Authors: Lorenzo Valente, Frank Downing, Raye Hadi, Ark Invest; Translated by: Jincai Finance
Ethereum Layer 2 solutions are an execution environment designed to enhance Ethereum's scalability through off-chain transaction processing and fully leverage its robust security through on-chain transaction settlement. These blockchains are built on top of Ethereum, have their own ecosystems—including applications, liquidity, and users—and settle compressed transaction data on Ethereum Layer 1 for validation. L2 is crucial for Ethereum's scaling vision, aimed at meeting global demands and use cases from DeFi to microtransactions, while ensuring network security.
Last year, as one of the L2s worth watching, Coinbase's Base generated about $89 million in revenue—of which only 14% flowed to Ethereum. Base's revenue primarily comes from the sequence fees (also known as base fees) that users pay for transactions.
Nevertheless, Base still faces competition, especially from Robinhood's announced L2, Kraken's L2 Ink, the blockchain Converge supported by Securitize/Ethena, and projects like Worldcoin. Both Coinbase and Robinhood have chosen to provide out-of-the-box infrastructure, an easy-to-deploy tech stack, and use Ethereum as the 'parent' blockchain technology.
Base has a first-mover advantage, thanks to its growing user base and strong network effects. Robinhood may have an edge in the tokenization space, leveraging its rich stock product offerings to bridge traditional finance and blockchain infrastructure.
Both Coinbase and Robinhood firmly believe that financial markets will be reshaped on-chain, and their rapid development of L2 platforms is a strategic move to seize a leading position. With a tech stack tailored for on-chain opportunities, both companies are committed to building scalable, seamless platforms while navigating a complex regulatory environment. Coinbase's ecosystem is more closely aligned with this opportunity, while Robinhood leverages its superior user interface as one of its competitive advantages.
Ultimately, success depends on which platform can simplify the complexity of cryptocurrencies and provide a better user experience. As the Layer-2 landscape evolves, the competition between Base and Robinhood will drive innovation in on-chain finance.
