Written by: Jon Reiter
Compiled by: Saoirse, Foresight News
In August 2023, we published an article arguing that Base was essentially a tool for Coinbase to provide centralized custodial transfer services without implementing customer identification and anti-money laundering reviews. The platform also deliberately used obscure technical jargon and vague vision statements to conceal the true nature of this business. Recently, Jesse Pollak (co-founder of Base) confirmed externally that the Base application has been re-integrated under the parent company Coinbase's planning. Jordan Fish (known online as Cobie), well-known in the industry, will independently oversee this product line. In the future, this product might even expand beyond the Base ecosystem. This development makes our earlier viewpoint increasingly difficult to refute.
Coinbase holds multiple financial licenses globally. Such operations, whether in the past or present, have serious compliance issues. As early as February 2023, Coinbase proactively admitted that Base had no decentralized attributes at its launch and also publicly released a decentralization roadmap that year. We will elaborate on this later, but the conclusion is clear: this roadmap was shelved long before any substantial progress was made. The authoritative Layer 2 monitoring platform L2Beat currently rates Base at Stage 0 (this rating will be downgraded from Stage 1 to Stage 0 in August 2026), with the entire network fully backed and controlled by the platform. Simply put, this highly recognized industry monitoring institution judges that Base possesses no decentralized characteristics.
After our August 2023 article was published, Coinbase promptly issued a decentralization pledge for the Superchain ecosystem. The article explicitly admitted that Base was fully operated by Coinbase and claimed it would work with Optimism and the entire Superchain ecosystem to gradually resolve centralization issues. However, like the previous roadmap, this pledge was also shelved without any substantial progress.
In 2024, Vitalik publicly stated, calling for the industry to stop heavily promoting Stage 0 Layer 2 products and to fully advance all projects towards the Stage 2 decentralization standard. In February 2026, Vitalik directly overturned the core idea that "Layer 2 scaling is the optimal solution for Ethereum scaling," citing the reason that "progress towards the Stage 2 standard across the industry has been far slower and more difficult than initially envisioned."
It is necessary to state objectively: whether in 2023 or 2024, no project in the industry had produced a mature, technically feasible Stage 2 solution balancing security and scalability; even today, the projects Vitalik mentioned have still not completed this full solution. This is not due to a failure of teams to execute clear plans, but rather because the entire industry's R&D efforts to date have failed to overcome the core technical challenges. To use an analogy: it is like a Mars exploration plan where the complete rocket blueprint has not been finalized before the R&D funds are exhausted, forcing the project to be shelved. The industry's initial bet on quickly realizing the path to decentralization has now fallen through.
The above is a concise summary of the industry's state over the past three years. The vast majority of Ethereum Layer 2 networks face similar issues: the progress of decentralization for all Layer 2 projects has either been slow and intermittent or completely stalled.
Next, we will meticulously deconstruct the complete development history of Base, followed by confronting the core dilemma the industry avoids discussing: when a Layer 2 network remains stuck at the fully centralized, officially controlled Stage 0 for an extended period, what is the difference between it and a custodial financial institution or a money transfer service provider? When should regulatory agencies initiate investigations into such platforms that lack proper licenses and bypass customer identification and anti-money laundering processes?
Base's Development History
According to Coinbase's initial roadmap, a permissionless fault proof mechanism was scheduled for implementation in 2023. It's not essential to understand this technology; the key point is: this core component was not launched as planned in 2023. It is a necessary element for removing the official control and safety net mechanism, and its delay introduced significant risks.
It wasn't until April 2025 that Coinbase finally announced achieving this milestone. At that time, L2Beat rated Base as a Stage 1 Layer 2 network, defined as "essentially decentralized, but retains an emergency safety net mechanism that the official party can fully take over." Of course, stage classification involves some subjective judgment, and industry rating standards are continuously updated; the technical level achieved in April 2025, under today's new standards, would only be classified as Stage 0 with full official control. It's worth noting that numerous security incidents in recent years have shown that these so-called "emergency-only" control permissions are being invoked by platforms with increasing frequency and with far greater actual control than initially advertised by project teams, leading to a continuous tightening of industry stage classification standards.
