Ethereum Layer-2 Networks Are Rolling in Cash—And Base Is Boss

In the dynamic world of cryptocurrency, Ethereum layer-2 networks are emerging as lucrative hubs, boasting substantial profits and paving the way for scalable blockchain solutions. Among these networks, Coinbase’s Base shines as a formidable leader, raking in over $6 million in on-chain profits in May alone. This staggering figure places Base at the forefront of the profitability race, outpacing competitors like Blast and Optimism.

Base: A Beacon of Profitability

Base, the brainchild of leading U.S. crypto exchange Coinbase, has catapulted to prominence with its impressive on-chain profitability. May witnessed Base's coffers swell with a remarkable $6.1 million in profits, solidifying its position as the most profitable layer-2 network in the Ethereum ecosystem. This achievement is not merely a stroke of luck but a testament to Base's robust infrastructure and strategic initiatives.

Fueling Base's meteoric rise is its rapid expansion in total value locked (TVL), a key metric indicating the network's economic activity and user engagement. Over a span of just three months, Base's TVL skyrocketed from $1.3 billion to a staggering $7.6 billion, setting a new milestone for the chain. This surge can be attributed to Ethereum's implementation of crucial upgrades such as EIP-4844 and proto-danksharding through the anticipated Dencun fork, which bolstered Base's scalability and appeal to users.

Blast: Riding the Wave of Innovation

While Base commands the spotlight, other players in the Ethereum layer-2 arena are also making significant strides. One such contender is Blast, a rising star from the creators of the NFT marketplace Blur. Despite trailing behind Base, Blast demonstrated notable growth, accruing $1.5 million in on-chain profits in May.

Blast's ascent can be attributed to its unique offerings, including a native yield for ETH and stablecoins, along with enticing projects like Pacmoon and Fantasy Top. These initiatives have resonated with users, propelling Blast's share of layer-2 profits from 5.3% in April to an impressive 15.2% in May. Despite its remarkable growth, Blast still trails behind Base, which captured a staggering 56.8% share of all layer-2 profits last month. This dominance underscores Base's unrivaled position as the leading profit generator in the Ethereum layer-2 ecosystem.

Optimism: Navigating the Competitive Landscape

Amidst the flourishing landscape of Ethereum layer-2 networks, Optimism stands as a stalwart contender. Although not matching the profitability surge witnessed by Base and Blast, Optimism remains a significant player with $1.4 million in on-chain profits in May. The network's resilience lies in its steadfastness, maintaining a stable TVL amidst fluctuating market dynamics.

Optimism's role within the Optimism "superchain" ecosystem is pivotal, as it continues to provide scalability solutions and foster innovation. While Base dominates the profitability charts, Optimism's steady performance underscores its longevity and relevance in the competitive realm of layer-2 solutions.

Understanding Data Variances

In the realm of data analytics, variances in reported figures are not uncommon, as highlighted by a Dune dashboard maintained by pseudonymous on-chain analyst Kofi. This dashboard placed Base at the helm, reporting just shy of $7 million in profit for May. However, such variances can be attributed to differences in how each data curator measures revenue and expenses. It's important to note that while Dune’s dashboard provides valuable insights, its exclusion of Blast data renders it an incomplete depiction of how leading layer-2 networks stack up in terms of profitability.

Base's Dominance and Growth Trajectory

Base's journey to profitability supremacy has been nothing short of remarkable. According to data from GrowThePie, Base has consistently outperformed other layer-2 networks since March 2024, solidifying its position as the top player in the ecosystem. Over the past three months, Base has witnessed an astronomical surge in its Total Value Locked (TVL), nearly sextupling from $1.3 billion to an unprecedented $7.6 billion. This surge represents a historical high for the chain, underscoring its rapid growth trajectory and market dominance. With Optimism's TVL stagnating in recent months, Base is poised to potentially surpass OP Mainnet in the near future, further cementing its position within the Optimism "superchain" ecosystem.

Ecosystem Dynamics: Base, OP Mainnet, and Arbitrum

Base and OP Mainnet, both built on the OP Stack and integral parts of the Optimism "superchain" ecosystem, occupy distinct positions within the layer-2 landscape. While Base has emerged as a profitability powerhouse, OP Mainnet remains a formidable contender. Despite Base's impressive growth, it still trails behind the industry leader Arbitrum, which boasts a staggering $19.1 billion in TVL. These dynamics highlight the diverse competitive landscape of Ethereum layer-2 solutions, with each network carving out its niche and contributing to the ecosystem's vibrancy.

Driving Forces Behind Base's Success

Base's ascent to prominence can be attributed to a combination of technological upgrades and strategic initiatives. The implementation of upgrades facilitated by the Dencun fork has enhanced Base's scalability and appeal to users, fueling its exponential growth in TVL. Furthermore, Base's recent partnership with Coinbase and the introduction of the Smart Wallet have significantly bolstered its standing within the crypto community. The Smart Wallet, featuring account abstraction technology, promises to simplify on-chain transactions for both seasoned DeFi enthusiasts and newcomers alike. Leveraging Coinbase's extensive reach and promotional efforts, Base has capitalized on its newfound visibility, with initiatives like the "On-Chain Summer" rewards campaign further amplifying its appeal and user engagement.

Bottom Line

The Ethereum layer-2 landscape is witnessing unprecedented growth and competition, with Coinbase's Base emerging as a dominant force in profitability and innovation. Despite challenges such as data variances and stiff competition from networks like Blast and Optimism, Base's surge in Total Value Locked (TVL) and strategic initiatives position it for continued success. As the ecosystem evolves, fueled by technological upgrades and community engagement, the future promises exciting developments and opportunities for Ethereum's scalability solutions.