Base Captured 46% of L2 Market Share—Did Distribution Just Beat Technology?

layer2_lisa · March 20, 2026, 8:27pm

The numbers are stark, and they tell a story I’m still trying to process as someone who’s been building L2 infrastructure for six years.

Base now controls 46.58% of all Layer 2 DeFi TVL with $4.63 billion locked in the protocol. That’s nearly half the entire L2 ecosystem. Add Arbitrum’s 30.86%, and you’re looking at 77% of the L2 market controlled by just two networks. The top three—Base, Arbitrum, and Optimism—process nearly 90% of all Layer 2 transactions, with Base alone handling over 60%.

Even more telling: Base captured 62% of total L2 revenue year-to-date in 2025 ($75.4M out of $120.7M total). Meanwhile, 40+ other rollups are fighting over the remaining scraps, and most saw their TVL stagnate or decline once incentive programs faded.

The Distribution Advantage

Here’s what I keep coming back to: Coinbase had 9.3 million monthly active trading users in Q3 2025. Base didn’t need to bootstrap a user base from scratch or run unsustainable liquidity mining programs. Every Coinbase user became a potential Base user through seamless UI integration, verified wallet infrastructure, and fiat on-ramps that competitors simply cannot replicate.

Other L2s are stuck in a painful loop: attract users with incentives → users farm rewards → incentives end → users leave → TVL collapses. Base bypassed this entirely through direct access to an already-onboarded user base.

The Technology Question

This is where it gets uncomfortable for me as an engineer. Many of the L2s that failed to gain traction had equal or superior technology. Better proof systems, lower latency, more innovative approaches to sequencing, novel solutions to MEV. The OP Stack that Base runs on is solid, but it’s not categorically better than zkSync’s zkEVM architecture or StarkNet’s Cairo-based proving system.

The market didn’t select for the best technology. It selected for the best distribution.

Did Rollups Scale Ethereum?

When Vitalik outlined the rollup-centric roadmap, the vision was elegant: anyone can deploy a rollup, innovation happens permissionlessly, Ethereum scales through a thousand flowers blooming. And technically, that happened. We have 50+ rollups in production. Deploying a rollup has never been easier.

But permissionless deployment didn’t lead to decentralized usage. Instead, we got a power-law distribution where one company’s rollup—backed by one company’s 100 million user distribution channel—captured nearly half the market.

From a pure scaling perspective, yes, Ethereum can now process far more transactions than the base layer alone. Base is genuinely settling massive transaction volume to Ethereum mainnet.

But from a decentralization perspective, did we just recreate the centralization problem we were trying to solve? If 77% of L2 activity runs through two entities, and one of those entities controls 46% alone, what exactly did we decentralize?

What Keeps Me Up at Night

I’ve spent the last three years building rollup infrastructure. I believed the story: build better technology, and users will come. Optimize proving systems, reduce latency, improve UX, lower fees. We did all that. And Base still won.

Not because Base built meaningfully better tech. Because Coinbase had distribution, and distribution beats technology every single time in crypto infrastructure markets.

The uncomfortable question I can’t shake: Should we have seen this coming?

Look at every other crypto infrastructure market:

Exchanges: Binance, Coinbase, Kraken dominate despite dozens of technically competent competitors
Wallets: MetaMask captured majority share through early Firefox/Chrome distribution
Nodes/RPC: Infura and Alchemy control massive market share despite being centralized services

Infrastructure markets in crypto follow the same power-law dynamics as traditional tech: a few winners capture most of the value, distribution and network effects matter more than marginal technical improvements, and late entrants need 10x better solutions just to survive.

We assumed rollups would be different. They’re not.

The Path Forward

I’m genuinely conflicted about what this means for Ethereum’s roadmap. On one hand, rollups did scale Ethereum—we’re processing millions of transactions per day that would be impossible on L1. On the other hand, we created a new centralization vector that concentrates activity around whichever entities control user acquisition.

A few questions I’m wrestling with:

For the Ethereum Foundation: Should there have been more focus on distribution and user acquisition alongside technical research? Did we optimize for permissionless deployment but ignore permissionless adoption?

