tl;dr
Base, Coinbase's layer-2 network, has refuted allegations of selling its Ethereum (ETH) holdings. Concerns arose when it was noticed that Base funneled sequencer fees to Coinbase, prompting suspicions of ETH sales. However, Base's strategist denied these claims, emphasizing that earnings are reinves...
Base, Coinbase's layer-2 network, has refuted allegations of selling its Ethereum (ETH) holdings. Concerns arose when it was noticed that Base funneled sequencer fees to Coinbase, prompting suspicions of ETH sales. However, Base's strategist denied these claims, emphasizing that earnings are reinvested in Ethereum's ecosystem. They stated that both Base and Coinbase collectively hold over 100,000 ETH, using it for operations and grants rather than liquidation. Base aims to increase on-chain activity and transition more costs to be covered in ETH, remaining committed to long-term ecosystem growth.
On Feb. 8, Santisa, the CIO of investment firm Lucidity Cap, raised the alarm that Base has been sending all sequencer fees to Coinbase since its launch. Further analysis pointed out that the network’s sequencer operations generate nearly a 90% profit margin, and all related ETH was sent from Base to Ethereum and then to Coinbase. Coinbase’s financial reports were puzzling, adding to the speculation. Meanwhile, co-founder Andre Cronje also criticized Base’s approach, questioning its operational nature under Coinbase and its transparency decisions.
In response, Sadarangani defended Base’s financial practices, stating that its earnings are reinvested in Ethereum’s ecosystem. He addressed concerns about transparency and explained that Base utilizes off-chain custody on Coinbase for security and auditing purposes. Base aims to transition more costs to be covered in ETH while increasing on-chain activity. Sadarangani clarified that any ETH converted to USD is minimal compared to its overall holdings and the broader Ethereum market. According to him, Base remains committed to long-term ecosystem growth rather than short-term financial gains.