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Base Member Refutes Rumors of Coinbase Selling Ether (ETH)
A member of layer 2 scaling solution Base has refuted rumors that its sequencer Coinbase has been selling ether (ETH).
“Coinbase has accumulated $300M+ in ETH, which is more than 2x all of Base’s ETH earnings over time,” Base member Kabir.base.eth said on X. “Base and Coinbase have and continue to hold ETH and publicly disclose our long-term holdings (100K ETH+, $300M+).”
Kabir added that Base uses off-chain custody for security and audit reasons, and that’s why funds move to Coinbase. He emphasized that Base earns and spends as much as possible in ETH, using it for Layer 1 costs and granting support. We reached out to Coinbase for a comment on the matter.
The comments from Kabir come after pseudonymous observer Santisa said that Base has been transferring all sequencer fees to Coinbase since its debut, and the sequencer has likely sold these coins.
The Role of Coinbase as a Sequencer
Coinbase is the only sequencer node on Base that sequences and finalizes transactions in a specified order and improves transaction throughput (speed). Coinbase charges a fee, collected in ETH, for this role.
Criticisms of Centralized Sequencers
Santisa’s take echoed Sonic Labs founder Andre Cronje’s concerns about the use of centralized sequencers in layer 2 solutions that lead to profit models that don’t fully align with the broader Ethereum values.
In essence, while Layer 2 scaling solutions earn a substantial revenue from transaction fees, they send a small portion of that to the Ethereum mainnet for data availability and security purposes. In other words, most fees collected in ETH is either retained or offloaded into the market, reducing the fee revenue and associated ETH burning on the mainnet. This has an adverse impact on ETH’s supply.
“L2s are why Ethereum is inflationary again. SCALE ETHEREUM. They can get the Sonic tech for free. 0 charge. Will 1000x their throughput,” Cronje said on X.
Conclusion
In conclusion, Base has refuted rumors that Coinbase has been selling ETH, and clarified its relationship with the sequencer. While concerns about centralized sequencers remain, it is essential to understand the role they play in layer 2 scaling solutions and the impact on the broader Ethereum ecosystem.
FAQs
What is Base?
Base is a layer 2 scaling solution that uses off-chain custody for security and audit reasons.
What is a sequencer?
A sequencer is a node that sequences and finalizes transactions in a specified order and improves transaction throughput (speed). Coinbase is the only sequencer node on Base.
Why do layer 2 scaling solutions earn revenue from transaction fees?
Layer 2 scaling solutions earn revenue from transaction fees, which are then used for Layer 1 costs and granting support.
What is the impact of centralized sequencers on Ethereum’s supply?
Centralized sequencers can lead to profit models that don’t fully align with the broader Ethereum values, resulting in a reduced fee revenue and associated ETH burning on the mainnet, which has an adverse impact on ETH’s supply.
