Research Summary

The report provides an in-depth analysis of Base, an Ethereum L2 incubated by Coinbase. It discusses Base’s purpose, problem it addresses, solution, market size, competition, product, business model, team, and financials. The report also compares Base’s performance with other leading Ethereum L2s in the market.

Key Takeaways

Base’s Purpose and Solution

  • Base’s Dual Purpose: Base serves as a globally available application platform for developers and as the infrastructure that allows Coinbase to rebuild itself onchain.
  • Addressing the Crypto Stack Problem: Base aims to solve the lack of a well-functioning, end-to-end crypto stack for developers, including products like fiat onramp, secure wallet, scalable infrastructure, liquidity, mindshare, and a trusted brand.
  • Base’s Leadership: The Base team is led by Jesse Pollak, a Coinbase veteran who has spent about seven years at the company, focusing mainly on consumer products.

Base’s Market and Competition

  • Market Size and Potential: Base’s market size is compared to Amazon’s AWS, with the potential to scale faster and become bigger than AWS due to the permissionless nature of blockchains.
  • Competition: The report suggests that Base’s actual competition might come from L2s launched by bigger fintech companies like Robinhood, rather than “startup” L2s.

Base’s Business Model and Financials

  • Business Model: Base operates like any other general-purpose blockchain, where users pay transaction fees when using applications on Base, and Base captures a percentage of those fees.
  • Financials: Base’s onchain earnings are estimated to be around $8M per year, which is about 8% of Coinbase’s ’23 net income.

Base’s Performance Against Other Ethereum L2s

  • Base’s Growth: Base is among the fastest-growing Ethereum L2s, with an annual revenue run rate of approximately $76M.
  • Base’s User Adoption: Base has about 1.2M monthly active users and generates around $500k daily transaction fee revenue.

Actionable Insights

  • Monitor Base’s Growth: Given Base’s rapid growth and potential to scale faster than AWS, it’s worth keeping an eye on its performance and growth trajectory.
  • Understand Base’s Business Model: Understanding Base’s business model can provide insights into how general-purpose blockchains operate and generate revenue.
  • Assess the Competitive Landscape: Evaluating the competition from L2s launched by bigger fintech companies can provide a broader perspective on the market dynamics and potential challenges for Base.

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