Base

Coinbase CEO says Bitcoin Lightning is ‘something we’ll integrate’

“Lightning is great and something we’ll integrate,” Brian Armstrong said in response to an allegation that he was “ignoring” the network.

Bitcoin (BTC) layer 2 scaling solution Lightning may feature on the cryptocurrency exchange Coinbase in some capacity, according to its CEO, Brian Armstrong.

In a tweet on April 8, Armstrong said that “Lightning is great and something we’ll integrate” in response to a tweet criticizing him for “actively ignoring” the network.

Armstrong provided no further details on what a Lightning integration with Coinbase would involve or when it could be expected.

Coinbase, along with Binance and the now bankrupt FTX, has been called out in the past for not integrating the Lightning network which enables faster and cheaper BTC transactions than the Bitcoin base network.

According to a GitHub repository by Lightning enthusiast David Coen, Coinbase would join Bitfinex, Kraken and OKX as the largest trading platforms to have integrated Lightning, if Armstrong stays true to his word.

Coen had previously suggested that Lightning integration may go against the business plan for many of these trading platforms, “since the priority seems to be to integrate as many altcoins as possible and follow the trends of the market.”

Armstrong claims to have tested out a Lightning network application in recent days, and sent Cointelegraph reporter Joseph Hall $100 in BTC after Hall shared a video of himself using Bitcoin in Senegal.

The $100 was a prize by Armstrong for those who shared the “best” examples of how people are using crypto in Africa. Hall said he would give away the funds to onboard others to Bitcoin.

Hall reported, however, that he hasn’t received the payment, prompting Bitcoiner Derek Ross to suggest that Armstrong “needs a lesson on Lightning.”

Coinbase has lately been more active in the Ethereum ecosystem having launched “Base” on Feb 23 — an Ethereum layer 2 application-focused network powered by fellow layer 2 Optimism.

Related: Bitcoin Lightning Network growth is organic, coming from real-world adoption

Interestingly, Armstrong wrote a “Scaling Bitcoin” article in January 2016, where he said that he would throw support behind Bitcoin scaling solutions:

“We also did it to show our support for scaling Bitcoin, and encourage things to move forward, since we’d like to see a solution sooner rather than later.”

Lightning was launched about two years later in March 2018, with last month marking the fifth anniversary of the network.

Cointelegraph contacted Coinbase for comment but did not receive an immediate response.

Magazine: Bitcoin in Senegal: Why is this African country using BTC?

Coinbase wants devs to build inflation-pegged ‘flatcoins’ on its new ‘Base’ network

Coinbase explained that it is now “more important than ever” to build an inflation-tracking stablecoin that negates poor monetary policy decisions of central banks.

Crypto exchange Coinbase sees inflation-pegged “flatcoins” as one of four “critical” innovations that should be built on its recently launched layer-2 network Base.

The other three include an on-chain reputation system, an on-chain limit order book (LOB) exchange and tools that make the decentralized finance (DeFi) ecosystem safer. 

The trading platform outlined the four areas in a post published on March 24, about a month after Coinbase launched Base, a network that is secured by Ethereum and powered by fellow layer-2 network Optimism.

First off the bat was the development of an inflation-pegged flatcoin. In light of the recent banking crisis, Coinbase said it is now “more important than ever” to build an inflation-tracking stablecoin that negates poor monetary policy decisions of central banks:

“[We] are particularly interested in ‘flatcoins’ — stablecoins that track the rate of inflation, enabling users to have stability in purchasing power while also having resiliency from the economic uncertainty caused by the legacy financial system.”

While most stablecoins are pegged to a reference asset such as the U.S. dollar, flatcoins aim to be pegged to the “price of living” by tracking consumer price index and inflation data.

Coinbase added that it is also open to other ideas that “fill the space” between fiat-pegged stablecoins and volatile cryptocurrencies.

The concept has the approval of investor Ray Dalio too, who recently said that he would like to see an “inflation-linked coin” to ensure that consumers can secure their buying power.

“The closest thing to that is an inflation index bond, but if you created a coin that says OK this is buying power that I know I can save in and put my money in over a period of time and transact in anywhere, I think that would be a good coin,” he said.

Coinbase has also urged developers to look into developing an on-chain reputation system, which it says will play a “critical role” in establishing “onchain trust” between users, Coinbase said.

A reputation protocol could implement a credit score or a rank-like system which ensures certain criteria is met before an onchain identity can interact with a decentralized finance (DeFi) application:

“This could look like a FICO or Google page rank type score on ENS names, ratings/reviews for merchants, and other measures that help build trust onchain.”

Ganesh Swami, CEO of blockchain data aggregator Covalent, previously told Cointelegraph that this could be achieved by reviewing past transaction data of a particular wallet address on competitor protocols, as the blockchain leaves what he describes as “historical breadcrumbs.”

