Base Team Denies Coinbase Selling ETH, Reveals $300M Holdings

In a recent development, a member of the layer 2 scaling solution Base has refuted rumors that its sequencer, Coinbase, has been selling ether (ETH). Kabir.base.eth, a Base team member, took to Twitter on Sunday to address the speculation, stating that Coinbase has accumulated over $300 million in ETH, which is more than twice all of Base's ETH earnings to date. Both Base and Coinbase continue to hold ETH and publicly disclose their long-term holdings, with over 100,000 ETH and $300 million combined.

Kabir further explained that Base uses off-chain custody for security and audit purposes, which is why funds move to Coinbase. He emphasized that Base earns and spends as much ETH as possible, using it for Layer 1 costs and providing support. CoinDesk reached out to Coinbase for a comment on the matter but did not receive a response.

Kabir's comments came in response to pseudonymous observer Santisa's claims that Base has been transferring all sequencer fees to Coinbase since its launch, and the sequencer has likely sold these coins. Coinbase is the only sequencer node on Base, responsible for sequencing and finalizing transactions in a specified order to improve transaction throughput (speed). Coinbase charges a fee for this sequencer role, collected in ETH.

Santisa's concerns echoed those of Sonic Labs founder Andre Cronje, who has previously expressed reservations about the use of centralized sequencers in layer 2 solutions. These solutions can lead to profit models that do not fully align with the broader Ethereum values. While layer 2 scaling solutions earn substantial revenue from transaction fees, they send only a small portion of that to the Ethereum mainnet for data availability and security purposes. Most fees collected in ETH are either retained or offloaded into the market, reducing the fee revenue and associated ETH burning on the mainnet, which has an adverse impact on ETH's supply.

Cronje emphasized the importance of scaling Ethereum, stating, "L2s are why Ethereum is inflationary again. SCALE ETHEREUM. They can get the Sonic tech for free. 0 charge. Will 1000x their throughput."