PRO | 5 Ways To Capitalize on Base’s Success

As a result, fees across L2s dropped from $0.10 - $1.00 down to < $0.01.

As you can see in the chart above, Base fees went to $0.003, resulting in activity increasing by almost 10x in a matter of days. This has caused some issues in Base’s performance as well as some random spikes in gas fees, as seen above too.

However, Base has made some upgrades to its chain, resulting in lower and more sustainable fees, while still handling the influx of activity. 

You can see this represented in the chart below.

Despite onchain transaction costs being slashed by more than 90%, Base's gas-generated revenues have seen a notable rise. 

On several days, revenues exceeded $1.5 million, with one day topping $2 million. However, these peaks coincided with onchain transaction fees exceeding $1, suggesting such high revenue levels may not be sustainable.

Regardless, with transaction fees back down to under $0.01, it’s still driving more than $400k-$800k/day in revenue for Base.

At the same time, expenses to settle on Ethereum have gone down considerably.

This of course means that Base is currently pulling in significant profits on a daily basis. Base generated more than $7 million in onchain profit in just the month of April. 🤯

But where is all of this activity and revenue coming from? 🤔

Like any blockchain, a large part of it is coming from trading and DeFi. 

In fact, close to 60% of all labeled transactions on Base are from trading and DeFi, which means apps like Uniswap, Sushiswap and Aerodrome are the most used apps on Base.

But what’s interesting about Base, is that it also has many non-trading and non-speculative applications gaining adoption too.

A few examples of apps that live on Base include: Basepaint (onchain art), FriendTech (SocialFi), Sound (music), Paragraph (newsletters), Blackbird (restaurant rewards), Catalog radio, Dmail network, etc…

And finally, what’s likely to become the biggest use case of them all on Base in the coming 1-2 years is stablecoins and payments. 

The teams from Coinbase, Coinbase Wallet, Circle and Base are all working together to create a frictionless payments experience via USDC. 

This has potential to onboard the masses, those who could care less about crypto or trading tokens and JPEGs. 🌊

Ok, so it’s clear that Base is having a moment. Now the question is… 

Will Base continue to grow at this rate and how can we be so sure that Base will continue to be the dominant L2 in this space?

Let’s jump into why we think Base will outperform the rest of the market.

WHY BASE WILL CONTINUE TO OUTPERFORM 🚀

While there are many advantages that Base has over the rest of the market, there are 3 particular reasons why we think Base will continue to gain attention:

Let’s dive into each.

COINBASE 🔵

The most simple and obvious reason for Base’s continued success is its owner, Coinbase.

Coinbase is an absolute beast in the crypto space and has probably done more to onboard the western world into crypto than any other company.

Base of course, is built by Coinbase, so the Coinbase team is incentivized to use their products to push users over to Base before any other chain. 

You can already see this happening across Coinbase’s suite of products like the Coinbase Exchange and Coinbase Wallet.

Both apps have specific integrations and user experiences that seamlessly move users to Base. With this in mind, it’s pretty clear that the more Coinbase grows, the more Base will grow.

Coinbase has more than 108 million verified users in their centralized app (as of EOY 2022). Those numbers are massive versus the current amount of onchain users.

In Q4 of 2023, Coinbase reported 7 million active monthly users, a decrease from its all-time high of 12 million in Q4 2021. 

Given current trends, it's highly probable that Coinbase will surpass those previous peak figures this year.

Just look how little the trading volumes were on Coinbase in Q4 2023 versus last cycle. As these numbers pick up, a meaningful share of that volume will also move onchain, most likely to Base. 

The more Coinbase grows in their app, the more users and activity they can push onchain to Base.

But remember, Coinbase doesn’t just have a centralized exchange, they also own one of the most popular wallets in crypto, Coinbase Wallet.

If you’ve used Coinbase Wallet then you’ve seen notifications and other triggers focused around moving users to interact on Base. 

This is the advantage that Base has and that all other L2s lack. 

Below, you can see the recent App Store downloads of both Coinbase and Coinbase Wallet in the USA. 

You could think of these numbers as an unofficial leading indicator for new users on Base.