For other L2 teams: Is there a path to competing with Base’s distribution advantage, or should the focus shift to becoming specialized chains for specific use cases rather than general-purpose competitors?

For the broader ecosystem: Does chain abstraction or shared sequencing change this dynamic, or do we just end up with Base controlling the sequencing layer too?

For all of us: If we accept that distribution beats technology in infrastructure markets, what does that mean for crypto’s decentralization goals?

I don’t have answers. Just uncomfortable questions from an engineer who spent years believing that building better tech would be enough.

What do you think—did we scale Ethereum, or did we just prove that even with permissionless tech, centralized distribution wins every time?

defi_diana · March 20, 2026, 8:28pm

I saw this coming from a mile away, and honestly, it frustrated me the entire time I was watching it unfold.

When we were building YieldMax’s cross-chain yield aggregator in 2024, we had to make a brutal decision: which L2s do we support? The technically correct answer was “all of them”—maximum optionality for users, capture liquidity wherever it lives. The pragmatic answer was “1-2 max” because supporting 10+ L2s means:

10+ separate smart contract deployments and audits
10+ different bridge integrations with different security assumptions
10+ sets of liquidation bots, oracle configs, gas token management
Liquidity fragmented across 10+ pools instead of concentrated in 1-2

We chose Base and Arbitrum. Like everyone else did. Not because their tech was better—it wasn’t. Because that’s where the liquidity already was, and liquidity begets more liquidity.

Distribution = Liquidity = Distribution

Here’s the uncomfortable cycle that killed most other L2s:

Base: Coinbase users → instant fiat on-ramps → verified wallets → zero friction onboarding → massive user base → protocols deploy there to access users → more liquidity → more users follow liquidity → reinforcing loop

Everyone else: Incentive programs → mercenary capital farms yields → incentives dry up → capital leaves immediately → TVL collapses → protocols leave → death spiral

Base didn’t just have distribution. Base had the one thing that matters in DeFi: sticky liquidity that doesn’t immediately exit when yields drop 2%.

Why? Because Coinbase users weren’t DeFi natives hunting 400% APYs. They were normies who wanted to “try that crypto thing” and Base was literally one button click from their Coinbase account. They’re not monitoring yield aggregators across 12 chains. They don’t even know they’re on an L2. They just know “Coinbase works.”

The Harsh Truth About “Tech Doesn’t Matter”

Lisa, you said many L2s had superior technology. You’re absolutely right. And I’m going to be blunt about why that didn’t matter:

In DeFi, users don’t choose chains. Liquidity does. And liquidity follows ease of capital deployment, which is:

Where users already are (distribution)
Where other liquidity already is (network effects)
Where regulatory/compliance overhead is lowest (Coinbase’s institutional relationships)

zkSync’s zkEVM proving system is genuinely impressive technology. StarkNet’s Cairo architecture is innovative. Scroll’s bytecode-level EVM equivalence is elegant engineering.

None of that mattered because DeFi users don’t give a single shit about proof systems. They care about:

“Can I deposit USDC easily?”
“Are the fees low enough?”
“Is there enough liquidity that I won’t get rekt by slippage?”
“Do I trust this won’t get hacked?”

Base answered yes to all four through Coinbase’s brand, not through superior rollup technology.

“We Didn’t Scale Ethereum, We Scaled Coinbase’s Moat”

This is the part that keeps me up at night as someone who genuinely believed in Ethereum’s decentralization vision.

We gave Coinbase the perfect playbook to capture Ethereum’s scaling layer:

Ethereum Foundation does years of free R&D on rollup technology
OP Stack gets built as open-source, permissionless infrastructure
Coinbase forks OP Stack (literally just uses existing open-source tech)
Coinbase plugs in their 100M user distribution channel
Coinbase captures 46% of all L2 activity while contributing minimal technical innovation

Coinbase didn’t out-engineer anyone. They out-distributed everyone. And we handed them the infrastructure for free.

The brutal irony: Ethereum’s permissionless, open-source ethos enabled the centralization we were trying to prevent. Any company with massive distribution could fork the OP Stack and instantly dominate the L2 market.

Should We Have Seen This Coming?

