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šŸ„› Coinbase enters the Layer 2 War

The next big blockchain: BASE

GM. This is Milk Road. The daily newsletter powering you through the world of crypto like a power boost in Mario Kart. Plus, there are no bananas to slip on.

Letā€™s get into the good stuff:

  • Coinbase launched a new blockchain

  • Reactions!

  • Crypto market comeback in 1 chart

COINBASE LAUNCHES A NEW ETHEREUM L2

Yesterday, Coinbase dropped an announcement that had everyone talkingā€¦ itā€™s launching its own Layer 2 (L2) blockchain, called Base.

Hereā€™s everything you need to know:

  • As a reminder, an L2 blockchain offers developers an easier, low-cost way to build decentralized apps (dApps) on-chain.

  • Base will be built using Optimismā€™s OP Stack. Optimism is another L2, and OP Stack is open-source code that powers Optimism. Coinbase is working with, and using code from, Optimism to build a competing L2. Keep friends close, but enemies closer?

  • Coinbase will incubate the new blockchain and be the sole sequencer for transactions. Sequencers validate and execute transactions on a blockchain. In other words, Base will start out ā€œcentralized,ā€ but over time Coinbase will ā€œdecentralizeā€ it by adding other sequencers. Big ā€œtrust me, broā€ vibes.

  • 48 crypto partners had access to the testnet. A test network launched a few weeks ago and crypto companies like Chainlinks, Magic Eden, and Uniswap all had access.

  • There are no plans to issue a token for Base. Other L2s like Arbitrum & Optimism have tokens, but Coinbase has decided against it for now. But this is crypto, so of course someone created a fake BASE token that pumped 270% yesterday. Scammers gonna scam.

Coinbase also announced a new fund, called Base Ecosystem, that will invest in early stage projects that build on the new blockchain.

After the news leaked, Coinbaseā€™s stock rose slightly, while Optimismā€™s token jumped over 20%.

Why it matters: The largest crypto exchange in the U.S. has officially joined the Layer 2 War.

L2s provide cheaper and faster transactions compared to L1s like Ethereum. To compare, today it costs ~$0.20 to send a transaction on Optimism. It costs ~$1.30 (over 6x more) to do the same thing on the Ethereum mainnet.

Unsurprisingly, L2 popularity has spiked more than Mac McClung's after this yearā€™s NBA Dunk Contest.

As of today, thereā€™s $6.34B in crypto locked across 26 other Layer 2 networks. Arbitrum is leading the way with a 53% market share, and earlier this week it surpassed Ethereum in daily transactions. Optimism is in second place with a 31% market share.

Now, Coinbase is taking its shot.

Coinbase might have a late head start, but it has something the others donā€™t: 110M users. And those users control $80B in assets across the Coinbase ecosystem. (Thatā€™s 12.5X as much as the entire L2 ecosystem.)

If Coinbase can get even a small percentage of its users onto Base, it can be a true contender. But thatā€™s a big ā€œif.ā€

Last year, Coinbase launched an NFT marketplace with the same formulaā€”but itā€™s been a total flop. Since the marketplace launched, itā€™s had a TOTAL of $7.3M in sales volume. And interest in it is waningā€”only 13 people bought something off the Coinbase NFT marketplace this week. Ouch.

Here at Milk Road we know one thing: history might not repeat, but it sure as hell rhymes. So we asked a couple of friends what they thought of the moveā€¦

MILK ROAD & FRIENDS REACTIONS

KOFI: ā€œI see two possible outcomes. A good outcome: Coinbase leans on its strength of being the accessible gateway to crypto for normies and smoothly onboards some portion of its user base to on-chain antics. Earns a ton of money in txn fees. (You can track other L2 profits here.) A bad outcome: Coinbase launches this rollup but doesn't manage to convince its large user base to adopt it. Wasted opportunity.ā€

ADAM LEE: ā€œIā€™ve been pretty impressed with their planning and rollout.ā€ (BTW, Adam works for thirdweb, one of the select partners chosen to get access to Base.)

Milk Roader Question of the Day: How do YOU think Coinbaseā€™s new blockchain will perform?

Reply to this email with your prediction and weā€™ll share the results later this week.

I WAS UP ALL NIGHT PLAYING INK GAMES

Can I be honest?

I barely got this section in on time.

I went to sleep at 4am & woke up to write this at 8am (we sent it an hour later).

Why?

I was up all night playing INK GAME'S new game, Prize Kingdoms.

Prize Kingdoms is like if Clash of Clans met Sorry. Hereā€™s what sets it apart:

  • Itā€™s a legit Triple A game. The graphics are clean and bright. (I love the little guys with the red hats)

  • The Gameplay is addicting: You roll dice and move from kingdom to kingdom building cities, attacking others, and earning prizes.

  • The game has 5 stars on the App Store. The team made games at EA, Zynga, and SciPlay

The best part?

Theyā€™re about to add referral technology that pays you for bringing in your friends.

But you need an INK ID to get paid and thereā€™s only one way to get one.

You need to be referred.

Click the button below and type in ā€œmilkroadā€ to grab yours.

CHART OF THE DAY

The crypto market is... making a comeback?

For the first time since April 2022, 30-day capital flows in crypto are positive.

That means more money is coming into the market than is leaving the market.

Capital flow is a hard number to measure, so market intelligence firm Glassnode uses something called the ā€œRealized Market Capā€ to measure it.

The Realized Market Cap = last value each token sold for on the blockchain X total token count. Realized value helps filter out illiquid coins as well as speculative off-chain trade volume.

After 8 straight months of outflows, on-chain metrics show $4.5b in inflows this month.

Is this the beginning of the next buā€¦..

Alright, Iā€™m not going to say it.

Letā€™s just enjoy the dub for now.

FUNDING FRIDAY

This week, $305M was invested in Web3 companies. Hereā€™s who got the bag:

Arbitrove got $14M to build yield-bearing index products on Arbitrum. Big week for layer 2 technologies

Towns got $25.5M to build a group chat protocol and app. The CEO is the former founder of social video app, Houseparty.

Chain Reaction got $70M to build a semiconductor manufacturer for blockchain and privacy infrastructure solutions.

Sentio got $6.4M to build an observability platform to gain insights, secure assets, and trouble transactions for decentralized applications.

If you wanna see all the companies that got funded, check ā€˜em out here.

MILKY MEME

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That's a wrap for today. Stay thirsty & see ya tomorrow! If you want more, be sure to follow our Twitter (@MilkRoadDaily)

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DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.

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