Is Coinbase Based? $50B L2 Network 🔵

Ex-Binance $100M VC Fund | Mia Deng of Amber Group

February 24, 2023

GM folks 👋🏻 - Happy Friday.

MakerDAO, the biggest stablecoin protocol, is playing with fire. Seems like we haven’t learned from all of the death spirals in the past cycle. In other news, Coinbase launched its layer 2 network built on Optimism, called Base.

Well, Brian Armstrong is certainly based 👨🏻‍🦲

In Today's Email:

What Matters: Coinbase launches Base, its layer 2 network 🔵
Founders-Investors Highlight: Mia Deng, Venture Partner at Amber Group 👩‍💼
Deal Flows: Ex-Binance Exec $100M Crypto Fund 📈

Narratives: Optimism. Coinbase launches its L2 network that’s based on Optimism’s (OP) technology and OP ecosystem projects has increased in price. Pay attention to Ethereum shanghai upgrade, which is scheduled to happen on March 2023.

WHAT MATTERS

Coinbase Launches a Layer 2 Network 🔵

base.org

State of play: Coinbase, the largest US-based and the only publicly listed crypto exchange has launched its own Ethereum L2 network, built on top of Optimism’s technology stack. The L2 chain is called Base.

Coinbase doesn’t plan to issue a new network token for Base, ETH will be used as the native gas token.
Base is currently in testnet, with mainnet coming soon. It will be permissionless from day one, without any KYC requirements (at least no details of such process yet).
Currently, Coinbase is the only sequencer, but it plans to decentralize down the road. 20% of the sequencer’s revenue will be allocated to fund public goods.

The key takeaway: Coinbase is continuously vertically integrating by launching more on-chain products. They’re also extremely thoughtful about regulatory repercussions of its products 👩‍⚖️

Binance decided to do a Layer 1 network and an exchange tokens. Coinbase pursued liquid staking products (cbETH) and an L2 instead. These initiatives are not without deliberate regulatory strategies.

Here’s a fun idea.

Coinbase L2 is mega bullish for cbETH
Step 1 → Coinbase makes UX decisions that push cbETH over other LSDs
Step 2 → cbETH becomes the gas token of Base
Boom multi-billion dollar Base business model.
— Yano 🟪 (@JasonYanowitz)
10:33 PM • Feb 23, 2023

Why it matters: This move by Coinbase will unlock enormous value for the exchange. Coinbase is taking a page out of Binance’s playbook. Binance launched its own chain and were able to use its BNB exchange token to bootstrap growth. Coinbase is valued at ~$15 billion, and Binance Coin’s fully diluted valuation alone (whether you think it makes sense or not), is ~$50 billion.

However, it’s also not without any potential negative repercussions. Some lawyers have argued that the move might be a massive miscalculation.

many people seeing some kind of regulatory strategy in Coinbase's L2
no idea if that is Coinbase's primary motivation or not, but, if so, imo it is a massive miscalculation
let me explain:
— _gabrielShapir0 (@lex_node)
3:55 PM • Feb 23, 2023

For builders: Make sure that you’re building a product, not a feature. Apple killed the Buy-Now-Pay-Later startups by simply implementing that feature on its Apple Pay. Don’t let Coinbase does the same thing to you. Regulators aren’t going to go against Coinbase for antitrust practices anytime soon.

For investors: Investing in layer 2 ecosystems will be the trend in the next few years. The liquidity flywheel that Ethereum provides for these chains mean that it’s much easier to bootstrap growth. Retail traders can catch ecosystem altcoin narratives while institutions can help bolster the ecosystems via incubation and ecosystem fund.

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BUILDER-INVESTOR HIGHLIGHT

Mia Deng, Venture Partner of Amber Group

Mia Deng is an Investor and Venture Partner at Amber Group. She was previously also a partner at Dragonfly, a juggernaut crypto VC firm. Other than her investing career, Mia was also the Co-Founder of TR Lab, a platform to discover and collect NFTs from the world’s leading artists.

Mia was the first hire at Dragonfly Capital, and helped scale the firm to one of the world largest crypto VC with $4B+ in AUM.
Mia was included in the Forbes 30 Under 30 Asia, Finance and Venture Capital, 2022 edition.