You asked whether the Ethereum Foundation should have focused more on distribution/UX vs pure tech. My answer: yes, absolutely.

Look at every other successful crypto product that achieved mainstream adoption:

Coinbase: won through distribution (fiat on-ramps, regulatory compliance, brand trust)
MetaMask: won through distribution (browser extension, early Ethereum wallet)
Uniswap: won through distribution (first-mover + simple UX + liquidity bootstrapping)

Technical superiority has never been the primary driver of crypto adoption. It’s always been distribution, UX, and network effects.

The Ethereum Foundation spent years optimizing for permissionless innovation (which succeeded technically) but basically ignored the user acquisition problem. They assumed “build better tech → users will come.” That assumption was wrong.

What Now?

The uncomfortable question: Should the Ethereum Foundation fund user acquisition campaigns for non-Base L2s to maintain ecosystem decentralization?

Because right now, we’re watching a slow-motion centralization where one company’s rollup could end up processing 60-70% of all Ethereum L2 activity within 18 months. That’s not a decentralized scaling solution. That’s Ethereum becoming a settlement layer for Coinbase’s blockchain.

I don’t have a good answer either. But I do know this: assuming “better technology wins” in crypto markets has been wrong every single time. Distribution wins. Network effects win. Brands win.

We built amazing technology. We lost the distribution war. And now we’re stuck with the consequences.

regulatory_rachel · March 20, 2026, 8:29pm

Lisa and Diana both raise critical points, but I want to add the regulatory and institutional perspective that often gets overlooked in these technical discussions.

Base’s dominance isn’t just about distribution—it’s about regulatory infrastructure that took Coinbase a decade and hundreds of millions of dollars to build. And that infrastructure is completely unavailable to most other L2 teams.

The Regulatory Moat

When institutional investors or regulated entities want to access Layer 2 infrastructure, they’re not asking “which rollup has the fastest finality?” They’re asking:

“Is the operator a registered MSB with FinCEN?” Coinbase: yes. Random L2 DAO: no.
“Do they have state-by-state money transmitter licenses?” Coinbase: 49+ states. Most L2s: none.
“What’s their SOC 2 Type II compliance status?” Coinbase: audited annually. Most L2s: what’s SOC 2?
“Who do we sue if something goes wrong?” Coinbase: Delaware corporation with clear liability. Decentralized L2 team: good luck.
“What’s their relationship with banking partners?” Coinbase: Silvergate, Signature (RIP), others. Most L2s: don’t have bank accounts.

This isn’t FUD or “regulation bad” argument. This is the reality of how institutional capital operates. Compliance infrastructure is a competitive moat, and Coinbase’s moat is massive.

Distribution Through Licensing

Here’s what many people miss: Base’s distribution advantage isn’t just Coinbase’s user base. It’s automatic onboarding through regulatory compliance.

Every Coinbase user has already:

Completed KYC/AML verification
Passed sanctions screening
Connected bank accounts or payment methods
Established trusted relationship with regulated entity

When that user clicks “try Base,” they’re not onboarding to a new platform. They’re accessing a pre-approved extension of their existing Coinbase account. Zero friction. Zero additional compliance burden.

Compare that to:

MetaMask wallet setup (12-word seed phrase, self-custody responsibility)
Bridge from L1 to random L2 (new smart contract risk, bridge exploit risk)
Connect to DeFi protocol (additional smart contract risk, no recourse if hacked)

For 99% of users, that friction is insurmountable. Base eliminates it entirely through Coinbase’s regulatory wrapper.

Why Other L2s Can’t Replicate This

The question isn’t “why don’t other L2s just get licensed?” It’s “why is that basically impossible?”

Cost: Coinbase has spent $500M+ on regulatory compliance, legal, and licensing since 2012. That includes:

49+ state money transmitter licenses at $100K-500K each
Ongoing compliance staff (hundreds of employees)
Legal teams for every jurisdiction
Audit costs, cybersecurity, insurance
Regulatory relationships built over 10+ years

Most L2 teams are 20-person startups with $10-50M in funding. They literally cannot afford Coinbase’s compliance infrastructure even if they wanted it.

