When Optimism tweeted the photo that is seen below on its official Twitter account in the early morning hours of February 23, 2023, Coinbase randomly shared an image of a blue-ringed emoji with its followers. This occurred between the hours of 2 and 3 in Korea. Because the Optimism logo is red, the usage of a blue circled emoji by Coinbase on Twitter caused a great deal of misunderstanding among its followers. This was especially the case given that Optimism utilizes a red circled emoji to represent itself. This gave rise to a number of rumors and questions, such as whether or not the Arbitrum network was going to introduce a new token and why the introduction of an Arbitrum token was being discussed on the Optimism Twitter account. However, the true news was that Coinbase, which operates the largest cryptocurrency exchange in the United States, will reveal its very own Layer 2 in conjunction with the Optimism team.

Source: Twitter

The background of Base

The following is a condensed version of the latest statement that was made by Coinbase and Optimism:

The collaborative L2 network on Ethereum that Coinbase and Optimism have built has been given the moniker "Base."
The launch of Base's testnet is slated to take place on February 23, 2023, at 11:00 PM local time in Korea.
Optimism's technological stack, known as OP Stack, was utilized in the construction of Base.
Base will operate as an L2 network that is fostered by Coinbase. It will include the integration of a variety of Web3 products developed by Coinbase as well as dApps developed by a wide variety of developers.
There are currently no plans in place to implement its very own token anywhere within the Base network.

After being in business for more than a decade, the cryptocurrency exchange known as Coinbase (founded in 2012) has since grown to become the largest exchange in the United States. Coinbase's primary objective from the very beginning was to create an open financial system that would encourage economic decentralization on a global scale. Coinbase has spent the past few years investigating a variety of different approaches in an effort to realize its lofty goals. However, because it was a centralized exchange, the platform that it used was not built on smart contracts. This caused a conflict with the ultimate goal that it had for itself. As a direct consequence of this, Coinbase has recently been working towards the realization of this goal by introducing on-chain products such as USDC, the Coinbase Wallet, and cbETH, a liquid staking protocol.

Coinbase understood that simply offering on-chain products would not be enough to help it accomplish its long-term goals. In addition, after much discussion, the business came to the realization that it needed to establish its very own Ethereum Layer 2 network. They arrived at the conclusion that the Ethereum Virtual Machine (EVM), which is widely regarded as the gold standard in blockchain technology, should serve as the basis for the development of an Ethereum Layer 2 network. In addition, considering that there may be a surge in monetary activity on the blockchain in the near future, possibly including significant sums of money being transferred, the fact that Ethereum's security is so strong makes it the only platform that can efficiently handle such transactions. Coinbase has contributed to the core development of EIP-4844, an improvement that significantly enhances the data storage capacity of the Ethereum network. Coinbase made this contribution in recognition of the scalability concerns that are still widespread in Ethereum Layer 2 networks.

Coinbase foresees a future for the Ethereum Layer 2 ecosystem in which several L2 networks will arise and eventually combine to form a single, interoperable network. This will ultimately result in a considerable improvement to Ethereum's scalability. Because there is a possibility that more than one L2 network would emerge, it was only reasonable for Coinbase to establish its very own L2 network. With over 110 million users and assets valued at $80 billion, Coinbase might be one step closer to realizing its big goal of encouraging global economic autonomy, which was envisioned in 2012. If the firm can effectively integrate its customers into the Base rollup network, it could move the company one step closer to realizing its grand vision.

Coinbase's outlook on the future of the Ethereum L2 ecosystem is very similar to the technical stack that the Optimism team is now working to develop. We will get into the specifics in a later section of this article. Because of this, Coinbase utilized the OP Stack, which is a technological stack established by the Optimism team, with whom they had previously worked together on EIP-4844, in order to construct the Base network, which was launched not too long ago. The Base network will be an L2 that utilizes the robust security of the Ethereum network to provide considerable scalability, interoperability (not just with Ethereum L2s, but also with other L1 networks like Bitcoin, Solana, and Cosmos), and user-friendly features. The interoperability it provides will extend not only to Ethereum L2s, but also to other L1 networks like Bitcoin, Solana, and Cosmos.

The OP Stack

OP Stack's architecture

Source: Optimism Foundation

In the previous part of this article, it was explained that Coinbase built its Base network using the OP Stack. But what exactly is the OP Stack? The Optimism Network is built on top of an open-source technological stack that incorporates a variety of software components. This stack serves as the network's foundation. At this time, the Optimism Network runs on the OP Stack, which is available to anybody who wants to use it and make modifications to it. This makes it possible to easily create an L2 network for developers called "OP Chain." This is analogous to the way in which the Cosmos SDK contributes to the process of creating an app chain.