One final note on Coinbase is that they recently announced that they were working towards moving more operational and customer funds onto Base as it’s more efficient and cost effective to do so.

Coinbase currently holds more than $197 billion worth of crypto. That’s a lot of liquidity moving to Base! 

Of course, not all of it will go there, but there’s reason to believe a significant amount will move to Base in the future. This will catapult Base to the #1 spot for TVL over the next year.

FARCASTER 🟣

Farcaster stands out as one of crypto's most promising applications, boasting over 64,000 daily active users and reaching 150,000 monthly active users in March.

Farcaster is a decentralized social media protocol that is natively integrated into various blockchains. While Farcaster accounts technically live on Optimism, you can transact, mint and interact across a number of L2 chains.

Base has become the most dominant chain to interact with on Farcaster, taking more than 50% of all transactions on Farcaster.

And driving more than 2.9 million transactions in March alone. As you can see, things are already looking up in April.

Just like how the growth of Coinbase means the growth of Base, so too does the growth of Farcaster mean the growth of Base.

This means that Base benefits directly from the adoption of the social layer of crypto (Farcaster) and the adoption of new or returning crypto users (Coinbase).

DEVELOPERS + L3s 👷

The best metrics to understand the current and future health of a blockchain ecosystem is by looking at its developer community. 

A chain with more developers, creating new apps and use cases boosts the odds of it being the platform that brings millions more users onto the blockchain.

The success of apps or ecosystems relying on a chain for transaction settlements amplifies its network effects, spinning a positive flywheel that attracts more apps, increasing user activity and opportunities for growth.

We already mentioned the various apps on Base above, but what’s even more important to see is that Base has recently broken away as the clear #1 spot for daily smart contracts deployed across all L2s. 

The devs are building on Base and it’s not even close with any other L2.

Speaking of ecosystems relying on your chain, L3s could be the next innovation layer for applications, and Base currently sits in 2nd, behind Arbitrum for the leading chains to acquire L3 teams. 

We expect the number of L3s to grow exponentially in the coming months and Base will likely be front and center of it all.

Ok, let’s talk about how we can capitalize on the success of Base.

5 WAYS TO CAPITALIZE ON BASE’s SUCCESS 💰

Unfortunately, because Base doesn’t have a token, there is no way to get direct exposure to Base. However, there are plenty of indirect ways to capture the upside here. 

Below, we will discuss 5 options. 

Note: These are not guaranteed outcomes. Should Base's adoption surge, these are our best guesses on what might thrive alongside its success.

1/ $COIN 📈

The first option is buying Coinbase’s stock, an investment that we have written about in detail over the last year. Read our $COIN PRO report here.

Any profits or success of Base go directly to Coinbase, so it’s the purest way of getting exposure to Base.

We recommended snagging $COIN when it was under $60 last year. But even at $255 (at the time of this writing), we still believe it has plenty of room to run.

Especially when you consider that it has yet to hit its previous all-time highs of around $420, despite evolving into a beast of a company since its IPO last cycle. 

$COIN has some support around $210, if it gets back down there it’s a great buying opportunity, but even now it’s a good buy for the cycle in our opinion.

2/ $OP (OPTIMISM) 🔴

Base is an L2 that uses the OP stack, and as a result, it pays the OP Collective 15% of all onchain profits it earns from fees. 

Over the last few weeks, $OP has generated $50k-150k in daily revenues, totalling more than $4.7 million since the launch of Base. 

Optimism of course has their own chain generating significant profits too, in addition to 10+ other L2s paying a rev share model back to the OP collective just like Base. 

$OP is one of our favorite L2 tokens for this cycle. Learn why in our $OP tokenomics report here.

3/ $ETH 🦇

Moving one layer down the tech stack, Ethereum sits at the bottom, benefiting from the success of every L2 or L3 that exists today. 

So far, Base has paid a total of $16 million to Ethereum to settle its transactions, with about 99% of that $ETH being burned and the other 1% paid to validators.

Since EIP 4844 however, daily transaction costs have been reduced significantly, from $100,000/day to <$1,000/day. 