Time: It took Coinbase years to get licenses in all 50 states. You can’t fast-track this. Regulators move slowly. Each state has different requirements.

Philosophy clash: Many L2 teams are ideologically opposed to this model. They’re building decentralized, permissionless systems. Becoming a registered MSB with KYC requirements fundamentally contradicts that vision.

So you end up with a paradox: the L2s with the best technology are philosophically opposed to the regulatory infrastructure that would give them distribution, and the entities with regulatory infrastructure (Coinbase, potentially Kraken, Robinhood) don’t need to build better tech—they just fork open-source rollups.

Did We Just Formalize Centralization?

Lisa asked whether we recreated the centralization problem we were trying to solve. From a regulatory perspective, yes, but it’s arguably worse than the L1 problem.

On Ethereum L1, at least validators are globally distributed (though concentrated in certain jurisdictions). On Base, every single transaction flows through Coinbase’s sequencer, which is subject to:

US sanctions compliance (OFAC)
Subpoenas and law enforcement requests
Potential government pressure to censor transactions
Single corporate entity’s business decisions

If Coinbase decides (or is forced to decide) to block certain addresses, they can do that at the sequencer level before transactions even get included in blocks.

The Ethereum Foundation’s vision was permissionless scaling. What we got was licensed scaling, where the winners are the entities with the biggest regulatory compliance budgets.

The Uncomfortable Truth

Here’s what I tell my clients who ask why Base won:

“The L2 race wasn’t decided by technology. It was decided by who could offer the lowest-friction fiat on-ramps while maintaining regulatory compliance. Coinbase had both. Everyone else had neither.”

That’s not a technical problem. That’s a structural problem with how crypto interfaces with traditional finance and regulatory systems.

Diana’s right that we handed Coinbase the playbook. But I’d go further: the regulatory environment guaranteed Coinbase would win the moment Ethereum committed to a rollup-centric roadmap.

Because rollups require:

Centralized sequencers (at least initially)
User onboarding (which requires fiat rails in practice)
Liquidity bootstrapping (which requires institutional trust)

All three favor large, regulated, US-based companies with existing user bases. Coinbase checked every box. Decentralized L2 teams checked zero boxes.

What This Means for Ethereum’s Decentralization Goals

The meta-question: if we accept that regulatory compliance is a prerequisite for mass adoption, can Ethereum’s L2 ecosystem ever be truly decentralized?

My honest answer: not under the current regulatory framework.

As long as fiat on-ramps require money transmitter licenses, and those licenses cost hundreds of millions of dollars and take years to obtain, distribution will always concentrate around a small number of regulated entities.

Chain abstraction might help. Shared sequencing might help. But neither solves the fundamental problem: most users need fiat on-ramps, and fiat on-ramps require regulatory compliance, and regulatory compliance creates centralization.

We didn’t just prove that distribution beats technology. We proved that regulatory compliance is the ultimate distribution moat in crypto.

And I don’t know how we solve that without either:

Changing the regulatory framework (good luck)
Building better decentralized fiat on-ramps (every attempt has failed or been shut down)
Accepting that L2s will be dominated by licensed, regulated entities

None of those options align with Ethereum’s original decentralization vision. But all of them might be inevitable.

ethereum_emma · March 20, 2026, 8:30pm

Reading this thread is equal parts frustrating and validating. Frustrating because you’re all right. Validating because I’m not the only one who feels like we built amazing tech that somehow… didn’t matter as much as we thought it would?

The App Store Analogy

This reminds me so much of the mobile app ecosystem. Technically, anyone can build an iOS or Android app. The tools are (mostly) free. Distribution is “permissionless”—you just submit to the App Store or Play Store.

But in practice:

Apple and Google control the distribution channels
Apps that integrate with platform features get promoted
Discovery is nearly impossible without platform support or massive marketing budgets
Most apps get < 1000 downloads despite being technically competent

Sound familiar? Permissionless deployment ≠ permissionless adoption.

The difference: at least with mobile apps, Apple/Google built the platforms. With Ethereum L2s, we built the open-source infrastructure, and then Coinbase used it to build a moat around their existing user base.

