The TVL of Base saw a prominent increase in March, benefiting from the recent meme frenzy. The Base TVL surpassed 700 million USD, reaching a historical high of 743 million USD at the time of writing. With the backing of Coinbase, Base seems to be becoming a new growth point in the Ethereum ecosystem.
The increase in on-chain activities on Base has been questioned by the community, with concerns that it may be driven by bots rather than genuine active users. However, the need for real users and on-chain activity is particularly crucial for Base compared to other chains.
Base launched its mainnet in August last year, and protocol lead Jesse Pollak explicitly stated in a Bankless podcast that Base would not issue tokens and had no plans to do so. As the only chain created by the publicly listed cryptocurrency exchange Coinbase, Base indeed has low token issuance expectations, thus relying on real users to contribute fee income as the source of revenue for the entire ecosystem.
It is well known that the cryptocurrency market is a highly speculative and capital-efficient environment. So why are users entering Base, and how is Base attracting more users, and what is the potential for further growth?
Ecological Logic of Base
With no token issuance expectations, Base has become a unique presence in the Ethereum Layer 2 ecosystem. It seems that there is a surge in actual income and traffic for the entire ecosystem on Base at regular intervals. From the TVL trend chart, it can be seen that Base has experienced three significant increases in TVL since its launch.
The first surge was driven by the popularity of the social application Friend Tech, which single-handedly led to a sharp increase in Base TVL. The second surge occurred in February this year when the social protocol Farcaster introduced new features called frames, along with the community meme coin DEGEN and a series of anticipated airdrops. The third surge occurred recently with the implementation of the Cancun upgrade, with Coinbase's support helping to increase on-chain liquidity for Base's DeFi projects, along with the synergistic effect of increased market capital inflows.
These three surges also respectively demonstrate the unique developmental factors inherent in Base compared to other Layer 2 solutions.
Focus on User Growth "VC Chain"
Do you remember the market frenzy brought about by Friend Tech last year? Although it may seem somewhat chaotic now, at that time the market was still in a bearish cycle, and the emergence of the social protocol Friend Tech on the Base chain was like a bolt from the blue.
From the initial product release in August to mid-October, the Friend Tech protocol accumulated $21 million in revenue, with a daily peak revenue of approximately $1 million, far exceeding mainstream DeFi protocols or NFT markets at the time. By solving industry pain points through social viral sharing, Friend Tech achieved a cold start through speculative effects at the right time, and relied on rapid iteration and bundling with Paradigm to solidify development expectations, in addition to enhancing user stickiness through the release of anticipated airdrops. It can be said that Friend Tech provided a valuable product management lesson for the Web3 market at that time.
In this upward spiral, the early stage relied on invitation codes and well-known KOLs to drive social viral sharing, but the emergence of Paradigm was a key factor. A research report from Folius Ventures indicated that Friend.Tech refused to engage with any VC other than Paradigm, indicating a high degree of association with Paradigm. But if we were to say who benefited the most from this SocialFi frenzy, it is undoubtedly Base.
In addition to Friend Tech, there are other projects on Base, such as FrenPets, which focuses on the electronic pet market, Unlongly, a Web3 live streaming platform, sound.xyz, which focuses on music collection, PartyDAO, a fundraising platform, Zora, which collects art, and Drakula, a Web3 TikTok, and so on.
After the meme smoke cleared on Base, many people asked what else was on Base. Jesse Pollak, the protocol lead of Base, listed a long string of project names, all of which are focused on consumer applications serving Web3 users. Jesse stated that Base is currently brewing a trend called build2earn, or "building influential new on-chain products and winning respect, appreciation, and economic rewards."
Behind these consumer applications are a group of well-known VC institutions in the cryptocurrency market, such as Paradigm, a16z, Multicoin, DragonFly, Variant Funds, and 1confirmation. These VC institutions have differentiated the Base ecosystem into two distinct characteristics due to their different investment styles. One is the "gambler culture" faction led by Paradigm, and the other is the long-term-oriented faction centered around a16z. However, their goal is the same - to bring more real users to Base and create an active and prosperous on-chain ecosystem.
In contrast to the Friend Tech model, there is the social protocol Farcaster, which has been quietly cultivating its user base for the long term. After securing a $30 million investment from VC firms such as a16z and 1confirmation, Farcaster was initially seen as the ceiling for decentralized social protocols. It did not rush to grow its user base until February this year when it introduced the frames framework, which led to widespread adoption through articles from major institutions or KOLs, resulting in a historic high in DAU and a brief trading frenzy on Base.
Currently, Farcaster and its main front-end protocol, Warpcast, have become the backyard of the Base ecosystem, and ecosystem assets represented by DEGEN are becoming the main speculative targets on the Base chain. Although there is still a certain barrier to entry into Warpcast, the Base ecosystem, and even the Ethereum ecosystem, have established their own social circles and culture on it. This may seem somewhat elitist, but as projects continue to break into the mainstream and gain wider user adoption, these "elites" seem to be compromising with the gambler culture.
Ecological Linkage and Interaction with OP
The reason why Base is considered fortunate is not only due to the enthusiastic support from VC institutions in building growth strategies but also its close collaboration with the Ethereum ecosystem. The most representative example is its participation in the OP superchain vision.
In August last year, Base and Optimism jointly announced a governance and revenue-sharing agreement, which stipulated different governance cooperation 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 2 solutions, which were originally in competition, joined hands to build the ecosystem.
