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January 27, 2025

Base’s DeFi Boom: Insights from the Top Crypto Trading App

Base’s DeFi Boom: Insights from the Top Crypto Trading App

Base is on the rise in the crypto world, experiencing an impressive surge in DeFi activity. This comes at a time when the hype surrounding AI agents and memes is starting to fade. The app activity on Base has jumped by 129%, demonstrating its growing influence in the decentralized finance space. Let’s take a closer look at how Base is integrating with Coinbase and Phantom Wallet to expand its reach while tackling the challenges of decentralization. We’ll also explore the liquidity movements on Base and what they mean for automated investment strategies.

The Surge of Base’s DeFi Activity

Base is experiencing substantial growth in its underlying app activity, particularly after the slowdown of memes and AI agents. The increase in Morpho lending and total DeFi value locked is driving this expansion. With over 500 decentralized apps on board, Base is establishing itself as a prominent player in the DeFi scene. In January, the chain reached over 2 million daily active users, marking a significant rise in activity over the past three months.

The 129% increase in app activity on Base is largely fueled by DeFi lending. Key drivers include the SynFutures DEX and Morpho’s DeFi lending services. Originally designed for fun NFT and meme experiments, Base is now advancing in the DeFi space, particularly with a growing interest in cbBTC trading. Morpho gained traction after being promoted by Coinbase as a source for crypto-backed loans. The app connects users with Coinbase, enabling them to borrow against Bitcoin collateral.

The addition of Base to Phantom Wallet has also been a significant factor in its growth, as it helped onboard a large number of new users in late 2024.

Base’s Place in the Crypto Ecosystem

Base’s app volumes hit an all-time high in January, following months of user accumulation. Initially, Base attracted low-value transactions driven by memes and easy accessibility. Now, it holds $2.27 billion in cbBTC, enhancing liquidity for DeFi activities.

In total, Base locked in $3.47 billion, although other reports indicate a higher value locked in smart contracts. Morpho Blue, the Base version of the lending protocol, locks in an impressive $3.56 billion across all chains, underscoring its importance in Base’s inflow dynamics. Recently, the lending protocol expanded its asset and loan offerings, reaching an all-time high.

The increasing activity on decentralized apps and interactions with DeFi protocols is boosting throughput for Base. Since its launch, Base has maintained a lead over other Layer 2 solutions in terms of throughput.

Coinbase’s Control and the Challenge of Decentralization

Base’s dependence on Coinbase’s regulatory status carries significant implications for its decentralization and user trust. While Base is positioned as a decentralized Layer-2 solution, it currently operates under Coinbase’s control. Coinbase doesn’t directly manage Base’s daily operations, but it does control the sequencer, which is responsible for bundling and processing transactions on Ethereum. This centralization raises concerns about the authenticity of decentralization in blockchain technology. However, Coinbase has expressed its commitment to progressively decentralize the sequencer over time.

By controlling the sequencer, Coinbase exerts substantial influence over transactions on Base. This control allows the company to profit from the difference between the transaction fees paid by users and the costs of settlement on Ethereum. Although this centralization is seen as a temporary measure, it currently undercuts the complete decentralization ethos of Base, a cornerstone of blockchain’s value.

Despite the current consolidation of authority, the collaboration with Coinbase offers advantages such as easy fiat onramps and access to a broad user base that can drive adoption.

Phantom Wallet Integration and Its Benefits

Base’s integration with Phantom Wallet brings several benefits that can be compared to other crypto trading platforms regarding user acquisition and retention:

Multi-Chain Support

Phantom Wallet’s integration with Base enhances its ability to manage assets across various ecosystems, including Solana, Ethereum, Base, and Polygon. This multi-chain support is beneficial for users who need to navigate multiple chains.

User Experience

The seamless user experience offered by Phantom Wallet, such as direct purchases of Ether and USDC on Base and token swaps across different blockchains, enhances convenience and satisfaction. A smooth experience is key to retaining users.

Security Features

Phantom Wallet prioritizes security with features such as Ledger compatibility and automatic spam detection. These measures are crucial for user trust.

Access to DeFi and NFTs

The integration enables users to access decentralized applications (DeFi) and non-fungible tokens (NFTs) within the Base ecosystem, which is vital for retention. Other platforms often emphasize access to a diverse range of DeFi and NFT opportunities.

Comparison with Other Strategies

While some wallets offer loyalty points, staking rewards, or cashback in crypto, Phantom focuses on enhancing user experience. The multi-chain support and security features could serve as indirect retention incentives.

Implications for Automated Crypto Investment

Base’s liquidity movements from Ethereum carry significant implications for automated crypto investment strategies:

Stability and Efficiency

Base’s high liquidity, supported by second-layer solutions and rollup mechanisms, allows for stable and efficient operations in DeFi platforms. This stability is critical for automated trading strategies.

Market Conditions

Base’s integration with the Ethereum ecosystem and its focus on efficiency provide a solid foundation for automated crypto investment strategies. However, the liquidity fluctuations and other market conditions may impact these strategies’ performance, requiring adaptability.

Integration with Exchanges

The integration with Coinbase means that automated trading platforms supporting Coinbase, such as 3Commas, can leverage Base’s advantages. This enhances overall efficiency for automated crypto investments.

Economic Considerations

The high Total Value Locked (TVL) on Base generates significant economic activity, which can influence broader market conditions and affect the performance of automated trading strategies. High TVL and trading volumes indicate market confidence, a positive sign for automated strategies, but volatility remains a concern.

Summary: Base’s Future in Crypto Exchange Market

Base continues to be a significant player in DeFi and CeFi activity, bolstered by Coinbase’s efforts to offer consumer crypto products. The platform relies on Coinbase’s regulated status and the reputation of USDC, its most widely used stablecoin. Base stands out as one of the leading chains for token transfers and overall on-chain utility.

Base’s DeFi growth is propelling it to the forefront of the crypto exchange market. Its collaboration with Phantom Wallet and Coinbase is crucial to its expansion. Despite challenges related to decentralization and market fluctuations, Base’s technical strengths and vibrant ecosystem support its continued growth. As Base evolves, it could play a pivotal role in shaping the future of decentralized finance and automated crypto investment strategies.

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Egor Romanov
About Author

Egor Romanov is an experienced crypto analyst, professional trader, and author of trading strategies and the Cryptorobotics blog, where he shares his knowledge about cryptocurrencies and financial markets.

Alina Tukaeva
About Proofreader

Alina Tukaeva is a leading expert in the field of cryptocurrencies and FinTech, with extensive experience in business development and project management. Alina is created a training course for beginners in cryptocurrency.

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