Base denies selling ETH, says the network is committed to Ethereum

Coinbase’s layer-2 network, Base, has denied allegations of selling its Ethereum (ETH) holdings.

Over the weekend, crypto assemblage members pointed retired that Base has funneled sequencer fees to Coinbase, sparking concerns astir transparency and imaginable ETH sales.

However, Base strategist Kabir Sadarangani refuted these claims, asserting that the accusations of a deficiency of transparency and imaginable ETH income were unfounded.

The allegations

On Feb. 8, Santisa, the CIO of concern steadfast Lucidity Cap, raised the alarm that Base has been sending each sequencer fees to Coinbase since its launch.

He added:

“We don’t cognize if they sold, but we bash cognize they didn’t deploy those funds connected Base oregon support them on-chain. The deficiency of transparency makes it just to presume they sold. Not precise Ethereum-aligned of them.”

Further investigation by Sonic The Assistant pointed out that the network’s sequencer operations make astir a 90% nett margin—over $100 million—and each related ETH was sent from Base to Ethereum and past to Coinbase.

Coinbase’s fiscal reports were puzzling, further adding to the speculation. The Assistant noted that earlier Base’s launch, Coinbase held astir 118,924 ETH ($230 cardinal astatine $1,934 per ETH) arsenic of June 30, 2023. By Q4 2024, this fig had lone somewhat accrued to 119,696 ETH, meaning Coinbase added conscionable 772 ETH ($2 cardinal astatine existent prices) during Base’s operational period.

The Assistant besides highlighted a caller transaction wherever 240.35 ETH ($618,960) was moved off-chain to Coinbase. This prompted questions astir the whereabouts of the remaining $100 cardinal successful sequencer-generated ETH.

Meanwhile, Andre Cronje, the co-founder of Sonic Labs (formerly Fantom), besides criticized Base’s approach. He questioned whether the level operates arsenic a centralized firm blockchain nether Coinbase oregon arsenic a genuinely Ethereum-aligned layer-2 network.

Cronje further challenged the team’s determination to support fees off-chain alternatively than maintaining them transparently connected Ethereum.

Coinbase code concerns

In response, Sadarangani defended Base’s fiscal practices, stating that its net are reinvested successful Ethereum’s ecosystem alternatively than liquidated.

He pointed retired that Coinbase and Base collectively clasp implicit 100,000 ETH, making them the largest nationalist institution holders of ETH and surpassing immoderate layer-2 DAO oregon improvement entity.

Addressing concerns astir transparency, helium explained that Base utilizes off-chain custody connected Coinbase for information and auditing purposes.

He furthered that the ETH generated is utilized for operations and grants alternatively than liquidation. Base aims to modulation much costs to beryllium covered successful ETH portion expanding on-chain activity.

Sadarangani said:

“We gain and walk arsenic overmuch arsenic we tin successful ETH. We walk ETH connected L1 costs, we denominate each of our outer grants successful ETH, our extremity is to proceed to determination much of Base’s costs to relation successful ETH, and we are moving hard to determination much of our operations onchain.

He besides clarified that immoderate ETH converted to USD is minimal compared to its wide holdings and the broader Ethereum market. According to him, Base remains committed to semipermanent ecosystem maturation alternatively than short-term fiscal gains.

The station Base denies selling ETH, says the web is committed to Ethereum appeared archetypal connected CryptoSlate.