March 27, 2024

3 Reasons Why Layer 2 Network Base Has More Than Doubled Its Total Value Locked This Year

Unchained Crypto

Base, the Coinbase-incubated layer 2 network, has undergone tremendous growth since the start of the year.

Data from blockchain analytics firm Artemis shows that the total value locked (TVL), one popular metric to gauge the activity of a network, currently stands at $1 billion on Base. That represents a nearly 130% increase since the start of the year when its TVL sat at $437 million, highlighting substantial growth for a layer 2 network that is less than a year old.

The total locked value on Base since the beginning of 2024. (Artemis)
The total locked value on Base since the beginning of 2024. (Artemis)

The rise of Base’s total value locked stems from a variety of reasons, namely, increased developer activity, an active meme culture, and the advantage of the fact that it has such a strong relationship with Coinbase.

1. Greater Developer Activity

One of the reasons for the rise in Base’s TVL is the growth in activity by developers, who have been lured by attractive incentives. The number of unique contracts deployed on its network, as well as the number of unique wallets deploying contracts on it, have greatly exceeded those on Arbitrum and Optimism, the two largest layer 2 networks ranked by TVL.

On the left, the number of new contracts deployed to Arbitrum, Optimism, and Base. On the right, the number of unique wallets deploying contracts on those networks. (Artemis)
On the left, the number of new contracts deployed to Arbitrum, Optimism, and Base. On the right, the number of unique wallets deploying contracts on those networks. (Artemis)

For the first week of 2024, blockchain developers deployed 5,340 smart contracts on Base, more than Arbitrum’s 2,770 and Optimism’s 1,080. The percentage growth in Base’s smart contracts has also outpaced that of Arbitrum and Optimism.

Base developers deployed 29,550 smart contracts, mostly from unique wallets, in the week between March 18 and March 24, a more than 450% increase since the first week of 2024. By contrast, the number of contracts deployed on Arbitrum has increased 265% in the same period to 10,130, while Optimism has jumped 101% to 2,180 smart contracts deployed.

The increased activity of development on Base arises from the way projects are incentivizing software developers to build on the layer 2 network. For example, developers who build on the smart wallet infrastructure platform Safe and Base itself can apply for free gas credits of up to 1 ETH.

And Base has also been giving grants to builders through hackathons such as ETHDenver and programs such as “Builder Grants” which is for developers “with early ideas or initial prototypes.”

2. A Thriving Meme Culture

The increased developer activity of Base comes as memecoins occupy a large part of the mindshare of those in the crypto ecosystem.

While not as extensive and large as the memecoin ecosystem on Solana, which has several billion dollar market cap memecoins, the highly active meme culture on Base is especially notable compared to other Ethereum L2s.

“Historically there’s not been enough consumer attention on L2s to see a thriving L2 meme ecosystem,” wrote Tina Dai, startup investor and builder, in a Telegram message to Unchained. “Base is different because there’s consumer apps on it already like Farcaster + Friend.Tech and there’s the bet that Coinbase could turn its millions of users onto Base.”

Among the memecoins on Base, TOSHI and DEGEN stand out with a $222 million and $185 million market cap, respectively. Launched in Jan. 2024, the ticker for DEGEN is crypto parlance for “degenerates,” the name for those who are typically high risk traders. The token is also intimately connected to Farcaster, because users on the decentralized social network can reward or tip others with DEGEN for creating “quality content,” as outlined on the token’s website.

TOSHI is a memecoin inspired by Coinbase co-founder Brian Armstrong’s cat and the pseudonymous creator of Bitcoin, Satoshi Nakamoto, according to its landing page. At press time, more than 53,560 wallets are currently holding DEGEN, according to blockchain explorer Basescan, while 34,835 wallets hold TOSHI.

“So to me, what’s really happening is a cycle of hype that feeds itself,” said Dai. “The idea that Base is where the action will be will draw over new memecoins and entrants, and that movement will continue propelling the story. This makes the memecoin culture on Base more cohesive and stronger relative to other ETH L2s, and being at the center of this attention and capitalizing on it well will solidify Base’s spotlight.”

In the past seven days, DEGEN has increased 122% to $0.01451, while TOSHI has jumped 80.3% to $0.0005254, according to CoinGecko.

3. The Coinbase Advantage

Lastly, Base benefits from its relationship with the largest crypto exchange in the United States by trading volume, since the network had been incubated by Coinbase.

While Coinbase users on their mobile device can transfer crypto assets, such as ETH or USDC, directly from their account to a variety of L2s for the same cost, Base is heavily promoted on Coinbase and users are frequently encouraged to use it.

On average for each month of 2023, Coinbase had seven million transacting users, responsible for $468 billion in spot trading volume, according to the exchange’s annual 10K published on Feb. 15. Coinbase is actively trying to improve the user experience of the pathway from the exchange and to the layer 2 Base for their current transacting users. “Our goal with Base is to make onchain the next online and onboard 1B+ users into the crypto economy, wrote Coinbase’s VP of Engineering, Will Robinson, in a blog post from 2023.

Additionally, Base’s- all-time high in total value locked comes hot off the heels of Coinbase vice president Max Branzburg announcing yesterday plans to store more corporate and customer USDC balances on Base. Out of its $92.3 million onchain portfolio, Coinbase holds $60.7 million USDC on its layer 2 blockchain network, data from blockchain analytics firm Arkham Intelligence shows.

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