Base Member Addresses Rumors on Coinbase’s ETH Sales
A member of the layer 2 scaling solution Base has publicly addressed and refuted recent rumors suggesting that its sequencer, Coinbase, has been selling ether (ETH). In a post on X this past Sunday, Base member Kabir.base.eth clarified, “Coinbase has accumulated over $300 million in ETH, which is more than double the total ETH earnings of Base throughout its operational timeline.” He emphasized that both Base and Coinbase are committed to holding ETH and have transparently disclosed their long-term holdings, which exceed 100,000 ETH and amount to over $300 million.
Kabir further explained that Base employs off-chain custody methods for enhanced security and auditing purposes, which is the reason behind the transfer of funds to Coinbase. He stated that the Ethereum layer 2 solution aims to earn and utilize as much ETH as possible, using it to cover Layer 1 expenses and provide necessary support.
CoinDesk has attempted to reach out to Coinbase for further commentary on this matter. Kabir’s remarks came in response to claims made by the pseudonymous observer Santisa, who suggested that Base has been transferring all sequencer fees to Coinbase since the project’s inception, implying that the sequencer might be liquidating these assets.
It is important to note that Coinbase operates as the sole sequencer node on Base, responsible for sequencing and finalizing transactions in a predetermined order, which significantly enhances transaction throughput (speed). For this critical role, Coinbase charges a fee, which is collected in ETH.
Santisa’s perspective aligns with concerns voiced by Andre Cronje, the founder of Sonic Labs, regarding the implications of centralized sequencers in layer 2 solutions. Cronje argues that this centralization leads to profit models that may not fully resonate with the core values of the broader Ethereum ecosystem.
In essence, while layer 2 scaling solutions accumulate substantial revenue from transaction fees, they allocate only a small fraction of that revenue to the Ethereum mainnet for purposes related to data availability and security. Consequently, the majority of the fees collected in ETH are either retained or sold on the market, which diminishes both fee revenue and the associated ETH burning on the mainnet, ultimately impacting ETH’s supply negatively.
Cronje articulated his concerns on X, stating, “Layer 2 solutions are why Ethereum is experiencing inflation again. We need to SCALE ETHEREUM. They can access the Sonic technology at no cost, which could potentially 1000x their throughput.”
