Upcoming ICO: Layer-2's Coinbase Incubation
The blockchain space has experienced massive growth in layer-2 solutions to address scalability challenges on major networks like Ethereum. Coinbase has been incubating its own layer-2, Base, and it has certainly garnered significant charm given the discussions of a native token launch that could resemble an ICO in both structure and impact. Coinciding with BaseCamp 2025, this is set to launch a native token into Base, potentially changing the way a user is incentivized and governed on the network. For investors that are focused on layer-2 projects, the Coinbase incubated project is a strategic merger of centralized exchange expertise and decentralized scaling through the issuance of tokens that could drive adoption and value accrual.
Coinbase, a leading cryptocurrency exchange, launched Base in 2023 as an Optimism-based layer-2 to reduce transaction cost and speed for applications running on Ethereum. The project has been incubated and launched as part of Coinbase's ecosystem and thus far has been able to utilize many of those robust resources, such as developer support and wallet service integration through the exchange. As rumors of a native token for the project grow louder, the ICO-like launching event could unlock major milestones for Base, where a reward can be given to early contributors, and encourage the growth of a self-sustaining economy. The new milestone for Base aligns to broader trends in layer-2 networks where newly offered tokens are used to incentivize liquidity provision and network security, like Arbitrum's ARB or Optimism's OP.
What is particularly remarkable about this incubation is that Coinbase's previous projects have courted success in bridging traditional finance with blockchain technology. The exchange's investment initiatives, and venture arm have put money into a number of Layer-2-related projects, but Base is the one to pay attention to because it's an in-house project, making some connection to Coinbase's user base of over 100 million users. Investors should look for how the token complements the existing product features (on-ramps for the fiat conversion), as it may be seen as lowering the barriers for retail participants entering the ICO.
To better position yourself to participate in some future L2 token launches:
- Consider registering on the Coinbase exchange sooner than later, thus positioning yourself for potential airdrops or priority access to whatever the token is at launch.
- Pay attention to all official Base accounts and when they announce snapshot dates to determine ethereal participants' eligibility.
- Consider allocating at least a portion of your portfolio to related community assets, such as ETH, to hedge against the risk of platform failure or specific network failure.
- Participating in the testnet activations for Base will yield points that can be converted for testing points when tokens are released.
Your preparation will position you to exposure to possible outcomes of the incubation.
Clarifying How Base May Launch Its Token in The Near Future
Base expects its token will launch as other layer-2 chains have launched: fair launch and use of the token. The theory of the token is teaser, so details are not actually available, but Coinbase has teased Base will explore a native token at BaseCamp 2025, which indicates they may issue some form of airdrop to ecosystem participants of Base's use from the beginning. There might be some token rewards for users who utilized Base during testnet or should they have bridged assets and traded on integrated DEXs. The token may also serve multi-functional utilities or services for example governance votes on protocol upgrades, or staking utilization, similar to OP tokens in Optimism.
Coinbase's incubation presents Base a significant advantage as a potential project for very large combinations of the exchange's infrastructure for launching. This could mean that we would simply have the token lists directly on Coinbase post-ICO, which could provide instant liquidity and eliminate most of the classic post-launch volatility new projects experience. The initial launch could potentially utilize a fair launch model that does not include large pre-mines for insiders, to be more in line with community expectations for a DeFi project. Initial estimates total a supply which will likely be in the billions with liquidity mining and developer grants that will be effectively used to incentivize growth.
Another fundamental aspect of the token economics will be the relationship of the token with Base's optimistic rollup technology and whether token holders will be able to earn yields from transaction fees. This has gained popularity in protocols like Arbitrum where token holders receive part of the fees from the sequencer as a revenue share. More information on rollup economics should be available in the Optimism documentation on revenue models.
Project teams experimenting with this kind of model should be cognizant to:
- Create transparent breakdowns of how allocations will occur to build trust on day one
- Use vesting schedules for team tokens to prevent 'dumps'
- Allow community audits of distribution contracts
- Work with oracles for fair pricing during the sale
These factors build a stronger foundation for a long-lived token.
Coinbase Incubation Model for Layer-2 Success
Coinbase's incubation model has been catalytic to Base's rise as it provided more than just liquidity. It provided marketing and technical support. The launch model, which began with Coinbase as the use case of expanding beyond just trading, leveraged the user base of Coinbase and its reputation of establishing legitimacy through compliance. This I cubation model involves working closely with the Optimism Collective to ensure Base is a contribution to the Superchain vision to bring security and liquidity to many layer-2. Through incubation, Base has achieved over $1 billion in total value locked (TVL) and is leading all layer-2 networks by activity.
The model's success is attributable to its focus on onboarding developers, offering tools such as easy deployment kits and grants for building on Base. This means that, once the token officially launches, a ready-made ecosystem exists where the token can find immediate utility in dApps and wallets. Furthermore, Coinbase's participation also helps to minimize regulatory risk for the token because it gives the project credible status as it's backed by a licensed exchange (Coinbase) - this helps to demonstrate the project complies with U.S. policy and potentially leads to institutional engagement.
The incubation process is also distinct from other independent layer-2 projects, which often face challenges due to lack of initial liquidity. Coinbase has the resources to accelerate growth as evident from the partnerships the network has formed with wallets like Rainbow and Phantom. For further reading on incubation programs, see the guide provided by Y Combinator for crypto startups.
Incubator ecosystems can help facilitate similar outcomes as Coinbase by:
- Providing mentoring on compliance and scaling.
- Offering seed funding contingent on milestones.
- Making introductions to key players within the ecosystem.
- Encouraging open-source contributions for community buy-in.
In-effect these processes will build and create resilient layer-2 ecosystems.
Token Distribution and Economic Design
The basis of Base's native token economic design is to create a healthy network and alignment of users. Although the token economic design is still pending, it is expected to look like a distribution of ~40% community airdrops, ~30% ecosystem grants, ~20% liquidity incentives, and ~10% vesting for the team. This smooths out where the distribution does not route to extreme centralization. The design probably incorporates deflationary features, such as fee burns from transactions, to lessen the inflation from transactional rewards.
Distribution will also be retroactive to reward historical users based on some activity such as gas spent or apps interacted with, thereby rewarding loyalty versus farming. Further utility of the token in gas fees or staking for validator slots builds the token into the functioning of its network; as total value locked increases demand will grow.
The economic model of layer-2 tokens frequently includes locking mechanisms for boosted rewards, often referred to as voting escrow tokens and Base may take this approach as it will promote long-term holding. For a review of similar economic models, take a look at Arbitrum's token economy.
To think about ecologic token economy designs for layer-2 projects, we recommend to:
- Establish inflation rates that are related to the usage of the network to avoid overproduction.
- Feature governance escrow so the token has voting power.
- Plan for security bounty allocation.
- Create models such as CadCAD to simulate scenarios.
These eco-specific designs create a sustainable valued product.
Market Implications of Introducing a Token
The introduction of a native token within the Base ecosystem will have significant market implications and increase total value locked by as much as 50% as incentives bring liquidity providers into the ecosystem. The broader space of layer-2 tokens saw similar increases with the launch of the OP token within the Optimism ecosystem, and other recent trends indicate activity massively increasing for well-recognized launches. The token might accelerate the cadence of users migrating applications from Ethereum to Base as it lowers transaction fees and incentivizes applicable retail users. A reputable market analyst currently projects a $0.50 price at launch and notes a history of similar tokens increasing 4x in the first 6-months.
In addition to the on-chain implications the token effects, there will be major peripheral value to owning the token in Coinbase shares. The token's utility in an ecosystem adds economic value, and there are projections of Coinbase shares increasing by 5-10% as the broader implications involve a boost in competition in layer 2’s which will lead to innovations in yields and interoperability; investors should keep an eye in relations to any correlation to ETH given the importance of Base’s success and the viability of Ethereum as a whole.
Additionally this introduction could have debate ramifications in regulating the use of tokens responsibly in deployment under scaling solutions. Messari publishes research on truck effects of the market.
Some things to think about the potential impact of (i.e.):
- increased on-chain activity pushing gas revenue
- generated liquidity to Base-native tokens
- investment into VC funding in dApps
- establishing a precedent with other incubated projects
The implications above all show the importance of the token.
Next Steps for the IEO Participant
IEO participants should prepare deeply in order to have a chance at an allocation blind. First, check the participation eligibility which could include if you already have a position on Coinbase. Specifically, exchange has done a favorable acquisition in the users who hold or process a certain approximate level of token, such as a portion of an ETH or volume traded at a certain threshold in their platform. Next, make sure to set up a compliant wallet such as the Coinbase Wallet and ensure you have spent a portion of it on ETH in order to allow sufficient gas funds to complete the claiming process for your allocation.
Next, Watch BaseCamp 2025 for announcements beyond speculation as a source of direct information (if approved), which as project will eventually be featured in announcements via social media. If possible, get on the waitlist for prioritizing and read the project token whitepaper to get detail around utility.
To recap, below are some considerations for preparing to participate in IEO:
- Complete KYC if you have not with Coinbase
- Create an allocation budget using price guidance of expected pricing
- Practice wallet actions /tokens in Base testnet
- Follow key influencer accounts for advanced signals
These action steps will provide you with the readiness that you need.
Community Engagement in the Token Rollout
The community will also play a key role in how the token is rolled out. Airdrops will incentivize participation among those that are contributing to the community, providing the opportunity to lock in loyalty. The Base's forums and Discord channels are filled with conversations about future use cases for the token and these will play a role in determining how the token is finally designed.
Governance of the protocol will be community-driven, meaning token holders will have the opportunity to vote on proposals for upgrades. This will keep the protocol in line with what user’s need as the network evolves. This level of community involvement will provide a feeling of ownership to those involved, just as we have seen with other successful layer-2s that have taken off as a result of community adoption.
If you would like to be a part of this exciting progression, consider the following:
- Participate in testnet challenges where rewards will be distributed.
- Vote on initial proposals once the token is live.
- Provide feedback on social media channels.
- Join ambassador programs that provide incentives.
This role will provide great value to the overall network ecosystem.
Post-Launch Ecosystem Activity
Once the new token goes live, Base's network will focus on scene creation and developing partnerships for members that can integrate their dApp to utilize the token. We should see a yield farming program where token holders can earn from liquidity pools and leverage this through a yield farming farm to provide incentivization and create further utility.
The other interesting area of development will involve tools for developers that would like to build token gated applications, to facilitate rapid development for these applications and gaming use cases, where we are likely to see token incentives given to users on the network.
If you want to participate in this important aspect of Base post-launch, you should consider the following:
- Continue to monitor Base partnership announcements as these will support opportunity for ecosystem development.
- Participate in yield farming so you can earn yields on your tokens.
- Utilize the dApps for applications to the token, and provide feedback.
- Pay attention to important metrics like Total Value Locked (TVL) to gauge the health of the network.
This type of activity supports future value creation.
Conclusions
The upcoming ICO for the proposed Base token that comes as part of Coinbase's layer-2 incubator is an important milestone in the blockchain scaling narrative. With the introduction of a native token, the financial incentive for co-ownership and participation will be an element that adds distinctive value they will have over other competitive layer-2 solutions. The decentralized incubator and resources that facilitate the prospects for a successful launch, combined with economic designs that contribute to sustainable models through community participation, will significantly support the growth and development of the shared layer-2 vision from this incubator. Early contributors and investors that can recognize the opportunity presented here could benefit from this network as it grows.
As the layer-2 narrative continues to evolve and mature, Base's design approach will serve as a model of centralized expertise enhancing the decentralized model. The conferment of token governance and token rewards will provide it relevance, facilitating relevance as Ethereum grows into other areas. Overall, the launch of this ICO holds the innovative spirit involved in the stakes of Coinbase's incubator commitment.
While launching, it is conceivable that the broader crypto space will gain interest and labels will emerge that will plant seeds and possibly incubate their own scaling solution and token. Preparation will go a long way in contributing to the successful launch of the new project, for token holders and supporters, with the prospect of making financial rewards available for the increase in Base Tokens in the market place venture along a growth continuum.
Read more: https://ayema.ng/blogs/275456/The-Hottest-Upcoming-IDO-on-Ethereum-Layer-2-Networks