My Experience Building on Multiple L2s

I’ve shipped DeFi frontends on Base, Arbitrum, Optimism, zkSync, and Polygon zkEVM over the past 18 months. Here’s what I actually observed:

Technical differences: Honestly pretty minimal from a developer perspective. zkSync’s account abstraction was cool. Arbitrum’s dev tooling was slightly more polished. Base’s docs were… fine? Nothing groundbreaking.

User onboarding differences: MASSIVE.

On Base:

“Connect Coinbase Wallet” button
User clicks it
User is instantly on Base with funds ready to go
Conversion rate: ~70-80%

On every other L2:

“Install MetaMask” (user: what’s MetaMask?)
“Add this L2 network to MetaMask” (user: confused by custom RPC fields)
“Bridge funds from Ethereum mainnet” (user: why is gas $20? This was supposed to be cheaper!)
“Approve token spending” (user: why do I need two transactions?)
Conversion rate: ~10-15%

That 5-7x difference in conversion rates is the entire story. Not tech. Not UX polish. Not fee optimization. Just: does the user already have an account and funds on your chain, or do they need to jump through 6 hoops first?

The Uncomfortable Admission

Here’s what I don’t like admitting as someone who loves building and learning about tech:

We overestimate how much users care about what we’re building.

I spent weeks optimizing our zkSync integration to take advantage of native account abstraction. Users don’t know what account abstraction is. They don’t care.

I built custom bridge UIs to minimize steps. Users still bounced at “add custom network to wallet.”

I wrote detailed documentation explaining why L2s are better than L1. Users didn’t read it.

What worked: “Log in with Coinbase” button on Base. That’s it. That’s what worked.

Rachel’s point about regulatory infrastructure is spot-on, but I think there’s an even simpler layer underneath: users want things that feel familiar and safe.

Coinbase feels familiar. It looks like a normal app. It has a customer support number. If something breaks, there’s a company to yell at.

Random L2 with anonymous team and cartoon animal logo? That doesn’t feel familiar or safe. Doesn’t matter if the tech is better.

Is There a Silver Lining?

The one thing keeping me from total cynicism: at least Base is built on the OP Stack, which means:

The tech is open-source and auditable
Other companies can (and have) forked it to launch their own L2s
Improvements to OP Stack benefit everyone
The state can be reconstructed from L1 data if Coinbase disappeared tomorrow

Is that “decentralization”? Not really. Is it better than if Coinbase built a fully proprietary closed chain? Yes.

It’s like… decentralization with an asterisk. The tech is open. The usage is centralized.

Diana asked whether Ethereum Foundation should fund user acquisition for non-Base L2s. Honestly, I don’t think that solves the problem. The problem isn’t awareness. The problem is users fundamentally prefer platforms that reduce cognitive load and offer institutional trust.

You could give $100M to Arbitrum for user acquisition and it still wouldn’t change the fact that Coinbase users trust Coinbase, have funds on Coinbase, and don’t want to learn what a seed phrase is.

The Hope I’m Holding Onto

The thing I keep coming back to: maybe this is just a temporary state?

Chain abstraction is getting better. Apps like Jumper and LiFi let users access any L2 without thinking about which L2 they’re on. Intent-based systems could abstract away the entire “which chain should I use?” question.

If we get to a place where:

Users don’t need to manually bridge between L2s
Apps automatically route transactions to wherever liquidity is best
One wallet works across all chains seamlessly
Gas is auto-paid in whatever token users already have

…then maybe Base’s distribution advantage matters less? Because users aren’t “choosing Base” vs “choosing Arbitrum”—they’re just using apps, and those apps happen to be multichain by default.

I don’t know if that’s realistic or just hopeful thinking from someone who spent 2 years building L2 infrastructure and wants it to matter.

The Question I Can’t Answer

Lisa, you asked what this means for Ethereum’s decentralization goals. I genuinely don’t know.

Part of me thinks: we succeeded technically but failed strategically. We built permissionless scaling tech. We didn’t build permissionless adoption mechanisms.

Another part of me thinks: maybe this is just how all infrastructure markets work? AWS dominates cloud despite GCP and Azure being technically comparable. Postgres dominates databases despite many alternatives. Networks effects + distribution + brand trust = winner-takes-most.

If crypto infrastructure follows the same dynamics as every other infrastructure market, then we should expect concentration around 2-3 dominant players. And that’s what we got.

Is that okay? I’m not sure. It’s not the radical decentralization future we were sold. But it’s also not Ethereum becoming Coinbase’s settlement layer (yet), because Base still settles to Ethereum L1, which remains decentralized.

It’s messier and more centralized than we wanted, but more open and credibly neutral than traditional finance. And maybe that’s the best we can realistically achieve when interfacing with regulatory systems and normal user expectations.

Or maybe I’m just rationalizing because I don’t want to accept that the last 2 years of building were based on incorrect assumptions about what users actually want.

I don’t have answers. Just more questions and a lot of uncertainty about whether we’re building the future or just adding complexity to replicate existing power structures with extra steps.

product_manager_alex · March 20, 2026, 8:31pm

This thread articulates something I’ve been struggling with for months, and I want to add a product strategy lens that ties together the technical, regulatory, and UX perspectives you’ve all raised.

This is a Classic “Crossing the Chasm” Failure

Geoffrey Moore’s “Crossing the Chasm” model describes the gap between early adopters (who tolerate friction for cutting-edge tech) and mainstream users (who need complete solutions with minimal friction).

Early adopters: Crypto natives who understood seed phrases, gas optimization, bridge security, different L2 tradeoffs. These people compared zkSync’s Cairo proving system vs Arbitrum’s optimistic fraud proofs. They CARED about technical specs.

Mainstream users: People who clicked “try Base” from their Coinbase account because they heard crypto might be interesting. These people don’t know what an L2 is. They barely understand what Ethereum is.

Most L2s built for early adopters. Base built for mainstream users. Or more accurately: Coinbase already had mainstream users and just gave them an L2.

That’s the chasm. And almost everyone fell into it.

Why “Build It and They Will Come” Failed

Emma’s conversion rate comparison is devastating:

Base: 70-80% (Coinbase Wallet integration)
Other L2s: 10-15% (manual MetaMask + bridge setup)

That 5-7x difference compounds. Let’s run the math:

Scenario 1: Great tech, poor distribution (most L2s)

100,000 people hear about your L2
10% successfully onboard = 10,000 users
20% become active users = 2,000 active users

Scenario 2: Good enough tech, great distribution (Base)

9,300,000 Coinbase users see “try Base” button
5% click through = 465,000 users
75% successfully onboard = 348,750 users
20% become active = 69,750 active users

Base gets 35x more active users despite lower click-through and same activation rate, purely from distribution scale.

And it gets worse: network effects are exponential. Once Base hit critical mass, protocols deployed there to access users. Then more users came for the protocols. Distribution advantage becomes self-reinforcing.

Other L2s never had a chance.

The Product Strategy Lessons

Rachel’s regulatory moat analysis is crucial, but I want to generalize it to product strategy principles:

1. Distribution beats features

AWS didn’t win cloud because it had the best features (GCP arguably better ML, Azure better enterprise integration)
AWS won because they had first-mover distribution + network effects
Same dynamic here: Base had distribution (Coinbase), features became table stakes

2. Friction kills products

Every additional step in onboarding cuts conversion rates 20-40%
MetaMask setup + network addition + bridge transaction = 3 friction points
Base: 0 friction points if you’re already on Coinbase
Game over before it started

3. Users hire products to do jobs, not to be technically impressive

Users don’t want “fast zkEVM with cheap proving costs”
Users want “buy crypto thing easily and not get scammed”
Base delivers the job users actually hired the product for

4. Brand trust is a moat

Coinbase = safe, regulated, has customer support
Random L2 team = anonymous devs, smart contract risk, “your keys your responsibility”
Mainstream users choose safety over sovereignty every time

The Ecosystem Question That Keeps Me Up

Diana asked whether Ethereum Foundation should fund user acquisition for non-Base L2s. My product manager instinct says: that’s not a solution, that’s a band-aid.

The real question is: what market are we building for?

