Wednesday, February 21, 2024

The new Coinbase blockchain is seen as a ‘major vote of confidence’ for Ethereum

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The Ethereum community seems to have taken an optimistic view of Coinbase’s newly announced second layer network, Base, which has been described as a “massive vote of confidence” and a “watershed moment” for the blockchain network.

Base, secured on Ethereum and fueled by the optimism of a Layer 2 network, aims to eventually become a network for building decentralized applications (DApps) on the blockchain. The layer-2 network is currently in its testing phase, according to Coinbase CEO Brian Armstrong.

Members of the crypto community like Bankless Show host Ryan Shawn Adams believe the move is a “major vote of confidence for Ethereum,” which could set a precedent for cryptocurrency companies and financial institutions to use Ethereum as a settlement layer of choice.

Coinbase has nearly 110 million verified users and has partnered with 245,000 companies in more than 100 countries since its founding in 2012. The cryptocurrency exchange is the second largest by trading volume, after Binance according to CoinGecko.

“If Coinbase converts 20% of its 110 million verified users into Layer 2 users in the coming years, that alone will double the total number of original crypto users,” Adams added.

Adam also praised Coinbase for choosing an open source platform and believes that the new layer-2 network will bring more block space demand on Ethereum.

Meanwhile, Sebastien Guillemot, co-founder of blockchain infrastructure firm dcSpark, suggested that Coinbase made a wise decision to go with layer 2 instead of an independent sidechain, noting that “nearly all cryptocurrency transactions” and the value locked on Ethereum are in layer 2s. These days.

Ryan Watkins, co-founder of cryptocurrency-focused hedge fund Syncracy Capital, described the news on February 3rd. Tweet 23 as a “watershed moment” in the Ethereum blockchain ecosystem. He added that “there is probably no one better” than Coinbase to bring the 10 million users and organizations onto Ethereum.

However, not everyone was so optimistic.

Gabriel Shapiro, general counsel for investment firm Delphi Labs, to explain in feb. 23 posted on Twitter that the launch of a Layer 2 centralized network “opens the door” for the SEC to unwanted scrutiny.

Related: Coinbase beats fourth-quarter earnings estimates amid lower transaction volume

“A centralized L2 that trades lots of tokens of which any number could be purported securities, or does lots of arguably regulated DeFi transactions (security swaps etc.), opens the door for the SEC to create New Types of Secondary Markets Shapiro wrote, adding:

“IMO, this will accelerate the SEC’s ‘secondary market’ agenda regarding blockchain securities issues, because they cannot allow the SEC registrar to ‘get away from’ potential violations and build a legal arbitration strategy under the SEC’s nose.”

Shapiro’s concerns come as the Securities and Exchange Commission (SEC) recently increased its enforcement efforts against several recent stablecoin issuers and betting service providers.

Regarding the launch of Base, the attorney opined that it could be “a bad move for them” and cause “collateral damage” to the rest of the ecosystem, particularly in the event the SEC finds a disclosure loophole: