Coinbase new blockchain seen as ‘massive vote of confidence’ for Ethereum

The Ethereum community appears to have taken a bullish view of Coinbase’s recently announced layer 2 network, Base, which has been described as a “massive vote of confidence” and a “watershed moment” for the blockchain network.

Secured on Ethereum and powered by layer-2 network optimism, Base aims to become a network for building decentralized applications (DApps) on the blockchain. The Layer-2 network is currently in the testnet phase, according to Coinbase CEO Brian Armstrong.

Members of the crypto community, such as Ryan Sean Adams, host of the Bankless Show, believe the move “is a massive vote of confidence for Ethereum” that could set a precedent for cryptocurrency companies and financial institutions to use Ethereum as the settlement layer for elections.

Coinbase has approximately 110 million verified users and has partnered with 245,000 companies in over 100 countries since it was founded in 2012. The cryptocurrency exchange is the second largest in terms of trading volume behind Binance, according to CoinGecko.

“If Coinbase converts 20% of its 110 million verified users to Layer 2 users over the coming years, this alone will 10x the total number of cryptonative users,” Adams added.

Adam also praised Coinbase for choosing to open source Base and believes the new layer 2 network will provide even more block space demand on Ethereum.

Meanwhile, Sebastien Guillemot, co-founder of blockchain infrastructure firm dcSpark, suggested that Coinbase made a wise decision to go with a layer 2 as opposed to an independent sidechain, noting that “almost all” cryptocurrency transactions and value locked on Ethereum reside on make 2s these days.

Ryan Watkins, the co-founder of crypto-focused hedge fund Syncracy Capital described the news as a “watershed moment” in the Ethereum ecosystem, in a February 23 tweet. mail before opining that there was “probably no one better” positioned than Coinbase to bring the next ten million users and institutions to Ethereum.

Not everyone was positive though.

Gabriel Shapiro, general counsel for the investment company Delphi Labs explained in a Twitter post on February 23 that launching a centralized layer-2 network “opens the door” to unwanted SEC scrutiny.

Related: Coinbase beats fourth-quarter earnings estimates amid falling transaction volume

“A centralized L2 that trades many tokens that may be purported securities, or conducts many DeFi transactions that may purport to be regulated (securities swaps, etc.), opens the door for the SEC to come up with new types of requirements on the secondary market,” explained Shapiro and added:

“imo, this will accelerate the SEC’s “secondary market” agenda regarding blockchain securities issues, because they cannot allow an SEC registrant to “get away with” potential violations and build a legal arbitrage strategy right under the SEC’s nose.

Shapiro’s concerns come as the SEC has recently increased its enforcement efforts against several stablecoin issuers and staking service providers of late.

Regarding the launch of Base, the lawyer believed that it could be a “bad step for them” and could cause “security damage” to the rest of the ecosystem, especially in case the SEC finds a vulnerability to disclose: