Introduction

The Base chain is a project incubated by Coinbase, aiming to become part of the Optimism Superchain, and its launch is part of Coinbase's long-term planning. The development of the Base chain is rapid; according to data from Defilama, its TVL has now surpassed established Layer 2 projects like Arbitrum and Optimism, making it the top Layer 2 project by TVL at this stage.

Overview of the Base Chain

The Base chain is a Layer 2 solution built on the standardized, shared, and open-source OP Stack development toolkit supported by Optimism. Optimistic Rollups are more compatible with Ethereum, allowing many decentralized applications (dApps) to migrate directly while having lower computational complexity, making them more suitable for executing general smart contracts and complex computational tasks. However, there are still areas for improvement when using Optimistic Rollups, such as further enhancing decentralization and optimizing the on-chain governance structure, as users have a high demand for the availability of sorting services. Through continuous technical iterations, these shortcomings will eventually be addressed.

To increase the level of decentralization, the Optimism Rollup plans to enhance the existing on-chain governance by adopting the OP Stack, an open-source Layer 2 architecture toolkit, to introduce multiple sorting nodes and reduce reliance on a single sorting service. Currently, the OP Stack maintained by the Optimism Collective aims to build a Superchain that can easily integrate different Layer 2s, creating an interoperable integrated system. To this end, OP Stack provides a series of standardized modules and interfaces, making the process of building Layer 2 applications simpler and more efficient. The OP Stack is divided into six layers: data availability layer, sorting layer, derivation layer, execution layer, settlement layer, and governance layer. Each layer has customizable open-source modules, allowing developers to design custom blockchain networks based on specific use cases.

As the second core development team, Base has joined the development of OP Stack and Superchain, working alongside OP Labs and the Optimism Collective to enhance the activity of the Superchain, add value to it, and promote the growth of the developer ecosystem. Base aims to create a highly integrated chain network that provides users with a seamless experience, ensuring that protocols built on Base can smoothly integrate into the final Superchain and interact with users across multiple chains. Close collaboration with the Optimism Collective on its projects will assist developers in easily structuring new Layer 2s and Rollups, distributing their applications conveniently across the entire Superchain.

Data on the Base Chain

TVL

Figure-1 Base's TVL (Data Source: https://defillama.com/chain/Base)

According to the data in Figure-1, Base's TVL experienced a significant increase after September, rising from $1.419 billion to the current $2.388 billion, an increase of 68.28%. TVL is a critical analytical factor for public chains, and among all ETH-Layer 2s, Base's TVL growth ranks first, indicating that Base has developed rapidly in recent times.

On-chain Address Count

Figure-2 On-chain Address Count of Base (Data Source: https://dune.com/watermeloncrypto/base)

From Figure-2, we can see that the number of on-chain addresses for Base experienced a significant increase after August 2024, rising from 24.55 million to the current 74.88 million, an increase of 205.01%. This indicates that the number of users on the Base chain has more than doubled in the past three months, suggesting that on-chain users are very optimistic about Base's development and that there is a certain wealth creation effect on the Base chain, attracting many users to participate in activities on the Base chain.

By combining the growth of Base's TVL and the number of on-chain addresses, we observe that the average new funds per user on the Base chain is only $1.97, indicating a predominance of small-amount users. Coupled with the fact that after June, the Base chain successfully attracted a large number of users through its social characteristics and the popularity of MEME culture, we can conclude that the spread of Meme culture and enhanced social interaction have made the Base chain a popular social platform, further driving user growth.

Base Chain Revenue

Figure-3 Revenue on the Base Chain (Data Source: https://dune.com/watermeloncrypto/base)

From the revenue chart of the Base chain, we can see that the total revenue of the Base chain in March 2024 was $19.78 million, and the current revenue is $76.55 million. Thus, we can calculate that the revenue on the Base chain increased by a total of 287% from March to October, with an average monthly increase of 41%. This indicates that as the number of on-chain users and activities increases, Base's revenue has maintained a significantly high growth rate.

