- Coinbase is moving customer and corporate USDC stablecoin accounts to Base, its Ethereum layer-2 blockchain, to better manage funds with lower fees and faster settlement
- The move demonstrates growing adoption of layer 2 solutions like Base to scale Ethereum and pave the path toward an on-chain financial system
- Some criticize Base’s centralization as Coinbase currently controls it, but Coinbase intends to progressively decentralize it over time
Coinbase recently announced that it will start moving more of its customer and corporate USD Coin (USDC) stablecoin accounts to Base, its Ethereum layer-2 blockchain. This move will allow Coinbase to better manage and secure customer funds with lower fees and faster settlement times.
Coinbase’s Motivation
The change impacts Coinbase.com accounts, not Coinbase Wallet. Currently, Coinbase.com user tokens are custodied by Coinbase in a wallet secured by multiparty computation. Vice president Max Branzburg stressed that Coinbase always holds customer assets 1:1 and doesn’t lend funds out unless instructed.
The Benefits of Moving On-Chain
According to David Hoffman, co-host of the Ethereum-focused show Bankless, Coinbase’s move on-chain will pave the path toward a future on-chain financial system. Bankless co-host Ryan Sean Adams believes it will also set a precedent for exchanges and banks to follow.
Concerns Around Centralization
Some people are concerned about Base being too centralized in its current state. Coinbase is currently the sole sequencer of Base, meaning the chain is fully controlled by the exchange. However, Coinbase has stated its intention to progressively decentralize Base over time.
About Base
Base was launched as an Ethereum scaling solution on August 9, 2021. It uses optimistic rollups to store transaction data off-chain and submit transactions to Ethereum’s base layer. In October, Coinbase open-sourced Base’s code to increase transparency while allowing public contributions. Base is currently the fourth largest Ethereum layer 2 in terms of total value locked.
Conclusion
While some criticize Base’s centralization, Coinbase’s move demonstrates growing adoption of layer 2 solutions. As more assets migrate to Ethereum’s scaling layers, we inch closer to mass adoption of blockchain technology.
