- Bitwise, a cryptocurrency asset manager, has recently compared the position of Nasdaq-listed cryptocurrency exchange Coinbase to Amazon before its significant growth.
- The comparison is based on the potential of Coinbase’s Ethereum layer-2 network, Base, which was highlighted in the company’s recent earnings report.
- Base, which accounts for 1% of Coinbase’s revenues, is experiencing rapid growth and could become a significant revenue generator for the company.
Bitwise’s analysis of Coinbase’s recent earnings report suggests that the company could be on the brink of significant growth, similar to Amazon’s trajectory, due to the potential of its Ethereum layer-2 network, Base.
Bitwise’s Analysis of Coinbase’s Earnings Report
Bitwise’s analysis of Coinbase’s recent earnings report reveals a hidden game-changer – Base. Base is an Ethereum layer-2 network that allows users to move funds on Ethereum Virtual Machine (EVM) compatible decentralized applications at a minimal cost. Coinbase reported net revenue of $1.6 billion in the first quarter of the year, a 72% quarter-on-quarter increase and a 116% year-over-year increase. Base accounted for 1% of Coinbase’s revenues in the first quarter.
The Potential of Base
Bitwise analysts believe that Base could be a game-changer for Coinbase. The number of transactions on Base has been growing rapidly, with a 74% quarter-over-quarter increase in Q1. In April alone, Base processed 40% more transactions than in the entire first quarter. Coinbase’s CEO, Brian Armstrong, has also noted a surge in the number of developers on Base. As a result, Base could become a significant revenue generator for Coinbase, with high gross margins.
Coinbase as a Sequencer
Coinbase is currently the only sequencer on Base, verifying transactions on the Layer-2 network and batching them before posting them to the Ethereum mainnet. In the first quarter of the year, Coinbase earned $15.5 million in fees from Base, out of $27.4 million that Base users paid in transaction fees. In April, these fees accounted for $11 million of Coinbase’s revenue.
Conclusion
If Base continues to grow, it could reliably deliver significant profits to Coinbase each month. In the long term, if Base becomes the primary network for developers to build applications, Coinbase could end up owning a core piece of crypto infrastructure. This potential has led Bitwise to compare Coinbase’s position to Amazon before its significant expansion. Just as Amazon became a core infrastructure provider within the e-commerce ecosystem, Coinbase could become a core infrastructure provider within the cryptocurrency ecosystem.