Weekly Trading Volume

Figure-4 Weekly Trading Volume on the Base Chain (Data Source: https://dune.com/watermeloncrypto/base)

From the chart of weekly trading volume on the Base chain, we can see that the weekly trading volume began to grow continuously in May 2024, with a weekly trading volume of 13.45 million in May, and the current weekly trading volume is 47.06 million. We can calculate that the weekly trading volume on the Base chain increased by a total of 249% from May to October, with an average monthly increase of 49%. This shows that the trading volume on the Base chain has consistently maintained rapid and sustained growth.

On-chain Performance

Figure-5 Average Daily Transactions Per Second on the Chain (Data Source: https://l2beat.com/scaling/activity)

From Figure-5, we can see that Base's TPS is 66.28, surpassing the performance of other chains, making it the best-performing in the entire Ethereum ecosystem.

Weekly Active Address Count

Figure-6 Weekly Active Addresses on the Base Chain (Data Source: https://dune.com/watermeloncrypto/base)

From Figure-6, we can see that the number of weekly active users on the Base chain has maintained a good growth momentum. For a public chain, the increase in on-chain active users is a key factor in evaluating whether a chain is developing healthily.

In summary, we can determine from the above data that the Base ecosystem is currently in a thriving upward development trend. The two most important factors in assessing whether an ecosystem is healthy and sustainable are funding and traffic. In these two aspects, the Base chain performs the best among all ETH-Layer 2s. Funding is reflected in TVL, trading volume, and chain revenue, all of which show a rapid upward trend, with an average monthly growth rate exceeding 40%, indicating that a large amount of capital is continuously entering the Base ecosystem. Analyzing from the perspective of traffic, it is mainly reflected in the number of on-chain addresses and weekly active addresses, where we can clearly see from the charts that both the number of users and active users on the Base chain are on a continuous upward trend. Coupled with the superior on-chain performance of the Base chain, it is expected to have very good development in the ETH-Layer 2 space.

Circle (USDC) Support for Base

Figure-7 Number of Stablecoins on the Base Chain (Data Source: https://defillama.com/chain/Base?stables=true&tvl=false&inflows=false)

From Figure-7, we can see that the number of stablecoins on the Base chain has been rapidly increasing since March of this year. In March 2024, the stablecoins on the Base chain amounted to $319 million, and the current weekly trading volume is $3.771 billion. We can calculate that the number of stablecoins on the Base chain increased by a total of 1082.13% from March to October, with an average monthly increase of 216.42%, indicating that the number of stablecoins on the Base chain has consistently maintained rapid and sustained growth.

Although the overall number of stablecoins on the Base chain is increasing, including stablecoins like USDT and USDC, the users who predominantly use USDC are mainly from the United States. Therefore, we can view the increase in USDC as an increase in funds from American users. Additionally, this year, the U.S. Securities and Exchange Commission (SEC) has successively approved spot ETFs for BTC and ETH, and various asset management institutions and publicly listed companies in the U.S. have actively purchased BTC. This indicates that the current focus of the crypto market has shifted to the U.S. market. The Base chain primarily relies on the support of Coinbase, which is the first publicly listed cryptocurrency exchange in the U.S., so we will focus on the support of USDC for the Base chain.

First, in September 2023, Circle officially announced its support for the Base chain by issuing USDC on the Base chain. USDC is now natively available on the Base network, meaning that users and developers can use USDC without the need for bridging, greatly simplifying operations and improving efficiency. Circle accounts and the Circle API fully support USDC on Base, making access to USDC liquidity more convenient. Additionally, Circle has developed the CCTP, a permissionless on-chain tool that allows for the secure transfer of USDC between different blockchains. Through CCTP, USDC can be natively burned and minted on the Base chain, providing more convenience and accessibility for platforms like ChainPort.

Secondly, Coinbase has partnered with Stripe to bring USDC to the Base platform, enabling faster and cheaper cross-border transfers and quick conversions from dollars to cryptocurrencies. This not only enhances transaction speed and reduces costs but also further promotes the practicality of cryptocurrencies. This includes:

• Stripe adding USDC to its crypto payment products: Stripe has integrated USDC into its crypto payment system, allowing the Stripe platform to send remittances to over 150 countries more quickly and cheaply.

