Coinbase Layer-2 Success Shows Power of Marketing Over Cutting-Edge Tech

Base's “Onchain Summer” promotion saw participation of over 2 million unique wallets, resulting in over $5 million in mint revenue to creators

Coinbase Technologies Inc.’s layer-2 blockchain has shot to the second spot in the rankings for such networks, outpacing some of the biggest names in the industry despite being the new kid on the block.

Coinbase's Base layer-2 network has attained the second-highest market share among 74 active layer-2 networks, as per L2Beat. Arbitrum's Arbitrum One holds the top spot with a 40% share, while Base follows closely behind with an 18% share. Despite being built last year and utilizing code borrowed from Optimism's OP Stack framework, Base has managed to surpass older projects like Starknet, Polygon and even Optimism itself.

Layer-2 networks are designed to handle transactions faster and at a lower cost than the base Ethereum blockchain. They use a "sequencer" to bundle up transactions and then record or "settle" them on the main blockchain. These networks are a key part of the broader Ethereum ecosystem's plan to scale up and handle more transactions.

But it turns out that the race for blockchain dominance is driven largely by marketing savvy and a warchest to spend on attracting new customers – not just whoever has the best tech. And Coinbase has helped to fuel Base's growth through its own advertising campaigns and promotional events, including the recently concluded "Onchain Summer."

The three-month event saw participation of over 2 million unique wallets (compared to about 268,000 in 2023), resulting in over $5 million in mint revenue to creators, the company said Monday in a press release.

"The results really blew us away," a Coinbase spokesperson said in an email. "The 2.2 million unique wallets participating was about 8x what we saw last year, and more than double our internal expectations.”

Coinbase is helmed by Jesse Pollak, who joined the crypto exchange in 2017 as an engineering manager before moving in 2021 to oversee the company's protocols development.

Independent blockchain data confirms the growth at Base. A recent chart from on-chain data provider Token Terminal shows the network accelerating in recent months while other layer 2s were experiencing a dropoff.

A quick glance at Coinbase's most-recent quarterly report, filed with the U.S. Securities and Exchange Commission, shows that the crypto exchange spent over $165 million on sales and marketing during the three months ending June 30, more than double the amount spent during the same period a year earlier.

During the first quarter of 2024, Coinbase reported "other" transaction revenues of $52.5 million, which includes sequencer fees collected by Base.

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