Base, Coinbase's Layer-2 network, has denied claims for sale held by Ethereum (ETH).
Over the weekend, members of the Crypto Community noted that Base was focusing sequencer fees on Coinbase, raising concerns about transparency and potential ETH sales.
However, base strategist Kabir Sadharangani disputed these claims, claiming that the lack of transparency and the accusations of potential ETH sales were unfounded.
Appeal
On February 8th, Santisa, CIO of investment company Lucidity Cap, raised an alarm saying that Base has been sending all sequencer fees to Coinbase since its launch.
He added:
“I don't know if they sold them, but I know they don't deploy those funds to bases or keep them in chains. The lack of transparency makes it fair to assume they sold them. They're not very ethical.”
Further analysis assistants by Sonic noted that the network's sequencer operations generated nearly 90% profit margins of over $100 million, and all involved ETH was sent from the base to Ethereum and then Coinbase.
Coinbase's financial reporting is inexplicable and has been added to the speculation. The assistant noted that before the base launch, Coinbase held approximately 118,924 ETH ($230 million at $1,934 per ETH) as of June 30, 2023. 1 million at the current price) during the operation period of the base.
The assistant also highlighted a recent deal where 240.35 ETH ($618,960) was moved chain to Coinbase. This prompted questions about the location of the ETH generated by the remaining $100 million sequencer.
Meanwhile, Andre Cronje, co-founder of Sonic Labs (formerly Fantom), also criticised Base's approach. He questioned whether the platform operates as a centralized corporate blockchain under Coinbase or as a Layer-2 network truly located in Ethereum.
Cronje has further challenged the team's decision to keep chine in chains rather than keeping them transparently at Ethereum.
Concerns to address Coinbase
In response, Sadharangani defended the base's financial practices, saying that its proceeds have been reinvested into the Ethereum ecosystem rather than liquidation.
He pointed out that Coinbase and Base collectively own more than 100,000 ETHs, making them the largest public company holders of ETH, surpassing Layer-2 DAOs or development entities.
Addressing concerns about transparency, Bass explained that he is using off-chain custody at Coinbase for security and audit purposes.
He further stated that the generated ET will be used for operations and grants rather than liquidation. Base aims to migrate covering more costs with ETH while increasing activity in the chain.
Sadharangani said:
“We make and spend as much as we can with ETH. We spend ETH on L1 costs and all of the external grants at ETH. Our goal is to It's about continuing to move costs to work with ETH.
He also revealed that the USD converted ETH is minimal compared to its overall holdings and the broader Ethereum market. He said the base is working on long-term ecosystem growth rather than short-term financial benefits.
It is mentioned in this article