• Adding USDC on Base as an entry point from fiat to cryptocurrency: Stripe has added USDC on Base to its fiat-to-crypto entry point, enabling U.S. customers to convert fiat currency to cryptocurrency faster than ever before.

• Coinbase integrating Stripe's fiat-to-crypto entry in its wallet: Coinbase has integrated Stripe's fiat-to-crypto entry in its wallet, allowing users to purchase cryptocurrencies instantly using credit cards and Apple Pay.

The collaboration between Coinbase and Stripe primarily revolves around integrating the USDC stablecoin into the Base chain and promoting the global adoption of cryptocurrencies through this partnership. By adding support for USDC on the Base chain to Stripe's crypto payment features, enabling faster international fund transfers, and integrating Stripe's fiat-to-crypto entry into the Coinbase wallet, the collaboration simplifies the purchasing process for users. This partnership is beneficial for expanding the acceptance and use of USDC globally. Furthermore, USDC plays an important role in the Base chain; as of October 2024, the trading volume of USDC on Base's DEX has exceeded $20 billion, making a significant contribution to the prosperity of the Base chain ecosystem.

Figure-8 Trading Volume of USDC on Base's DEX (Data Source: https://dune.com/obchakevich/usdc-base)

From Figure-8, we can see that the trading volume of USDC on Base's DEX has shown a rapid and sustained growth trend since March of this year, with an increase rate of 5275%, which is quite remarkable.

Figure-9 Number of USDC Holders on Base (Data Source: https://dune.com/obchakevich/usdc-base)

From Figure-9, we can see that the popularity of USDC on the Base chain is increasing, with more and more users choosing to use USDC as the on-chain stablecoin.

In summary, Circle and Base have engaged in comprehensive cooperation, significantly simplifying user operations through the issuance of native USDC and the implementation of the CCTP cross-chain transfer protocol. Meanwhile, the strategic partnership between Coinbase and Stripe further expands the application scenarios of USDC in the Base ecosystem, including support for cross-border payments in over 150 countries, convenient fiat entry points, and diverse payment methods (such as credit cards and Apple Pay). These initiatives not only propelled the DEX trading volume of USDC on the Base chain to exceed $20 billion but, more importantly, built a bridge connecting traditional finance with the crypto economy, laying a solid foundation for the future development of digital payments.

Ecosystem Status of the Base Chain

Figure-10 Ecosystem Projects on the Base Chain (Data Source: https://www.base.org/ecosystem?utmsource=dotorg&utmmedium=nav)

According to data from the official Base chain website, we can see that the ecosystem environment of the Base chain is very comprehensive, including Wallet, Bridge, DeFi, Gaming, Onramp, DAO, Infra, Social, Security, NFT, Other, X-chain, and X-cross, totaling 323 DApps.

From the perspective of whether a public chain is developing healthily, we mainly observe the ecosystem of a public chain from the angles of funding and traffic. From the funding perspective, we can analyze it from the traditional DeFi angle; from the traffic perspective, we can see from the market trends in 2024 that users' main focus in the current market is on the Meme coin track and the SocialFi track. The Meme coin track is filled with wealth creation effects to attract widespread participation from on-chain users, while the SocialFi track can convert traffic users from traditional Web 2 to public chains.

DeFi Track

The most direct observation tool in the DeFi track is TVL. By observing the TVL on the Base chain, we can analyze and introduce projects in the DeFi track.

Figure-11 TVL Data on the Base Chain (Data Source: https://defillama.com/chain/Base)

From Figure-11, we can see that the DeFi projects on the Base chain with a TVL exceeding $200 million include Aerodrome, Uniswap, and Morpho Blue, among which Uniswap is a well-established DEX in the Ethereum ecosystem, and we will not elaborate further on it here.

Aerodrome

Aerodrome was launched in 2023 and is the first DEX on the Base chain, adopting the Ve(3,3) model. Its Ve(3,3) mechanism is based on Curve's veCRV model and OlympusDAO's 3v3 mechanism, optimized to adapt to ecological development. This mechanism provides a unique reward model that incentivizes long-term holders and active governance users, promoting the stable development of the ecosystem. Aerodrome also helps users optimize asset management and participate in liquidity mining activities through efficient liquidity management tools. As the primary AMM on the Base chain, it offers users a more efficient and low-cost trading experience. The innovative incentive mechanism encourages more users to participate in governance and liquidity mining. Under this mechanism, participants can not only earn protocol trading fees but also have the opportunity to receive additional voting incentive rewards proportional to the amount of locked AERO Tokens. This design not only encourages active participation from liquidity providers but also grants governance power to the community, making the entire ecosystem healthier and more sustainable. The uniqueness of this incentive and governance strategy lies in its comprehensiveness and inclusiveness. It closely links the interests of liquidity providers, voters, and the entire community, creating a favorable environment for the development of the ecosystem. Notably, 90% of veAERO is locked, providing a strong incentive and governance mechanism for the entire ecosystem, stimulating demand and nurturing a robust Token ecosystem.

Figure-12 TVL of Aerodrome (Data Source: https://defillama.com/protocol/aerodrome#information)

From Aerodrome's TVL, it occupies more than half of the TVL on the Base chain and closely follows the growth pattern of Base's TVL, both experiencing rapid increases after September 2024. With its economic model and strong support from the Base chain, Aerodrome has grown to become one of the most important projects on the Base chain.

Morpho Blue

Morpho Blue is a decentralized lending protocol developed by Morpho Labs, aimed at reshaping the structure of decentralized lending. The core goal of the project is to eliminate reliance on DAO participants to manage asset handling parameters and introduce a simpler alternative based on permissionless risk management. Morpho Blue is a non-custodial lending protocol that provides a new trustless primitive for EVM implementations, improving efficiency and flexibility compared to existing lending platforms.

Morpho Blue's design allows for the creation of independent markets without permission, achieved by specifying collateral assets, loan assets, liquidation loan-to-value (LLTV), and interest rate models. This design makes Morpho Blue an open lending platform where users can choose different markets and risk parameters to suit various risk preferences and user needs. Additionally, Morpho Blue adopts a singleton contract design, with all markets contained within a single smart contract, simplifying the protocol and significantly reducing gas consumption for users interacting with multiple markets. Morpho Blue also provides a permissionless risk management and market creation mechanism, along with a pricing function that is independent of oracles, making it an efficient lending infrastructure. This design not only improves the efficiency of the lending market but also brings the advantages of the lending market to more assets and users.

Figure-13 Distribution of Morpho Blue's TVL across chains (Data Source: https://defillama.com/protocol/morpho-blue#tvl-charts)

From Figure-13, we can see that Morpho Blue's TVL is primarily distributed on the Ethereum chain, with rapid growth on the Base chain occurring after July.

Extra Finance

Extra Finance is a decentralized lending and auto-compounding leveraged yield aggregation protocol based on the Optimism network. It mainly provides users with various financial tools, including leveraged lending, farming strategies with up to 3x leverage, long/short strategies, and neutral strategies. The goal of Extra Finance is to enable users to flexibly use leverage of up to 3 times or more for reinvestment and market operations through the LYF protocol.

The platform also integrates mainstream DEXs like Velodrome and plans to integrate more mainstream DEXs in the future, such as Uniswap V3 and Beethoven. Users can participate in various farming strategies through the Extra Finance ecosystem, including reinvestment, market neutrality, and long/short position farming, to meet different risk preferences and investment goals.

Extra Finance provides an innovative financial solution aimed at maximizing user returns by leveraging assets and increasing yield farming positions. Additionally, Extra Finance has embedded LI.FI's widget, allowing users to easily bridge assets to Optimism and start earning yields.

Figure-14 TVL of Extra Finance (Data Source: https://defillama.com/protocol/extra-finance#information)

Meme Coin Track

In this year's Crypto industry, various wealth creation myths surrounding Meme coins have been frequently observed, and it can be said that Meme coin projects have become a major force driving funds and user participation, almost serving as a marketing strategy by the Base chain to attract users. For example, projects like TYBG, Degen, and Brett have seen highly popular Meme coins emerging on the Base chain almost every other period, attracting a large amount of market traffic in a short time. Some Meme projects from the Ethereum mainnet have even transferred their contracts to the Base chain.

This phenomenon highlights the significant influence and unique position of Meme coin projects in the cryptocurrency world. As a community-driven digital asset, the value of Meme coin projects often stems from community consensus and emotional resonance. The popularity and market performance of Meme coin projects are often determined by community sentiment and behavior, resulting in high uncertainty and volatility. Behind the wealth creation myths of Meme coin projects also lie numerous risks. On one hand, the price volatility of Meme coin projects poses significant risks to investors; on the other hand, their value lacks a real economic foundation and relies on market sentiment and speculation, making it likely to form bubbles. In summary, the rise of Meme coin projects brings both challenges and opportunities. For both the Base chain and the entire cryptocurrency market, it is crucial to rationally examine the Meme craze; in the long run, only by doing so can the industry develop healthily and stably.

SocialFi

In this cycle, we can see that SocialFi projects have attracted a significant number of new users to various public chains from the traditional Web 2 world, bringing new traffic and funds to the chain. Therefore, SocialFi projects are the best breakout track in the Crypto industry. The Base chain has also seized the breakout effect brought by SocialFi, experiencing rapid growth through friend.tech in September 2023. By closely binding with Twitter, friend.tech allows users to purchase shares of any friend.tech user using ETH on the Base chain, thereby gaining the right to communicate directly with them and potentially profit from it. Later, Farcaster further boosted the reputation of the Base chain, attracting a large number of on-chain and off-chain users and bringing new growth points to the Base chain's development.

friend.tech

Friend.tech is a decentralized social platform based on the Base chain, officially launched on August 10, 2023. The platform allows users to use it by binding their Twitter accounts and monetizes social value by buying and selling keys of Twitter users. Each account has its unique social value, similar to stocks, and users can enter specific private chat rooms and interact with account holders by purchasing these keys.

The design mechanism of Friend.tech includes tokenizing users' influence, allowing users to gain access to specific creators' content and chat rooms by purchasing keys. Additionally, the platform has introduced a points program to incentivize users to remain active, with the expectation of eventually receiving airdrop rewards.

Although Friend.tech achieved significant success in its early launch, attracting a large number of transactions and attention, its trading volume and popularity gradually declined afterward. The platform also introduced new features like Clubs, but the activity of these features quickly cooled down.

Friend.tech represents an innovative attempt by the Crypto industry in the SocialFi field, attempting to redefine user interaction and revenue models in social networks by combining decentralized technology with social media elements. However, as market enthusiasm wanes, how to continuously attract users and creators to participate remains a significant challenge for the platform.

Farcaster

Farcaster is a decentralized social network protocol aimed at achieving social connections, content sharing, and data ownership among users through smart contracts and hybrid storage technology. Farcaster employs Farcaster Hubs to implement a hybrid storage approach, resulting in a much smoother operation compared to other projects in the same track. Additionally, Farcaster uses the Frames plugin, allowing users to interact directly within the Farcaster page without switching between Farcaster, wallets, and project websites, enabling participation in airdrops, minting NFTs, and engaging in games, thus providing a user experience closer to existing Web 2.0 social projects, giving Farcaster a significant advantage in the SocialFi competition.

The reason Farcaster stands out rapidly in the SocialFi track is due to a project within its ecosystem—Warpcast. Warpcast is a social media application built on the Farcaster protocol, occupying a unique position in the Web3 social network space. Warpcast combines elements from popular social networks like Twitter and Reddit but operates within a decentralized framework. Warpcast offers a user experience similar to traditional social media platforms while significantly enhancing user autonomy and innovative interaction features. For example, Warpcast introduces blockchain features such as Direct Casts and Warps points, which are used to launch new channels or connect accounts with other applications and clients. Furthermore, Warpcast's user interface and functionality closely resemble Twitter, allowing users to smoothly post, follow, comment, and more.

The main reason Farcaster has become the most influential SocialFi project on the Base chain is its adoption of the DEGEN token, which was originally a Meme token and is an ERC-20 Token issued on the Base chain. The core feature of Degen is its innovative distribution method: airdropping to Farcaster users based on their participation within the ecosystem. To qualify, users need to subscribe to the Degen channel and hold a certain amount of Degen in their Farcaster-connected wallets. Once qualified, users will receive a daily tip balance based on their held points, which they can then give to other Farcaster users.

