Will Coinbase’s new moves calm decentralization concerns?
Coinbase moves on-chain to leverage the speed and costs offered by blockchain networks.
- Coinbase has opted to move customer and corporate USDC balances on-chain.
- It will save the firm on settlement speed and costs, but decentralization concerns persist.
Coinbase is shifting towards an on-chain financial entity after stating it will move customer and corporate USD Coin [USDC] balances on-chain to Base.
Coinbase’s vice president, Max Branzburg, announced the development on X (formerly Twitter), citing speed and cost as reasons behind the move.
“Going forward, Coinbase is going to be storing more corporate and customer USDC balances on Base. This enables us to manage and secure customer funds with lower fees and faster settlement times, with no impact to the Coinbase user experience.”
Base is an Ethereum [ETH] L2 linked to Coinbase. The L2 has recorded explosive growth in March, surging from $500M to $1.0B club in TVL (Total Value Locked) as of the time of writing.
Is Base setting the precedence?
Reacting to the development, David Hoffman of Bankless acknowledged that the move could tip others to follow suit.
“Coinbase is carving the path towards a future on-chain financial system. Eventually, all financial institutions will move their operations on-chain.”
However, another user dismissed the move, stating that Base isn’t decentralized.
The user cited Base’s self-sequencer status, which is reportedly controlled by Coinbase. This means Coinbase solely controls Base’s operations.
A spot check of Base risks on L2Beat confirmed the single sequencer claims.
Base’s roadmap indicates a phased decentralization plan: upgrading from Stage 0 to Stage 1 in 2023 and then Stage 2 in 2024.
However, data from L2Beat showed that Base was still at Stage 0 in Q1 2024 with no proof system, and permissioned operators can censor users’ withdrawals.
Therefore, the move is commendable, but some players may only be on board when Base is more decentralized.
