The Decentralised: Coinbase’s layer 2 launches and Goldfinch in trouble

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Hey everyone, Tim here.

Welcome back to The Decentralised, where we take you on a tour of the top DeFi news from the past week.

This week was all about Ethereum layer 2s — separate blockchains built on top of the top smart contract network which aim to lower transaction costs for users. While layer 2s are nothing new — some have been around for years — last week heralded some significant developments which will likely set the tone in DeFi for the coming months.

On August 9, Osato Avan-Nomayo reported on the official launch of Base — Coinbase’s homebrewed layer 2. Base joins a growing list of Ethereum layer 2s connected to centralised crypto entities, including MetaMask’s Linea, and ByBit’s Mantle.

So far, users have poured over $129 million into smart contracts on the new network. Several DeFi favourites like lending protocol Compound and decentralised exchange Uniswap have launched versions on Base, although the network’s native token swapping hub, BaseSwap, is currently the biggest protocol with $54 million in total value locked.

Even before the official August 9 launch, there was a spike in Base activity due to BALD, the mystery memecoin that pulled the rug on its holders. A representative for TKV Research, an on-chain analytics platform, told DL News that the early drama turned out to be a “perfect way” to promote Base, despite fears it might tarnish Coinbase’s reputation.

As Adam Morgan McCarthy investigated later in the week, initial Base activity has exceeded some analysts expectations. Based on Base’s revenues since launch, the layer 2 could make Coinbase an additional $60 million a year, according to one analyst from asset management firm Needham.

Read Adam’s full piece here to find out how a successful Base chain could impact Coinbase’s bottom line.

And Base isn’t the only layer 2 raking in cash.

Last week, I took a look at how much revenue Arbitrum and Optimism — the current top two layer 2s — are making. By arbitraging the difference between what they charge users for transactions and what it costs them to post transaction data on Ethereum, these layer 2s made a combined $5.5 million in revenue in July.

Find out what Arbitrum and Optimism plan to do with all this revenue by reading the full article here.

Another big layer 2 update last week was the decision from PancakeSwap — a decentralised exchange with over $1.47 billion worth of deposits — to deploy its code on the current biggest layer 2, Arbitrum.

PancakeSwap said the move was part of efforts to “connect users and projects wherever they might be” as it sees Ethereum layer 2 networks as a “high-potential area.”

Check out the full article, with comments from PancakeSwap’s Chef Mochi, here.

Lastly, Aleks Gilbert took a sojourn away from layer 2s to report on Goldfinch — a crypto lender that facilitates loans between DeFi users and companies in developing countries.

Goldfinch depositors may face big losses on their investments after Tugende Kenya, an African motorbike finance company, defaulted on a $5 million crypto loan. Some critics pointed out that Goldfinch’s loans to Tugende were likely “underpriced,” meaning that those who financed them weren’t getting a return commensurate to the risks involved.

However, it’s worth noting that Toyota’s corporate venture arm and the US Development Finance Corporation both also invested in Tugende, although the terms of their loans are not known.

Read Aleks’ full article here.

Data of the week

Coinbase’s layer 2 Base is off to a strong start, as data from DefiLlama shows. Since its official launch on August 9, users have deposited over $129 million into protocols built on the network. However, Base is still a long way away from challenging Arbitrum, the current top layer 2 network with almost $2 billion worth of deposits.

This week in DeFi governance

VOTE: Implement oSnap for CoW DAO governance

CoW Swap’s DAO is voting on whether to implement UMA’s oSnap, a governance tool that will allow the DAO to execute the results of votes on-chain. This will eliminate the DAO’s reliance on multi-signature wallets and promote a more decentralised and efficient vote execution process.

PROPOSAL: Maker to deploy Spark Lend on Polygon zkEVM

Spark Lend is a Dai-centric lending protocol that provides sDAI, a liquid, interest bearing version of Maker’s flagship stablecoin. If successful, Spark’s deployment on Polygon zkEVM will be its first venture to a chain other than Ethereum.

TEMP CHECK: Should Aave deploy on Celo?

Michigan Blockchain and Isha Varshney from the Celo Foundation are canvasing interest with Aave DAO members to deploy the top lending protocol on Celo. Despite launching in 2020, Celo is still relatively small with less than $100 million of user deposits. However, many hope Celo’s recent decision to become a layer 2 network on Ethereum can change that.

Tweet of the week

Base’s announcement that Coca-cola would launch an NFT collection on the layer 2 on Sunday gave Crypto Twitter flashbacks to the 2021 crypto bull run.

As Bitcoin soared and crypto became the current “cool thing,” consumer brands like Budweiser and Pepsi pilled in.

They spent huge sums on NFTs, launched some of their own that went nowhere, and put on cringe-inducing performances on Twitter to show how they too were down with the crypto bros.

What we’re watching for next week

Gnosis Pay is one of several platforms attempting to bridge the gap between holding crypto in a non-custodial wallet and using it for payments in the real world. With Visa-supported debit cards dropping later this year, we’re watching closely to see if Gnosis Pay will live up to the hype.

Tim Craig is DL News’ London-based DeFi Correspondent. Reach out to him with tips at tim@dlnews.com.

Disclosure: Tim holds over $1,000 worth of Ether, Swell staked Ether, Redacted Cartel, and GMX. He also holds over $1,000 worth of Coinbase stock. He also holds an insignificant amount in NFTs.