive businesses as centralized exchanges, the comparisons between BNB and Base will likely be an ongoing theme throughout the industry. However the two networks are remarkably different: While Binance chose to create a new L1, Coinbase decided to create an L2. This particular L2 is part of the Optimism Superchain and is generally considered an Optimism clone. Where Binance can leverage its own token (BNB), Coinbase opted against creating a token and uses ETH for gas. Base is also far from decentralized – at the moment Coinbase is the sole operator of the sequencer for the network, validating and executing transactions on the network.
Average blocks by network per minute from block 0 to 100,000
If we can only use one word to describe Base’s first 100,000 blocks: “fast” would come to mind. The network has produced an incredible average of 30 blocks per minute far superior to any other network in their infancy. It’s impossible for this to be a fair comparison given that Base has had years of experience and improvements to build upon, however it’s a bright start to the network which has committed to improve upon itself in the immediate future.
Gas prices are also a huge advantage for the incumbent L2, which is over a quarter cheaper than that of Optimism’s first 100,000 blocks. Sure, there may be several external factors for this experience other than gas efficiency (for example, Arbitrum and Optimism were both launched during periods of active market participation and Base’s launch is firmly in a bear market) but it’s a great place to build upon. With the expectation of large inflows of users and TVL, Base is hoping these gas fees can continue to bring an advantage for users and create stickiness, which has been a big point of concern for some of the networks which incentivized their launches. Low gas fees are beneficial for Coinbase as well, as one of the largest market movers on the Ethereum chain. Coinbase has a large incentive to pivot its exchange capabilities towards Base to reduce gas fees, especially during volatility when people are most likely to use Coinbase.
Considering Base mainnet launched under the radar, it’s no surprise that there was very little user activity during the first 100,000 blocks. Activity on the network is likely to be developers putting everything into place as they await for a more public reception. In fact, we can see that two networks (other than Ethereum) with any significant user participation in these initial stages heavily incentivized users to perform activities on their networks and likely had strong development activity on their testnets prior to launch.
Unique active addresses by network from block 0 to 100,000
As more networks continue to launch, they can learn from the actions of others to create new playbooks or replicate successful ones to ensure a higher chance of success. It’s important to also remember the context of these launches as market factors also play a critical role in adoption and user participation.
Stay on the lookout for the follow-up where we take another look at these networks seeing how they’ve evolved over time, and to see how Base really is holding up.
To learn more about Amberdata, please contact us to book a demo, hear how our products can help your business, or receive pricing information.