While the full effects remain to be seen, the theory is that EIP 4844 should enable multiples of orders of magnitude more transactions across hundreds to millions of L2s and L3s, resulting in more demand to settle on Ethereum’s blockspace in the future.

$ETH remains the Milk Man’s highest conviction investment and continues to serve as the “diversified” bet to capture the upside of almost anything that succeeds in the crypto space.

4/ MEMECOINS ($DEGEN) 🤡

Every chain has its memecoins that act as a levered bet on the success of the ecosystem. Crypto’s in general is $DOGE, Ethereums is $PEPE or $SHIB, Solana’s is $WIF or $BONK and it appears that Base’s might be $DEGEN.

Interestingly, $DEGEN is a token born from Farcaster that is used for tipping across the social platform. It quickly proliferated from its tipping function and has become the biggest memecoin in the Farcaster and Base ecosystems.

The Degen team has taken things a step further, launching an L3 on top of Base called Degen, adding additional utility to $DEGEN as a gas token. 

Other memecoins have tried to add utility to their token in the past, though it’s still up in the air if that is a bullish or bearish signal.

Regardless, if $DEGEN becomes the memecoin of Base and we expect many many new users to onboard to Base in the coming months, then it could be a way to indirectly capture the upside of Base.

Alpha Tip 👀

We went to the degens of the Milk Road PRO community to seek more alpha in the Base memecoin space and they suggested: $HIGHER, $BRETT, $MOCHI and $TOSHI.

The other token that was brought up frequently was $AERO, which is the token for the popular DeFi protocol on Base, Aerodrome Finance.

P.S. - Milk Road has not done any due diligence on the above tokens and does not recommend or suggest that you invest in them. Do your own research before investing. This is just a tip from the milkiest of degens inside the PRO community. Thanks for your support.  🥛 

5/ $BASE AIRDROP 🪂

When someone in crypto tells us they aren’t releasing a token, we respond with: “WEN TOKEN?!”

Coinbase can say they aren’t dropping a $BASE token all they want, but we’re pretty damn sure it’s coming. 

Obviously things with the SEC need to be figured out first, though it appears Coinbase is kicking their ass in court from all angles.

Regardless, at some point we believe Base will launch the $BASE token and it very well might be the biggest airdrop of all time. 

Of course, we have no idea how to best position yourself for this potential airdrop, but here’s a few ideas:

1/ Use the chain (duh!). Trade tokens, use applications, mint NFTs and more.

2/ Coinbase and Base often release free mints that signify various moments and achievements of Base. 

For example, the NFT when they first introduced Base…

Or the Onchain Summer Base NFTs… 

Some of these are no longer available to mint, but we’re sure many more will come—Onchain Summer is returning soon by the way.

Keep an eye and make sure to mint any memorable NFTs put out by Coinbase or Base.

3/  If you’re a developer or creator, build on Base. 

You can already get grants if you’re building apps or L3s on Base. In addition, you will also likely get plenty of points for the airdrop. 

If you’re a creator, mint your newsletters on Base via Paragraph or your music on Base via Sound.

Base will undoubtedly find ways to give back value to early builders and supporters.

And that’s a wrap, friends!

I hope you found this helpful and that you manage to capture some of the upside in one of the most successful projects in crypto to date.

If you want to find more ways to capitalize on Base, I’d recommend heading to the PRO discord and chatting in the 🚀 #degen-trading channel. This is where the alpha lives!

Action Step For PRO Members 🥛 

Join the private PRO community now!

This is your all-access hub for engaging directly with the Milk Road PRO research crew and fellow PRO members, diving into live AMA sessions, digital events, and daily robust discussions on market trends, fundamentals, and industry insights.

🚨 Important: Upon joining the Discord, you’ll be asked to fill out a form. Please, please pay attention to 2 things:

Do this with bomb-defusing precision—a single typo might lock you out! 😬

See you on the inside! 🥛

The Milk Man Needs Your Feedback 🥛 

Disclaimer: This article is for informational purposes only and not financial advice. Conduct your own research and consult a financial advisor before making investment decisions or taking any action based on the content.