However, Coinbase said that reputation protocols must ensure user privacy and autonomy is preserved.

In its third area of focus, Coinbase said an on-chain limit order book exchange could serve as a more “advanced exchange” because it can carry out the normal operations of exchange whilst eliminating counterparty risk through self-custody.

Limit orders are used to place an order to buy or sell the stock with a restriction on the maximum (or minimum) price that a user wants to trade at. A limit order book is a list of orders for a given security.

Coinbase believes the LOB exchange would open up a host of new trading opportunities on-chain: Base

By taking this onchain, Coinbase explained that it may offer professional traders and institutions a new trading venue to execute trading strategies that they’re familiar with in the traditional financial system:

“The high throughput of Base opens up significant new opportunities for designing new mechanisms for spot trading, limit orders, options, perpetuals, and more. And, builders can use open source tooling like OP Stack to build L3s that give them even more speed and control, potentially enabling even deeper liquidity, still accessible through L2.”

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

The final area of focus, according to Coinbase, is around making the decentralized finance (DeFi) ecosystem safer for users and developers.

To achieve that feat, it wants to enable tools that protect against smart contract code vulnerabilities and protocol logic errors.

The firm explained that self-service security testing tools and stronger auditor services may help mitigate threat prevention, circuit breakers and incident response systems.

Coinbase said it would also like to see more insurance protocols to serve as a “critical backstop” for users in the event of a smart contract exploit.

Meanwhile, to help fast-track DeFi on Base, Coinbase launched its Base Ecosystem Fund to help fund early-stage projects building on Base. The layer-2 network now supports over 30 blockchains, according to a recent post by Base.

Magazine: Unstablecoins: Depegging, bank runs and other risks loom

Coinbase wants devs to build inflation-pegged ‘flatcoins’ on its new ‘Base’ network

Coinbase explained that it is now “more important than ever” to build an inflation-tracking stablecoin that negates poor monetary policy decisions of central banks.

Crypto exchange Coinbase sees inflation-pegged “flatcoins” as one of four “critical” innovations that should be built on its recently launched layer-2 network Base.

The other three include an on-chain reputation system, an on-chain limit order book (LOB) exchange, and tools that make the decentralized finance (DeFi) ecosystem safer. 

The trading platform outlined the four areas in a March 24 post — about a month after Coinbase launched Base on Feb. 23. Base is secured by Ethereum and powered by fellow layer-2 network Optimism.

First off the bat was the development of an inflation-pegged flatcoin. In light of the recent banking crisis, Coinbase said it is now “more important than ever” to build an inflation-tracking stablecoin that negates poor monetary policy decisions of central banks:

“[We] are particularly interested in ‘flatcoins’ — stablecoins that track the rate of inflation, enabling users to have stability in purchasing power while also having resiliency from the economic uncertainty caused by the legacy financial system.”

While most stablecoins are pegged to a reference asset such as the U.S. dollar (USD), flatcoins aim to be pegged to the “price of living” by tracking consumer price index and inflation data.

Coinbase added that it is also open to other ideas that “fill the space” between fiat-pegged stablecoins and volatile cryptocurrencies.

The concept has the approval of investor Ray Dalio too, who recently said that he would like to see an “inflation-linked coin” that serves to ensure that consumers can secure their buying power.

“The closest thing to that is an inflation index bond, but if you created a coin that says OK this is buying power that I know I can save in and put my money in over a period of time and transact in anywhere, I think that would be a good coin,” he said.

Coinbase has also urged developers to look into developing an on-chain reputation system, which it says will play a “critical role” in establishing “onchain trust” between users, Coinbase said.

A reputation protocol could implement a credit score or a rank-like system which ensures certain criteria is met before an onchain identity can interact with a decentralized finance (DeFi) application:

“This could look like a FICO or Google page rank type score on ENS names, ratings/reviews for merchants, and other measures that help build trust onchain.”

Ganesh Swami, CEO of blockchain data aggregator Covalent previously told Cointelegraph that this could be achieved by reviewing past transaction data of a particular wallet address on competitor protocols, as the blockchain leaves what he describes as “historical breadcrumbs.”

However, Coinbase said that reputation protocols must ensure user privacy and autonomy is preserved.

In its third area of focus, Coinbase said an on-chain limit order book exchange could serve as a more “advanced exchange” because it can carry out the normal operations of exchange whilst eliminating counterparty risk through self-custody.

Limit orders are used to place an order to buy or sell the stock with a restriction on the maximum (or minimum) price that a user wants to trade at. A limit order book is a list of orders for a given security.

Coinbase believes the LOB exchange would open up a host of new trading opportunities on-chain: Base

By taking this onchain, Coinbase explained that it may offer professional traders and institutions a new trading venue to execute trading strategies that they’re familiar with in the traditional financial system:

“The high throughput of Base opens up significant new opportunities for designing new mechanisms for spot trading, limit orders, options, perpetuals, and more. And, builders can use open source tooling like OP Stack to build L3s that give them even more speed and control, potentially enabling even deeper liquidity, still accessible through L2.”