The OP Stack is made up of numerous levels, and developers have the ability to build their very own L2 network by choosing a module for each tier in the stack. A breakdown of the architecture of the OP Stack is as follows:

The data availability layer is the initial tier of the OP Stack. This layer is in charge of keeping transaction data that is created on the L2 network (Read part 3 of "Research] Polygon, the Front Runner of Modular Blockchain Future") (Read part 3 of "Research] Polygon, the Front Runner of Modular Blockchain Future"). Because this is how Ethereum stores transaction data by default, OP Chains, which are constructed using the OP Stack, will save transaction data in the Ethereum block as call data. However, if the EIP-4844 is implemented in Ethereum in the future, OP Chains will be able to store data in a new data structure known as blob rather than the call data structure. This will be possible if the EIP-4844 is implemented.

The sequencing information is stored in the second layer. Within the L2 network, it is the responsibility of this layer to gather and arrange all of the transactions. The single sequencer module is currently set as the default for the sequencer, and the multiple sequencer module is currently only planned to be supported in the future. Is it possible to have faith in a single entity to organize transactions inside a blockchain. If an L1 network were operated by a single organization, this would be considered a centralized network, which presents a significant danger to network security. On the other hand, executions on L2 networks are secure since they are confirmed on the Ethereum main chain before they are carried out. However, in order to address minor difficulties such as MEV, which a single sequencer is unable to manage, it may be essential to progress towards many sequencers in the case of L2 networks.

The third layer is called the Derivation layer, and its job is to transmit transactions from the data availability layer, which has been arranged by the sequencing layer, to the execution layer via the engine application programming interface. This layer works as an intermediate between the data availability layer and the execution layer. It should come as no surprise to you that the Ethereum network is composed of two layers: a consensus layer and an execution layer that was introduced following The Merge update. The Engine API was designed to make communication between these two tiers as easy as possible.

The fourth layer is known as the execution layer, and it is in charge of carrying out transactions by accepting inputs from the layer that is responsible for their derivation through the Engine API. Since the EVM module is already a part of the OP Stack, it can be deduced that any chain of OP Stack operations would use the EVM as their execution environment. It is important to note that the EVM in the OP Stack has reached the highest possible level of EVM equivalence, although with some minor adjustments to accommodate L2 networks. For instance, it increased the gas charge by one unit for storing transaction data in L1, and there are some slight variations in the opcodes, block requirements, and network specifications.

The fifth tier is referred to as the Settlement layer, and its primary function is to guarantee that network blocks have been completely processed. When it comes to withdrawal transactions on a network, finality becomes an incredibly important and critical factor. At the moment, proposers use the Attestation module as the default by voting on the blocks to validate finality. Proposed ideas to add fraud-proof or validity-proof settlement mechanisms are currently being discussed. But hold on, doesn't it seem strange that a module to prevent fraud has not yet been implemented? Because optimistic rollups make use of Ethereum's security by showing that they are not fraudulent, you can see from l2beat that Optimism has not yet created a fraud-proof mechanism, which is a bit strange, to say the least. At present, Optimism is working on building the system, and the state roots that Optimism is submitting to Ethereum at the moment are supplied utilizing a multisig way through attestation. Optimism is working on developing the system.

The last tier of the OP Stack is called the governance layer, and it gives developers the option of selecting either an off-chain governance mechanism that makes use of tokens or a multisig governance technique.

Up until this point, we have investigated the many levels that are contained inside the OP Stack. The L2 network, often known as the OP Chain, may be readily customized by the developers to meet their specific requirements if they choose the appropriate module for each tier. Coinbase was able to rapidly construct and deploy its Base network as a result of the robust framework that was utilized.

Superchain

Source: Optimism Foundation

The purpose of Optimism extends further than simply generating a large number of OP Chains by utilizing the OP Stack. They foresee the creation of a Superchain, which would be a network made up of many OP Chains that would combine their respective technological stacks, communication layers, and security protocols in order to achieve full interoperability. When in the Superchain state, all OP Chains use the same sequencing procedure, have the same degree of security, and are connected to one another via bridges; however, each chain is free to select the data availability layer that best suits its needs.

Superchain is an implementation of an interoperable network on top of Ethereum. This is analogous to how Cosmos constructed a massive interoperable network by utilizing hubs, zones, and IBCs. The Superchain enables several OP Chains to share the sequencing layer that may access all transactions on OP Chains, resulting in the creation of a synchronous environment. This is in contrast to the Cosmos app chains, which are responsible for their own security and run in an asynchronous environment. Even if there are a lot of networks, this presents a considerable benefit in avoiding the fragmentation of the liquidity pool.

Base Overview

Coinbase created the L2 network known as Base by utilizing the OP Stack in its development. Optimism was the first network to be formed using the OP Stack; Base is the second network to be created using the OP Stack. Because the network is constructed with the OP Stack, Base is also EVM-equivalent, just like Optimism. This enables developers to easily deploy Ethereum network code on Base and use a variety of development tools, including Foundry, Hard Hat, and Truffle. Base will primarily consist of goods and decentralized applications (dApps) developed by Coinbase. It will also provide a variety of services, such as an on-ramp that will facilitate the conversion of fiat currency for cryptocurrencies. Because of this, a substantial percentage of users on the Coinbase platform will have an easier time utilizing the network.

Some of Base's highlights include:

Secured by Ethereum: Base is created with the security and scalability required to power your decentralized apps. It makes use of Ethereum's underlying security, as well as Coinbase's best practices, to allow you to reliably onramp into Base from Coinbase, Ethereum L1, and other compatible chains.
Coinbase-powered: Base makes it simple to create decentralized apps with access to Coinbase's products, users, and resources. Developers can service the 110 million verified customers and $80 billion in assets in the Coinbase ecosystem thanks to seamless Coinbase product interfaces, simple fiat onramps, and strong acquisition tools.
Low fee: Base delivers complete EVM compatibility at a fraction of the cost and is committed to driving the developer platform forward. Create gasless transactions for your dapps using simple developer APIs for account abstraction, and safely create multichain applications using simple bridges.
Open source: With the goal of developing a standard, modular, rollup agnostic Superchain driven by Optimism, Base intends to be decentralized, permissionless, and open to everybody. Base team is joining Optimism as a Core Dev on the open-source OP Stack and aiming to build a flourishing developer community.

Base Ecosystem

The fact that the Base network was developed by Coinbase, a business that enjoys a stellar reputation within the sector, makes it quite clear that it already possesses a robust ecosystem. Included in this package are node providers such as QuickNode, Blockdaemon, and Infura, as well as block explorers such as Etherscan and Blockscout. The ecosystem also includes a wide variety of additional infrastructure providers as well as decentralized applications (dApps). Even while not all of these logos are recognizable, there is a handful that stands out:

oracles: Chainlink, Pyth NetworkData analytics platforms: Dune, Nansen, MessariBridge: Axelar, Layer ZeroGaming: Animoca BrandsDeFi: Aave, Ribbon Finance, Sushi Swap, Euler Finance, Balancer, 0x, OndoNFT: Magic EdenWallet: Rainbow WalletInfrastructure: Covalent, The Graph, GelatoSDK: TransakCoinbase intends to create a fund for the ecosystem it operates in. If you are interested in building on the Base network and would need additional information, Base is always responsive to your requests.

base ecosystem

Source: Coinbase

Future developments

Decentralization of Stage 0 has already been accomplished by Base, and the company now plans to accomplish Decentralisation of Stage 1 by 2023 and Stage 2 by 2024. But what exactly does each level entail? They are referring to the stages of rollup decentralization that Vitalik Buterin, the creator of Ethereum, said should be implemented.

During step 0 of the rollup, which is the first step of the process, all transactions are required to be carried out on-chain with complete nodes, and the rollup operator is not permitted to steal from users or censor their money. If, on the other hand, the state root is sent to Ethereum by means of multisig, there is no requirement for either a fraud-proof or a validity-proof mechanism. This is in accordance with the OP Stack that was mentioned before, and as a consequence, Optimism and Base are both considered to be in the Stage 0 category.

A rollup is required to have a functioning fraud-proof or validity-proof scheme before moving on to Stage 1. It is feasible to update the rollup smart contract; however, in order to do so, multi-signature authorization is required, and there must be a grace period (mandated activation delay) of at least seven days for the upgrading. In the event that there is a flaw in the proof scheme, the outcome of proof schemes can be overruled through the use of multi-sig approval.

In any circumstance, the results of the proof scheme cannot be overridden by the Stage 2 rollups in any way. There should be at least two fraud provers, two validity provers, or one of each, with a mandated activation wait of minimum of 30 days for upgrades. A single entity cannot execute state transition operations.

In the near future, Base will need to decentralize sequencers, construct a fraud-proof system, and form a multi-sig committee in order to satisfy the requirements of the decentralization roadmap that was detailed earlier.

Additionally, access to Base's testnet was opened up to the general public. At the moment, anyone is permitted to use the official bridge connection provided by Base in order to transfer ETH from the Goerli testnet to the Base Goerli testnet. It is strongly suggested that you give it a shot if you are intrigued by the prospect.

Conclusion

The recent announcement by Coinbase of the Base network may give the idea that it is comparable to the BNB chain and HECO chain created by Binance and Huobi, respectively, in that cryptocurrency exchanges construct their own networks. On the other hand, Base looks to be a whole new endeavor in comparison to other projects. Coinbase, in contrast to other companies, including existing exchanges, which aimed to establish their own ecosystem, has shown a keen interest in contributing to the ecosystem with a profound comprehension of the fundamentals of blockchain technology. Coinbase's goal is to bridge the gap between Web2 and Web3, making it easy for a large number of Web2 users to access the benefits of Web3, and it has demonstrated this keen interest in contributing to the ecosystem. In addition, the firm is devoted to contributing to the Ethereum ecosystem in a manner that is honest from a Web3 point of view. We are of the opinion that this move is beneficial to both parties involved and will contribute to the expansion of the Ethereum ecosystem.

Disclaimer:
This article is intended for and only to be used for reference purposes only. No such information provided constitutes advice or a recommendation that any investment or trading strategy is suitable for any specific name.

Base: A collaboration by Coinbase and Optimism