Recent discussions on social media have questioned whether Base, the Ethereum Layer 2 network developed by Coinbase, has been selling ETH earned from its sequencer fees. These claims have been directly addressed by key members of the Base team, who provided clarity on the network’s financial strategy and long-term vision.
Understanding the Allegations
On February 10, 2025, Santisa, Chief Information Officer of the crypto investment and advisory firm Lucidity, posted on X (formerly Twitter) expressing concerns about Base’s financial operations. The post suggested that since its launch, all sequencer fees from the Base network had been directed to Coinbase. While acknowledging the difficulty of confirming whether these funds were sold, Santisa emphasized that the fees had not been reinvested into the Base ecosystem or retained on-chain. The lack of transparency, according to the post, justified speculation that the funds might have been liquidated—a practice described as contradictory to Ethereum’s decentralized ethos.
Base’s Official Response
The following day, Kabir, a member of the Base team, issued a detailed rebuttal. He dismissed the allegations as baseless and outlined Base’s actual practices and commitments:
- Base is deeply committed to the Ethereum ecosystem, investing all earnings and resources back into its growth.
- The network has achieved significant adoption, onboarding millions of new users within just 18 months.
- Both Base and Coinbase maintain a long-term ETH holdings strategy, publicly disclosing reserves exceeding 100,000 ETH (valued at over $300 million at the time of the statement). This is reportedly the largest ETH holding among all publicly traded companies, surpassing other Layer 2 DAOs or Labs entities.
- For security and auditing reasons, Base currently uses off-chain custody solutions, which explains the flow of funds to Coinbase.
- The operational philosophy is ETH-centric: Base uses ETH to cover Layer 1 costs, denominates external grants in ETH, and aims to increase the proportion of ETH in its cost structure.
- While some off-chain expenses (like salaries) are still paid in USD, the amount of ETH converted for these purposes is minimal compared to the total holdings and the overall ETH market.
Kabir emphasized that Coinbase’s cumulative ETH holdings are more than double the total ETH earnings generated by Base. He reiterated a focus on long-term value creation rather than short-term price movements and invited the community to join efforts toward mass blockchain adoption instead of spreading fear, uncertainty, and doubt (FUD).
Insights from Base’s Founder
On February 11, 2025, Base founder Jesse shared his perspective on the matter, breaking down the network’s philosophy and strategic priorities:
Rejecting Purity Tests
Jesse argued that focusing on whether all earnings are held in ETH is a counterproductive purity test. Such debates distract from the core mission: building products users need, creating sustainable economic systems, and lowering barriers to entry so more people can benefit from blockchain technology.
Driving Global On-Chain Adoption
Base’s primary goal is to accelerate global on-chain adoption. This requires building a self-sustaining economic engine that fuels expansion and encourages other enterprises to participate in the on-chain economy.
Reinvesting in Growth
The network’s strategy involves diversifying revenue streams and reinvesting profits into ecosystem development. This includes team expansion, project grants, strategic acquisitions, infrastructure upgrades, and contributions to public goods—such as allocating 15% of revenue to Optimism’s public goods fund and sponsoring audits for projects like Solady. Jesse emphasized that investing in growth is a smart and commendable approach.
ETH as a Strategic Asset
Base maintains a strategic reserve of over 100,000 ETH, which reinforces ETH’s value storage properties and allows Base to benefit from Ethereum’s growth. However, Jesse cautioned against treating ETH’s store-of-value function as an end in itself; instead, it should emerge naturally from its utility as a productive asset.
Improving Transparency
Jesse acknowledged that current transparency practices are limited by the quarterly reporting requirements of U.S. public companies. However, as Base evolves into a decentralized global on-chain economy, the team is working to bring more operations on-chain—including partnerships with suppliers and contractors—to enable real-time transparency and move beyond traditional quarterly disclosures.
Frequently Asked Questions
What are sequencer fees in the Base network?
Sequencer fees are generated from transaction processing on Base. These fees are typically earned in ETH and are a common revenue source for Layer 2 networks.
Has Base sold its ETH earnings?
According to Base’s team, the network has not sold its ETH earnings. Instead, both Base and Coinbase hold a significant strategic reserve of over 100,000 ETH, which is publicly disclosed.
Why are funds flowing to Coinbase and not staying on-chain?
Base uses off-chain custody solutions for security and auditing purposes, which requires funds to be managed through Coinbase’s infrastructure. This is a temporary measure aimed at ensuring safety and compliance.
How is Base improving transparency?
Base is working to migrate more of its operations on-chain, including partnerships and financial flows. This will allow for real-time auditing and greater transparency beyond standard quarterly reports.
What is Base’s long-term vision for ETH?
Base views ETH as a strategic asset and aims to increase its use in the network’s cost structure. The goal is to support Ethereum’s ecosystem while driving practical utility and adoption.
How can I stay updated on Base’s financial practices?
For those interested in tracking Base’s growth and financial strategy, regular updates are provided through official channels and quarterly disclosures. 👉 Explore more on-chain strategies
Conclusion
The recent dialogue around Base’s financial practices highlights the importance of transparency and communication in the blockchain space. While concerns were raised about the handling of sequencer fees, Base’s leadership has provided detailed responses clarifying their commitment to holding ETH, reinvesting in ecosystem growth, and improving on-chain transparency over time. The network’s focus remains on building a sustainable economic engine that benefits the entire Ethereum community.