Previous backgrounds:

Mia started her career as a Product Manager at Mobike, a China-based stationsless bike sharing startup.
Post Mobike, she went straight into the web3 space by joining Amber Group as the Head of Business Development.

The big idea: Mia is a prime example of a crypto professional that understands both the Eastern and Western markets. For a truly global asset class like crypto, this is a critical skillset that not many people have.

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DEAL FLOWS

Cypher Capital $100M Crypto Fund

prnewswire

🤝 Deal flows remain strong. This week we saw $420M+ in deals, excluding multiple undisclosed amount of strategic rounds being done.

Cypher Capital $100M Crypto Fund: The Dubai-based VC firm has launched a $100M fund aimed towards digital assets. The firm was founded and financed by Bijan Alizadeh. It has also recruited Bill Qian, Binance’s former head of VC investments as its Chairman. Qian left Binance in June 2022 and aims to target Asian technology tycoons for further fundraising.

Cypher focuses on investments that can attract 5 billion internet users to the web3 ecosystem.
Cypher currently has a team of 10, including a former Executive at Tencent, Elaine Liu, to ramp up its expansion efforts in the UAE 👩‍💼
Cypher’s notable investments include Mysten Labs, which was founded by executives at Facebook’s defunct stablecoin project.

Deal flows in the past week:

PaperMeme, $3M Unknown Round
Strider, $5.5M Unknown Round
Zion, $6M Unknown Round
IMGNAI, $7.5M Unknown Round
BCB Group, $20M Unknown Round
Factor, $4M ICO
Intu, $2M Pre-Seed Round
Polybase, $2M Pre-Seed Round
Salsa, $2M Pre-Seed Round
Phi, $2M Seed Round
Den, $2.8M Seed Round
Curio, $2.9M Seed Round
3RM, $3M Seed Round
Renegade, $3.4M Seed Round
GloryFinance, $3.5M Seed Round
Million on Mars, $3.5M Seed Round
Superchain, $4M Seed Round
Gateway, $4.6M Seed Round
Nefta, $5M Seed Round
Unagi, $5M Seed Round
Kaito, $5.3M Seed Round
Cysic, $6M Seed Round
Stelo, $6M Seed Round
TipLink, $6M Seed Round
Sentio, $6.4M Seed Round
Azra Games, $10M Seed Round
Sending Labs, $12.5M Seed Round
Chaos Labs, $20M Seed Round
Kratos Studio, $20M Seed Round
Blocto, Undisclosed Series A
Sei Network, Undisclosed Series A
Onekey, Undisclosed Series A+
YGG, $13.8M Token Purchase Round
Botto Project, Undisclosed $ Strategic Round
EthSign, Undisclosed $ Strategic Round
Ordinal Hub, Undisclosed $ Strategic Round
Rocket Pool, Undisclosed $ Strategic Round
0N1, Undisclosed $ Strategic Round
PolyHedra, $10M Strategic Round
HAL, Undisclosed $ Acquisition
GK8, $44M Acquisition
YGG, $75M Venture Fund I
Cypher Capital, $100M Crypto Fund I

QUICK BITES

Coinbase launches a layer 2 network.
Federal Bank Regulators warn crypto liquidity risks.
SEC objects Binance US $1B Voyager deal.
IMF calls for coordinated action over crypto.
Binance closes Australia derivatives trading.
NBA NFT faces securities lawsuit.
Spotify tests token-enabled music.
NYAG sues CoinEx, alleges 4 tokens as securities.
Self-hosted wallet avoids EU crypto AML bill.
Frax votes to fully collateralize its stablecoin.
Cash App reports -25% drop in BTC profit.
Dapper Labs cuts staff by 20%.
Sushi plans derivatives exchange on Sei Network.

MEME & NOTEWORTHY READS

CMS Holdings’ article on dYdx and the future of decentralized perpetuals.
Jason Yanowitz’s thread on Coinbase layer 2 network.
DataFinnovation’s article on USDT: a bridge too few.

The last thing you see before all your crypto mysteriously disappears
— Wall Street Memes (@wallstmemes)
7:39 PM • Feb 23, 2023

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Disclaimer: All the information presented in this publication and its affiliates is strictly for educational purposes only. It should not be construed or taken as financial, legal, investment, or any other form of advice.