Blockchain Sleuths Say Base is Sending All L2 Fees to Coinbase

Base, an Ethereum Layer 2 scaling solution network by Coinbase, came under scrutiny on X for transferring sequencer fees to the centralized exchange.

“BASE has been sending all sequencer fees to Coinbase since launch,” Santisa, the pseudonymous chief investment officer of Lucidity, said in an X post. “We don’t know if they sold, but we do know they didn’t deploy those funds on Base or keep them on-chain.”

They added that the “lack of transparency makes it fair to assume they sold,”which is “not very Ethereum-aligned of them.”

"False Narrative"

A team member of Base, Kabir Sadarangani, said in a Feb. 9 X post, that the “narrative” posted by Santisa is inaccurate.

“Base is and will continue growing Ethereum,” Sadarangani said. “We’re investing all of our earnings and resources into doing this and we have gone from zero to millions of new people onchain in 1.5 years,” Kabir.base.eth said in the X post.”

Kabir pointed out that they need to move funds to Coinbase because Base uses off-chain custody for security and audit reasons, which requires the funds to be transferred. He emphasized that the Ethereum Layer 2 solution earns and spends as much as possible in ETH.

“Base and Coinbase have and continue to hold ETH and publicly disclose our long term holdings (100K ETH+, $300M+). AFAIK this is the largest ETH holding of any public company and way bigger than any other L2 DAO or Labs company today,” he said.

Sequencer fees are charges for transactions processed by the Layer 2 sequencer, which is responsible for ordering, batching, and submitting transactions from users before they are finalized on the Layer 1 blockchain. In this case, the sequencer packages transactions from Base into batches for execution before posting them to Ethereum’s mainnet. Usually, sequencer fees are used to cover network costs and development.

Cronje Weighs In

After Santisa's concerns regarding the fee transfer to Coinbase, Sonic Labs founder Andre Cronje shared a post he had previously posted, where he argued that Layer 2s’ incentives are not aligned with Ethereum’s.

“L2s are why Ethereum is inflationary again,” Cronje said in the X post.

In response to all the allegations and the debate on X, Kabir said they are focused on long-term growth, not short-term price movements.

“We wake up every day thinking about how to bring the world onchain, and if you believe in this mission, build something to help make that happen. Spreading about FUD on the weekends isn’t it,” Kabir further added in the X thread.