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

The final area of focus, according to Coinbase, is around making the decentralized finance (DeFi) ecosystem safer for users and developers.

To achieve that feat, it wants to enable tools that protect against smart contract code vulnerabilities and protocol logic errors.

The firm explained that self-service security testing tools and stronger auditor services may help mitigate threat prevention, circuit breakers and incident response systems.

Coinbase said it would also like to see more insurance protocols to serve as a “critical backstop” for users in the event of a smart contract exploit.

Meanwhile, to help fast-track DeFi on Base, Coinbase launched its Base Ecosystem Fund to help fund early-stage projects building on Base. The layer-2 network now supports over 30 blockchains, according to a recent post by Base.

Magazine: Unstablecoins: Depegging, bank runs and other risks loom

Coinbase CEO hints its new layer-2 network could include AML measures

Brian Armstrong said centralized firms have a responsibility to monitor transactions and carry out Anti-Money Laundering checks.

Coinbase CEO Brian Armstrong has hinted that the firm’s new layer-2 blockchain network Base may be subjected to transaction monitoring and Anti-Money Laundering measures at launch.

In an interview with Joe Weisenthal on Bloomberg Radio on March 6, Armstrong acknowledged that Base has some centralized components today, adding that “it will be more and more decentralized over time.”

However, he then suggested that there will be transaction monitoring and AML requirements for users of the new layer-2 network.

He suggested that Coinbase will have a responsibility in terms of transaction monitoring in the early days, adding:

“I think that the centralized actors are the ones that are probably going to have the most responsibility to avoid money laundering issues and having transaction monitoring programs and things like that.”

Armstrong’s comments were also highlighted up by decentralization advocate Chris Blec in a Twitter post on March 7.

Base is an Ethereum layer-2 network that offers a secure, low-cost, developer-friendly way for users to build decentralized apps, according to Coinbase.

It is being developed with the “OP Stack” used by Optimism, which will enable high-speed transactions on Ethereum. Base was unveiled on Feb. 23 and is currently in the testnet phase. Coinbase has yet to provide a mainnet launch date but it is expected in Q2, 2023.

Blec previously warned about Coinbase’s latest layer-2 offering in a blog post released in late February, five days after the firm announced Base.

He said that layer-2 infrastructure was quite centralized because they use “sequencers,” which are “nodes that construct and execute L2 blocks while transmitting users’ actions from L2 to L1.”

Coinbase, a licensed money transmitter, will be operating the sole sequencer for Base. This raised the question of whether Base would also legally require Know Your Customer (KYC) requirements, making it the first-ever L2 to do so.

Related: L2 is crucial to Ethereum decentralization, censorship resistance, says researcher

Coinbase hasn’t confirmed or denied whether Base would be implementing KYC and AML measures. Blec commented:

“Isn’t it ironic that ‘DeFi’ is heading toward being controlled by the entities that it was originally supposed to be battling?”

However, the crypto community and Ethereum advocates have said Base was a “massive confidence vote” for Ethereum.

Cointelegraph reached out to Coinbase for comment but had not received a response by the time of publication.

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

One Ethereum bull hopes the launch will help onboard a host of other crypto companies and financial institutions onto Ethereum.

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

Secured on Ethereum and powered by layer-2 network Optimism, Base aims to eventually become a network for building decentralized applications (DApps) on the blockchain. The layer-2 network is currently in its 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,” which could set a precedent for cryptocurrency companies and financial institutions to use Ethereum as the settlement layer of choice.

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

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

Adam also commended Coinbase for opting to open-source Base and believes the new layer-2 network will bring about 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 resides on layer 2s these days.

Ryan Watkins, the co-founder of crypto-focused hedge fund Syncracy Capital, described the news in a Feb. 23 tweet as a “watershed moment” in the Ethereum rollup ecosystem. He added that there was “likely no one better” positioned than Coinbase to onboard the next 10 million users and institutions to Ethereum.

Not everyone was bullish though.

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

Related: Coinbase beats Q4 earnings estimates amid falling transaction volume

“A centralized L2 that trades lots of tokens any number of which could be alleged securities, or does lots of DeFi transactions that arguably might alleged to be regulated (securities swaps etc), opens the door to the SEC making new kinds of secondary market claims,” wrote Shapiro, adding:

“imo, this will accelerate the SEC’s “secondary market” agenda re: blockchain securities issues, because they can’t let an SEC registrant “get away with” potential violations & build up a legal arbitrage strategy right under the SEC’s nose.”

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

Regarding the launch of Base, the lawyer opined that it could be a “bad step for them” and inflict “collateral damage” on the rest of the ecosystem, particularly in the event that the SEC finds a vulnerability to expose: