The “Base” Advantage: Tap into DeFi's Highest Yields!

Weekly Chain Highlight: What is Base Chain?

Launched in August 2023, Base Chain operates on the Optimism OP Stack, leveraging optimistic rollups to bundle transactions off-chain and finalize them on Ethereum. This design maintains Ethereum’s robust security while slashing transaction fees and boosting speeds. Its modular architecture streamlines scalability without compromising user experience or developer flexibility.

Base Chain isn’t merely a tool for Ethereum scalability—it’s an ecosystem designed for adoption. With Coinbase’s extensive resources and user base, it has the foundation for driving blockchain into mainstream usage.

Key Features of Base Chain

Base Chain stands out not just for its performance but for its approachability. Here’s what sets it apart:

• Low Fees and Speed: Transaction fees are drastically reduced by processing off-chain in batches. This unlocks opportunities for smaller transactions, making blockchain technology more practical for daily use.

• Developer-Friendly Framework: Full Ethereum Virtual Machine (EVM) compatibility ensures that existing Ethereum dApps can integrate with Base seamlessly. It’s an inviting platform for developers exploring decentralized finance (DeFi), gaming, and NFTs.

• Scalability at Its Core: With congestion offloaded from Ethereum’s mainnet, users experience quicker, smoother interactions.

• Planned Decentralization: While Coinbase incubates Base Chain, the network plans to shift governance to the community over time, prioritizing a decentralized future.

Base Chain has moved from a promising Ethereum Layer 2 to a prominent player with substantial adoption and innovation. Its focus on scalability, affordability, and usability positions it at the forefront of blockchain technology. Whether you’re a developer, a DeFi enthusiast, or a curious observer, Base is a project worth your attention.

The deeper you go, the more compelling Base Chain becomes. With its robust foundation and forward-looking approach, it’s not just a scaling solution—it’s shaping the future of decentralized applications.

Quick-Start Guide: 

The cbETH Strategy: A Clear and Effective Approach on Base

The cbETH strategy on the Base blockchain combines Coinbase wrapped staked ETH with Moonwell’s decentralized lending protocol to provide potential yields of over 13-21% APY. This guide explains how the strategy works, where the returns come from, and the risks you need to consider.

What You’ll Need

1. Ethereum (ETH)

   • To convert into cbETH on Coinbase.

   • ETH will also be used as gas fees on the Base chain for transactions.

2. Access to the Base Network

   • Bridge cbETH from Coinbase to the Base blockchain.

   • Use the Base Bridge for transfers.

3. A Compatible Wallet

   • Examples: MetaMask, Coinbase Wallet, or Rabby.

   • Connect your wallet to Moonwell and the Base network.

4. A Coinbase Account (Optional)

   • To manage the conversion of ETH to cbETH.

   • Set up your Coinbase account.

Quick Note:

You’ll interact with multiple pools during this process, each requiring their own token equivalent. This means you won’t only use cbETH but may also need other tokens, such as USDC, depending on the specific steps and pools involved. This also applies to how the rewards work, if the pool or instruction is for USDC then the yield is also in USDC. For more information on rewards with regards to this strategy, read here.

Steps to Execute the cbETH Strategy

1. Convert ETH to cbETH on Base
cbETH represents staked Ethereum (ETH), earning staking rewards while maintaining liquidity. Use Coinbase to convert ETH to cbETH and bridge it to Base.

• How to Convert:

  • Deposit ETH into your Coinbase account.

  • Convert ETH to cbETH. 

  • Transfer cbETH to Base using the Base Bridge.

• Decentralized Way:

  • Use Uniswap to swap ETH to cbETH

• Why cbETH?
  cbETH accrues staking rewards, offers liquidity, and integrates easily with DeFi protocols like Moonwell

2. Supply cbETH on Moonwell
Deposit cbETH into Moonwell to earn interest and use it as collateral for borrowing.

• APY for cbETH Supply: 1.5-3%

• Steps:

  1. Connect your wallet to Moonwell.

  2. Navigate to the cbETH lending section.

  3. Supply cbETH as collateral and earn interest.

3. Borrow USDC on Moonwell
Once cbETH is supplied, you can borrow USDC against it. This borrowed USDC will be staked for additional yield.

• APY for Borrowing USDC: 7-9%

• Steps:

  1. Navigate to the borrowing interface on Moonwell.

  2. Select USDC and enter the borrowing amount.

  3. Confirm the transaction.

4. Stake Borrowed USDC for Yield
Stake the borrowed USDC back into Moonwell to earn high returns.

• APY for Staking USDC: 20-25%.

• Steps:

  1. Access the staking interface on Moonwell.

  2. Select the USDC staking pool.

  3. Stake your USDC and begin earning rewards.

     

Yield Sources

The yields in this strategy come from several sources:

• Lending Yield (cbETH Supply): Generated by interest paid by borrowers who use cbETH as collateral.

• Staking Rewards (USDC Staking): Paid out by Moonwell using platform fees and token incentives.

• Platform Rewards: Moonwell distributes WELL tokens to incentivize lending and staking activities.

For detailed metrics, visit:

• Gauntlet Dashboard

• DefiRisk Metrics

• Token Terminal.

  

Calculating the Potential Yields

Here’s how the yields break down these numbers were taking as of the time of writing:

• Supply Yield (cbETH): 2.5% APY / 2-3% range

• Borrowing Cost (USDC): 8.2% APY / 7-9%

• Staking Yield (USDC): 22% APY / 20-25%

Net Yield:
22% (staking) - 8.2% (borrowing) + 2.5% (cbETH) = 13.8% APY / 13-21%

This strategy leverages stable and scalable assets like cbETH and USDC for reliable returns.

Risks to Consider

While the cbETH strategy offers strong yields, it comes with risks:

1. Liquidation Risk
   If cbETH’s value falls or the borrowed amount exceeds your collateral limit, your position could be liquidated. Monitor the collateral ratio regularly

2. Smart Contract Risk
   Moonwell and Base are subject to potential vulnerabilities in their smart contracts. Use audited platforms and diversify your holdings.

3. Dynamic APYs
   The interest rates for borrowing and staking can change, impacting the profitability of this strategy.

4. Market Volatility
   While cbETH is relatively stable, it tracks ETH’s value, which can fluctuate.

5. DeFi Risks
   Protocol-level issues, such as governance failures or liquidity shortages, could impact your funds.

Why This Strategy?

The cbETH strategy offers reliable yields by leveraging stable assets like cbETH and USDC, supported by Coinbase and Moonwell.

Pros

• Stable Assets: cbETH, managed by Coinbase, accrues staking rewards and is pegged to ETH. USDC is widely trusted and liquid.

• High Yields: Earns from 13-21% APY through lending, borrowing, and staking.

• Accessibility: Smooth integration with Moonwell and Base ensures ease of use and low fees.

• Diversified Returns: Combine rewards from staking, lending, and incentives.

Cons

• Liquidation Risk: ETH price drops could liquidate cbETH-backed loans.

• Smart Contract Risk: Moonwell and Base rely on code, which could be exploited.

• Fluctuating APY: Yield rates may vary, impacting returns.

cbETH Stability

• Trusted by Coinbase: Backed by the largest U.S. exchange, cbETH operates under regulatory oversight.

• Transparent Peg: Tracks ETH’s value and staking rewards with clear reserve reporting.

This strategy combines solid assets and accessible tools to deliver attractive yields, making it a strong choice for yield-seeking DeFi users.

Strategy Spotlight

1. Velvet Capital: Airdrop Farming

Use Velvet Capital to participate in airdrop farming campaigns and earn potential rewards.