Source:
- Original article: https://www.theblockbeats.info/news/44638?keyword=base
- Original article: https://www.theblockbeats.info/news/45275?keyword=friend%20tech
In addition to reaching consensus on strategic direction, Base and OP have also had excellent cooperation in the specific development of ecological projects. Many people believe that since Base has so many consumer applications, perhaps no one is paying attention to DeFi, which is the core configuration of most blockchains. However, Base, with top resources, tells you that it can not only build a truly consumer application chain but also manage liquidity well and create excellent DeFi applications, all thanks to the synergistic effects brought about by ecological linkage.
Currently, the liquidity protocol Aerodrome, deployed on Base by the leading protocol Velodrome Finance, dominates Base TVL. Its native token, AERO, is distributed to liquidity providers through emissions. After launching on Base at the end of August last year, it attracted nearly $200 million in TVL within 24 hours, with liquidity mining yields approaching 1000% on a non-compounded annual basis.
On January 25, Coinbase added Aerodrome Finance (AERO) to its listing roadmap. On February 27, Aerodrome announced an investment from the Base ecosystem fund led by Coinbase Ventures, with the specific amount undisclosed. The investment was made by purchasing Aerodrome's native token AERO. At the time of writing, AERO had surged to over $0.83 in a short period.
The series of actions from Coinbase listing to investment have once again propelled Aerodrome, the liquidity center of Base, with its token price soaring consecutively, with a monthly increase of nearly 700%. At the time of writing, Aerodrome's TVL had reached $317 million, with trading fees totaling $14.52 million and over 33,000 active users.
Backed by the Giant Tree of Coinbase
Coinbase is the key to Base becoming a naturally fortunate Layer 2 solution.
As mentioned earlier, Coinbase is the best trading venue for tokens deployed by some projects on Base, and it is not only beneficial for flows from Base to CEX but also worth paying attention to flows from Coinbase to Base.
Recently, Coinbase launched a new smart wallet with the core feature Magic Spend, which allows users to "instantly" transfer funds on-chain. When signing transactions/making payments, users can choose to withdraw funds from their Coinbase account, with funds only being withdrawn at the time of transaction signing/payment. In addition to having funds in their Coinbase account, users do not need to perform any other operations or download wallet extensions or bridge assets.
The smart wallet further removes barriers between on-chain and off-chain, and Base undoubtedly benefits the most from this. This not only lays the foundation for Base to attract users and funds on a large scale but also allows existing consumer applications on Base to have a wider range of adoption possibilities.
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 stated, "Authorities say that cryptocurrencies have no practical use other than speculation and illegal activities. However, 400 million people worldwide (including over 50 million Americans) have bought cryptocurrencies, and third-party data shows that illegal activities account for less than 0.5% of transaction volume." Armstrong, as the CEO of a CEX, often speaks not only for Coinbase but also for Base, or to legitimize the cryptocurrency market.
Which Targets Are Worth Paying Attention To
With the support of various VC firms and Coinbase, Base will undoubtedly become the most densely populated Alpha in the Ethereum ecosystem. Because of Coinbase's compliance attributes, Base has the innate attribute of not issuing tokens, which also means that if users want to speculate on Base assets, they can only focus on the ecological projects on Base.
Aerodrome, mentioned earlier, saw its native token surge from $0.04 to $0.8 after being listed on Coinbase, with an increase of 1900%. There are many other projects in the Base ecosystem, and the community is also increasing its expectations for their listing on Coinbase.
Moonwell (WELL)
Moonwell is an open lending protocol deployed on Base, synchronized with the Base mainnet. On February 15, Moonwell launched a tool called "USDC Anywhere," allowing individuals to lend Circle's USDC stablecoin to Moonwell through various Ethereum networks. The tool supports detecting USDC in users' 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 send USDC in the Ethereum ecosystem using their digital assets on Moonwell.
As the Base ecosystem heats up, Moonwell's user base is gradually growing. Its native token WELL is currently priced at $0.032, with a 333% increase in the last 30 days.
Avantis
On February 4, the oracle-based synthetic derivatives protocol Avantis completed its mainnet launch on the Base chain, allowing users to trade cryptocurrencies 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.
Currently, Avantis has not issued tokens and launched a trading volume reward on March 12.
Infusion
Infusion is a new AMM protocol on Base, launched on March 15, and is a rising star in the Base liquidity protocol. The Infusion Protocol solidifies on-chain liquidity through a new time-lock component called Timefuse. When liquidity is "time-fused," most fees are allocated to liquidity providers, and the liquidity is locked for a period of time, incentivizing the long-term stability required by DeFi.
The Infusion Protocol is a community-driven project, with contributors and advisors from various DeFi and infrastructure projects. Core contributors and advisors come from 1inch, Pendle Finance, Harmony, LI.FI, and Thorchain.
Infusion has not issued tokens at this time.
BSX
BSX is an emerging DEX on Base and one of the six crypto projects in the first round of investment by Coinbase Ventures' Base ecosystem fund. It uses a non-custodial system with "off-chain execution and on-chain settlement" and will also support commodity and forex trading in the future. BSX is currently in the public testnet phase and will launch its mainnet at the end of the month.
Drakula
On March 14, the social app Drakula.app announced the launch of the on-chain short video social app Drakula on social platforms. Users can earn 250 BLOOD points by logging in with Farcaster and can also earn points by publishing and watching short videos, with creators also earning commission income from each token transaction. In addition, Drakula has partnered with Degen, using DEGEN as the primary trading token, and Degen has provided Drakula with a grant of 10 million DEGEN tokens.
In the project's official introduction, the project stated that it is a social project invested by Paradigm and DragonFly. Considering the previous frenzy surrounding Friend Tech, perhaps we can expect Drakula to perform well in the future.
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