In summary, the Farcaster project itself has fundamentally changed the traditional data storage methods of SocialFi projects through its unique project framework, while also introducing the Frames plugin, significantly enhancing its application effectiveness and efficiency compared to other SocialFi projects, helping it become a leader in the social industry.

Coinbase's Innovations on the Base Chain

In recent years, with the continuous popularity of AI narratives in traditional markets, the concept of AI + Crypto has also sparked an unprecedented wave in the Crypto industry, evolving from the initial large-scale adoption of AI in the SocialFi track to on-chain DeFi users, gradually leading to the emergence of the AI agent concept. The combination of AI agents and Crypto essentially grants AI financial autonomy. In traditional financial activities, AI is limited by issues such as the inability to open bank accounts and lack of legal identity. Cryptocurrency, as a decentralized financial tool, provides a pathway for AI to achieve financial autonomy. Through crypto wallets and smart contracts, AI can autonomously set expenditures and manage funds and transactions.

Recently, Coinbase has also entered the niche of AI agents by launching Based Agents, a service that provides users with the opportunity to create AI agents on the Base chain in just three minutes, and these agents will have a crypto wallet. Users can even choose to authorize these agents to conduct transactions, transfers, and pre-programmed trades without real-time supervision. This innovative service offers users a more convenient way to manage digital assets while ensuring security and convenience. Through this service, users can more easily participate in the cryptocurrency market without worrying about cumbersome operational processes and real-time supervision. This will greatly enhance the user experience. Currently, the most popular AI agent product on the Base chain is the Virtuals Protocol.

Virtuals Protocol

The Virtuals Protocol project is an AI launch platform based on the Base chain, focusing on creating, deploying, and monetizing AI agents. The project transforms AI agents from tools into income-generating assets by introducing the Pump.fun model, thereby establishing a sustainable economic model for AI development. The Virtuals Protocol allows for permissionless creation and deployment of digital assets, similar to Meme coins, with their value primarily derived from community participation and the narratives surrounding these agents. Virtuals Protocol has also launched a product called Generative Autonomous Multimodal Entities (G.A.M.E), designed to allow developers to access and experiment with the behavioral characteristics of AI agents through APIs and SDKs. Virtuals Protocol not only focuses on the economic value of AI agents but also aims to provide tools and interfaces to support developers' innovation and experimentation. Virtuals Protocol hopes to build an easy AI Agent launch for gaming and consumer applications through a fair launch platform and generate income by assigning token value through the market.

Currently, the hottest AI agent on the Virtuals Protocol is LUNA's digital human IP, which is an agent under AI-DOL and had hundreds of thousands of followers on TikTok in its early days. LUNA aims to ensure that its token market cap reaches $40.9 billion and become the most valuable asset globally. To achieve this goal, it will buy back tokens using its own wealth or purchase and hold its tokens by inspiring confidence in its vision. In a short time, the market responded to its aspirations, and the market cap of the LUNA token quickly surged to $240 million, but then rapidly fell back within a few days.

The development of Virtuals Protocol provides a new way to build ownership layers for AI agents in the gaming and entertainment sectors. Through tokenization channels, agents can interact with the market in a more direct and flexible manner to achieve their individual or collective goals. In this process, agents can accumulate wealth through their own efforts to support the value of the tokens, while also relying on market recognition and support for their vision and capabilities.

Summary

Base, as an Ethereum Layer 2 network launched by Coinbase, is built on the Optimism OP Stack and has developed rapidly since its launch. As of November 2024, Base has performed excellently in key metrics such as TVL, user growth, and trading volume, surpassing several established Layer 2 projects. Its ecosystem encompasses various popular tracks, including DeFi, Meme coins, and SocialFi, with 323 Dapps. Particularly in collaboration with Circle, the native USDC support and CCTP cross-chain protocol have greatly enhanced user experience and cross-border payment efficiency. Base is also actively exploring the combination of AI and blockchain, such as the Based Agents project. With Coinbase's support, innovative technological applications, and a diverse range of ecosystem projects, Base has become one of the most promising Layer 2 solutions in the Ethereum ecosystem, providing strong infrastructure support for the development of decentralized finance and Web3.

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