Base, a layer-2 (L2) Ethereum network created by Coinbase, has recently passed an important milestone by reaching over $2 billion in total value locked (TVL).
This achievement places it as the second-largest L2 network of its kind, known as an optimistic rollup, just behind Arbitrum.
The network’s rapid growth shows its rising importance in the world of decentralised finance (DeFi), as the broader sector also begins to recover.
From $430 million to over $2 billion
According to data from DeFiLlama, Base’s total value locked now stands at $2.08 billion.
This is a huge increase compared to the $430 million it held at the start of 2023, marking a 370% growth so far this year. This is particularly impressive given that Base was only launched in August 2023.
Base operates as an optimistic rollup, which means it processes transactions off the Ethereum main network.
Instead of handling all transactions directly on Ethereum’s blockchain, Base gathers and processes them off-chain, then periodically sends the data back to Ethereum.
This method lightens Ethereum’s load and makes transactions faster and more efficient.
A major factor driving Base’s growth has been the decentralised exchange (DEX) Aerodrome, which holds over $1 billion of the total value locked on Base.
Aerodrome has been responsible for the majority of Base’s increase in TVL over the past year.
Another key player on Base is Uniswap, another popular decentralised exchange, which currently holds $220 million in deposits on the network.
Base outpaces Arbitrum in user activity
While Arbitrum remains the leader in terms of total value locked among Layer 2 networks, Base has overtaken Arbitrum in terms of user activity.
According to data from The Block, Base has the highest number of active users and daily transactions compared to other optimistic rollups.
This shows that Base is quickly gaining traction and becoming a popular choice for users, despite being a relatively new player in the market.
Uniswap has also been a crucial contributor to Base’s growth. Its $220 million in value locked on Base plays a significant role in the network’s overall success.
Together, Aerodrome and Uniswap make up the majority of the deposits on Base, helping it reach the $2 billion milestone.
DeFi market recovery boosts networks
Base’s success is happening at a time when the broader DeFi market is starting to recover from the downturn it experienced in 2022.
The DeFi sector, which allows users to engage in financial activities like lending and borrowing using cryptocurrency, has seen key metrics rise after falling significantly last year.
One important indicator of DeFi market health is the amount of active loans, where people lend their crypto to others in exchange for interest.
In 2021, during the height of the crypto bull market, the value of active DeFi loans reached $22.2 billion. However, this number fell sharply to $10 billion by March 2022 and dropped even further to $3.1 billion by January 2023.
Since then, the market has bounced back, with active loans climbing to $13.3 billion. This recovery is a positive sign for the DeFi space, showing that investor interest in DeFi lending is returning.
In addition to active loans, the total value locked in DeFi has also made a strong recovery. After peaking at $180 billion in November 2021, TVL in DeFi plummeted by 80% to just $37 billion by October 2023.
However, the sector has since seen a recovery of around 160%, with TVL now sitting at about $96.5 billion, according to DeFiLlama.
This recovery in DeFi has helped boost networks like Base, which benefit from increased user activity and investment in the sector.
Base’s fast growth in both TVL and user engagement highlights its importance in the current DeFi landscape.
