Base Team Denies Accusations of Unauthorized ETH Sales Through Coinbase Integration
Coinbase has accumulated $300M+ in ETH, which is more than 2x all of Base‘s ETH earnings over time,’ said Kabir.base.eth, a member of the Base team.
This statement was made on X, refuting rumors that ‘Coinbase, the sequencer for Base, had been selling ether (ETH)’. The Base team member emphasized that both Base and Coinbase hold significant amounts of ETH, with publicly disclosed long-term holdings exceeding 100K ETH and $300M.
Ethereum (ETH) is a decentralized, open-source blockchain platform that enables the creation of smart contracts and decentralized applications.
ETH holdings refer to the ownership or possession of Ethereum tokens, which are used for various purposes such as paying transaction fees, voting on proposals, and participating in governance decisions.
As of 2022, there are over 120 million ETH coins in circulation, with a total market capitalization of over '$500 billion.'
The largest holders of ETH include institutional investors, exchanges, and individual wallets.
Base’s ETH Holdings
Kabir added that Base uses offchain custody for security and audit reasons. This is why funds are occasionally moved to Coinbase. He stressed that the Ethereum layer 2 solution earns and spends as much as possible in ETH, using it for Layer 1 costs and granting support. These actions do not involve selling ETH.
Concerns Over Centralized Sequencers
Coinbase, a leading cryptocurrency exchange, allows users to buy and sell Ethereum (ETH) among other digital assets.
The platform's ETH sales refer to the process of selling 'Ethereum' for fiat currency, such as US dollars or euros.
This can be done through various payment methods, including bank transfers and credit/debit cards.
According to Coinbase's website, fees for buying and selling ETH range from 1.49% to 3.99%, depending on the payment method used.
The refutation of these claims came after pseudonymous observer Santisa raised concerns about Base‘s transfer of sequencer fees to Coinbase since its debut. Santisa suggested that the sequencer had likely sold these coins. This echoes the sentiments of Sonic Labs founder ‘Andre Cronje, who has expressed concerns over the use of centralized sequencers in layer 2 solutions.’
Cronje argues that this leads to profit models that don’t fully align with broader Ethereum values. Layer 2 scaling solutions earn a substantial revenue from transaction fees but send a small portion to the Ethereum mainnet for data availability and security purposes. This reduces the fee revenue and associated ETH burning on the mainnet, having an adverse impact on ETH’s supply.
Impact on Ether Supply
Cronje emphasized that layer 2s are making ether inflationary again. He suggested that using Sonic tech could increase throughput without any charge, potentially leading to a significant increase in Ethereum’s scalability.
Ether inflation refers to the increase in the total supply of ether, the cryptocurrency used by the Ethereum network.
This occurs when new ether is created through a process called 'gas fees.' Gas fees are charged for each transaction made on the Ethereum network and are used to secure the network and validate transactions.
The rate at which ether is inflated varies depending on the number of transactions processed on the network.
According to Ethereum's protocol, 2 million new ether are created every year as a reward for validators who help secure the network.
In response to these concerns, the Base team member has clarified their position on ETH holdings, refuting rumors of liquidations and emphasizing their commitment to transparency in managing their long-term holdings.