Option A: Crypto-native power users

These people care about decentralization, technical specs, sovereign keys
They’ll use non-Coinbase L2s because they philosophically oppose centralization
Market size: 5-10 million people globally

Option B: Mainstream users who want easy crypto access

These people care about “does it work?” and “is it safe?”
They’ll use whatever platform has least friction + most trust
Market size: 500 million - 2 billion people globally

If we’re building for Option A, current L2 landscape is fine. Multiple viable L2s serve different technical preferences.

If we’re building for Option B, we already lost, because Option B users will always prefer platforms built by trusted brands with great UX (Coinbase, potentially Robinhood, Kraken, PayPal).

Ethereum Foundation optimized for Option A. The market demanded Option B. Base captured Option B.

Network Effects Are Non-Linear and Brutal

This is where it gets really uncomfortable. Even if we funded user acquisition for other L2s, network effects make it nearly impossible to catch up.

Base’s advantages compound:

More users → more protocols deploy on Base
More protocols → more liquidity concentrates on Base
More liquidity → better pricing, less slippage
Better UX → more users choose Base
Back to step 1

This is a flywheel. And breaking a flywheel once it’s spinning requires either:

10x better product (other L2s don’t have this)
Regulatory intervention (probably not happening)
Catastrophic Base failure (possible but unlikely)
Fundamental market shift (chain abstraction maybe?)

User acquisition campaigns won’t break the flywheel. You need to change the market structure.

The Strategic Pivot Question

Lisa asked whether other L2s should shift to specialized chains for specific use cases rather than general-purpose competitors.

Yes. Absolutely yes.

You cannot out-distribute Coinbase if you’re trying to be a general-purpose L2. You will lose.

But you CAN succeed by:

Gaming L2s (Immutable X, Ronin model: own the gaming ecosystem, Base doesn’t)
Privacy-focused L2s (Aztec model: serve users who need privacy, Base can’t)
Enterprise L2s (Serve corporate clients with specific compliance needs Coinbase doesn’t want)
Geographic L2s (Serve regions where Coinbase isn’t licensed/available)

Stop trying to be “Ethereum’s scaling layer” in competition with Base. That market is decided. Base won.

Start being “the L2 for X specific use case that Base doesn’t serve well.” That market is wide open.

The Meta-Question About Decentralization Goals

Emma’s question about whether we’re building the future or replicating existing power structures hits hard.

Here’s my uncomfortable take: crypto’s decentralization goals were always in tension with crypto’s mainstream adoption goals.

Decentralization requires:

Users managing their own keys (friction)
Users understanding security tradeoffs (cognitive load)
Users accepting responsibility for mistakes (risk)

Mainstream adoption requires:

Zero friction onboarding (centralized intermediaries)
Trusted brands (institutional moats)
Customer support and recourse (centralized accountability)

These goals are incompatible for 95% of users. The 5% who care about decentralization will use non-custodial wallets and avoid Coinbase. The 95% who care about ease-of-use will use Coinbase/Base.

Maybe that’s okay? Maybe the endgame is:

Ethereum L1 remains credibly neutral and decentralized
Most users access Ethereum through centralized intermediaries (Coinbase, Robinhood, etc.)
Power users can always exit to self-custody if they want
Centralized intermediaries compete on service quality, keeping each other honest

That’s not the radical decentralization vision. But it might be the realistic decentralization outcome when you’re trying to serve billions of users who don’t want to memorize seed phrases.

What I Tell Founders Building in This Space

When teams ask me whether they should build on Base vs other L2s, my advice:

If your target market is mainstream users: Build on Base. You need their distribution more than they need your protocol.

If your target market is crypto-native power users: Build on the L2 that best serves your technical requirements. Base’s distribution advantage doesn’t matter here.

If your target market is underserved niche: Build specialized L2 or app-chain. Don’t compete with Base head-on.

The era of “general-purpose L2 competition” is over. Base won that race before most teams realized they were competing.

The era of “specialized L2s for specific use cases” is just beginning. That’s where the opportunity is now.

Maybe we didn’t scale Ethereum the way we imagined. But we did create the infrastructure for permissionless experimentation. We just learned that permissionless deployment doesn’t guarantee decentralized adoption.

And that’s a hard lesson, but an important one.