This is a prevalent issue in the Web3 industry: not just superficial "decentralization theater," but project teams also repurpose backend control permissions originally intended for "security protection and user asset safeguarding" for other uses. In extreme cases, they may even directly steal user assets. Many protocols touting decentralization have suffered massive losses precisely because teams secretly held admin keys, which were later compromised leading to asset theft.
For years, this publication has adhered to a conservative evaluation standard: all centralized control permissions must be analyzed under worst-case scenarios, assuming the operators are malicious by default, strictly assessing whether the platform has the ability to abscond with all user assets. Past security incidents have repeatedly validated the rationality of this evaluation logic, and now an increasing number of practitioners are beginning to agree with this view.
Returning to Base's development timeline: despite delays and limited effectiveness, the project did achieve some minor progress outlined in the roadmap. However, in February 2026, Coinbase announced it was completely abandoning the original plan to advance decentralization based on Optimism, and instead building a completely self-controlled technology stack. Before this adjustment, some administrative permissions for Base were jointly held by Coinbase and Optimism; after the adjustment, all control permissions were consolidated into two multi-signature wallets: a centralized Security Council multi-sig and a centralized Sequencer multi-sig. Coinbase, with its substantial capital and massive industry influence, could already exert considerable pressure on Optimism, and now can fully control the individuals and small partner institutions behind these two multi-sig wallets.
At this point, Coinbase is not only significantly behind its 2023 plan but has also directly discarded the entire roadmap without proposing any viable, alternative development plan. More crucially, the small portion of control temporarily diverted to Optimism has been entirely reclaimed by Coinbase. Joint ventures could have co-custodied assets; the cooperative structure between Coinbase and Optimism briefly achieved this, representing at least a tiny step towards the 2023 roadmap. But with the roadmap completely abandoned, Base no longer has any substantive basis for advancing decentralization. Various marketing campaigns do not equate to tangible progress; hype alone does not constitute real development.
In June 2026, Base suffered two consecutive network outage incidents. During the recovery process, Coinbase directly modified the underlying code, rolled back the entire blockchain data, and forced all network nodes to synchronize with the updated fix package to resume operation. After three and a half years, Base remains at the fully centralized Stage 0, where the platform can use its control permissions to directly handle user assets at any time. The facts are clear.
A Centralized Distributed Database
The recovery operations from the two outages completely exposed Base's essence: it is merely an ordinary centralized distributed database. There are countless mature commercial solutions available: Oracle, SAP, IBM all offer highly stable commercial databases; MySQL can be deployed for free; major cloud providers also offer cloud-based distributed database services. As long as transaction volume matches hardware capacity, distributed databases are already a mature and reliable technology, operating stably. Performance bottlenecks only occur when handling extremely large-scale traffic.
Base's transaction throughput is only a few hundred per second, a performance level equivalent to traditional systems from the 1980s and 1990s. Looking at industry reports from the internet bubble era 20-30 years ago reveals that many traditional enterprises handled transaction volumes orders of magnitude larger than Base's current level. This performance level predates the birth of Bitcoin, even predating the widespread adoption of smartphones; early online banking could only be done via computer browsers, requiring users to manually check HTTPS encryption indicators before entering passwords—a very old technological standard.
You can refer to 2001 reports about eBay's platform system failures in the late 1990s. We are not downplaying the challenges of system operations; we have personally experienced the technical limitations of the 90s: back then, you could only read digital camera photos via serial ports; in medical imaging work, a computer costing as much as a luxury car couldn't load a few dozen 16-megapixel black-and-white images at once; whereas today, the cheapest Samsung phone can easily store and smoothly open many times that number of image files.
But this does not mean Base is tackling old technological challenges. Achieving the performance of a 1990s traditional server within a permissionless, globally distributed, decentralized network might be extremely difficult, or perhaps not—but Base is not even making efforts in that direction. Today's Base is merely an inefficient, unstable, and poorly performing distributed database, a technology that was fully mature decades ago. Coinbase had grand visions for Base. In 2023 and 2024, the industry could still be tolerant, debating whether regulatory standards should be relaxed for innovation. But by 2025, this rhetoric had long grown tiresome.
After three and a half years of operation, Base's underlying technology is blockchain, but this blockchain is not used to create any new, original product logic. The entire system remains centrally operated by Coinbase from start to finish. The blockchain instead unnecessarily increases operational complexity, akin to choosing "hard mode" for running a long-mature database technology, yet failing to leverage it for decentralization. Simply because a company deliberately chooses a more complex and troublesome technical solution does not entitle it to special regulatory treatment.
Why We Consistently Emphasize the Entity is Coinbase, Not Base
In the article, we frequently attribute control to Coinbase rather than Base, a statement supported by ample factual evidence. You can review Coinbase's official announcement blog, where the recruitment section at the end states:
"Building the next generation of the internet is a collective endeavor. If you are passionate about scaling, security, or advancing Base's decentralization, we invite you to apply for our positions. Click here to view open roles."
Clicking the recruitment link leads to the Greenhouse hiring platform, where all positions clearly indicate that hired personnel belong to Coinbase, as either full-time employees or contractors. In the comments section of the announcement, Coinbase employees also uniformly use "we" to refer to the Base team. Throughout Base's website terms of service and privacy policy, Coinbase's identity is evident.
Coinbase's external narrative is that Coinbase merely acts as an incubator, and once the project achieves decentralization, Coinbase would not bear related legal liabilities. However, the reality is clear: the entire system is operated by Coinbase's full-time employees; and a Stage 0 Layer 2 network is fundamentally not decentralized. Therefore, Base's essence is a Coinbase-operated business. This is the core reason this article directly names Coinbase throughout.
Industry Prospects and Legal Controversies
A core question often raised about the Web3 industry is: many projects do not need blockchain at all but forcibly incorporate chain technology. Base's initial explanation was: blockchain is the only technology with the potential to efficiently solve scaling problems—a view that remains controversial. However, after several years of development with zero substantive progress, three sharp questions must be addressed:
- Did Coinbase's decentralization roadmap from the beginning lack a complete, actionable implementation plan?
- Considering the stagnation of Base and the broader Layer 2 ecosystem, is achieving full decentralization feasible in the short term?
- How much tolerance should regulators grant innovation, and when should compliance investigations commence?
Coinbase holds multiple national financial licenses, which legally prohibit it from operating a funds transfer platform that requires no customer identification and is exempt from custodial regulation. These are hard obligations attached to various licenses and laws and regulations applicable to all market entities. It is reasonable for regulators to show some tolerance during a new project's initial phase; software development inherently has bugs, and user asset security requires a run-in period, which the industry understands. However, no reasonable argument suggests that a complete lack of decentralization progress for 40 months can indefinitely enjoy regulatory leniency.
As a publicly listed company on the US stock exchange, Coinbase has an obligation to publish truthful, accurate public information, especially concerning business plans, development prospects, and shareholder interests. If Coinbase never had a viable decentralization implementation plan from the start and only heavily promoted vague "conceptual ideas" externally, it raises serious integrity issues: did the company deliberately conceal its technical shortcomings and falsely advertise having decentralization capabilities to the market?
Development work stalled for years with zero progress resembles not industry building, but rather a deliberate consumption of the regulatory grace period. From February 2023 to August 2026, Base's decentralization rating has remained at Stage 0, with no positive breakthrough. The development team indeed completed coding, launch, and other foundational work, and the platform has processed substantial user assets, performing "work" in a physical sense. However, the only output is the team's continuous marketing efforts. Regarding the core goal of decentralization, no substantive results have been produced.
Even if Base adds more features and more complex underlying mechanisms, it is irrelevant. The evaluation standard has never been whether engineers find R&D interesting or whether basic development work is completed. The core standard is: can this system provide legal, actually valuable services that align with Coinbase's publicly announced project plan?
Judging by the current state, Coinbase's series of operations essentially attempt to package "we still have not mastered the path to compliant decentralization" as "we are tackling major industry challenges and deserve permanent exemption from regulatory constraints." This rhetoric was already heavily criticized several years ago and is now full of holes.
Corporate innovation deserves a reasonable margin for trial and error; we do not expect all project plans of a listed company to be perfectly flawless and implemented without deviation. However, consecutive years of unmet plans, coupled with an operational model suspected of conducting unlicensed custodial and funds transfer services, must bear corresponding legal consequences. Otherwise, financial regulatory rules would lose all binding force.