Steps:

1. Visit Velvet Capital’s Airdrop Page.

2. Connect your wallet to the platform.

3. Explore the available airdrop campaigns listed on the dashboard.

4. Complete the required tasks, such as staking, interacting with smart contracts, or social media actions.

5. Claim your rewards once they are distributed.

2. Extra Finance: Leveraged Farming with Reinvestment

Extra Finance enables you to maximize returns by leveraging your liquidity and reinvesting rewards.

Steps:

1. Go to the Extra Finance Farming Page.

2. Connect your wallet to access your farming options.

3. Select a farming pool with leverage support and decide your leverage level.

   • Refer to the leverage farming guide.

4. Open a farming position by depositing your liquidity into the pool.

5. Enable reinvestment by activating the reinvesting strategy in the pool settings.

   • Learn more about this in the reinvestment strategy guide.

6. Monitor your position for any changes in impermanent loss or liquidation risks.

   

3. Morpho Vault: Morpho Earn Strategy

Morpho Vaults optimize your earnings by automating yield maximization across lending markets.

Steps:

1. Visit the Morpho Vaults Interface and connect your wallet.

2. Choose a vault that aligns with your preferred risk-reward profile.

3. Deposit your assets into the selected vault.

4. Let the vault optimize your yield by automatically reallocating funds across supported protocols.

5. Track your rewards and reinvest or withdraw as needed. Learn more in the Morpho Vaults Overview.

Innovations in BASE Ecosystem

• Optimized Stablecoin & LST Yield Farming:

  • Extra Finance has implemented an innovative interest rate model to optimize earnings for users by minimizing borrowing costs and mitigating interest rate volatility.

• Automated Market Maker (AMM):

  • Aerodrome Finance ($AERO) has positioned itself as a next-generation AMM on the Base chain, integrating the best aspects of prominent DeFi protocols like Curve, Convex, and Uniswap.

• CDP (Collateralized Debt Position) Platform: 

  • Overnight Finance ($USD+) stands out as the most popular CDP platform on Base, offering a simplified lending and borrowing experience.

• Open-Source Collaboration:

  • Built on the open-source OP Stack in collaboration with Optimism, Base aims to be decentralized, permissionless, and open to anyone, contributing to a standard, modular, rollup-agnostic Superchain.

• Support for Modular Scaling

  • Base adopts a modular architecture, allowing it to distribute tasks such as data availability and computation across different layers. This design improves scalability while maintaining flexibility for future upgrades and innovations.

The Numbers Behind the Surge

It started as a promising Ethereum Layer 2 (L2) scaling solution backed by Coinbase, but Base Chain has evolved into something far greater. From a quiet launch to a meteoric rise in users, transactions, and value, the numbers tell a story that’s impossible to ignore. Let’s unpack why Base is dominating the charts, the metrics driving its ascent, and what this means for the blockchain ecosystem.

The Coinbase Factor: A Catalyst for Growth

At the heart of Base’s growth lies Coinbase, one of the most influential players in crypto. Beyond acting as a gateway for millions of users, Coinbase wields unmatched marketing power and credibility. It’s not just a blockchain—it’s a blockchain with the backing of a titan, capable of onboarding users at unprecedented scales. This combination has turned Base into a magnet for builders, traders, and users alike.

With its mission to bring a billion people on-chain, Coinbase has made Base a centerpiece of its strategy. The result? Base isn’t just growing—it’s exploding.

A Closer Look at Base’s Metrics

To understand the momentum behind Base, let’s examine the data:

• Total Value Locked (TVL): In September 2024, TVL was a respectable $1.6 billion. Today, it stands at $4.28 billion, an increase of 167% in just three months. This growth reflects not only user trust but also the influx of capital from DeFi protocols, NFT marketplaces, and beyond.

• Transaction Volume: Daily transaction volume has soared from $423 million in September to $2 billion recently, showcasing the network’s ability to handle massive economic activity.

• Fees and Revenue: Both metrics were modest at $40,000 in September. Fast-forward to now, and Base generates $650,000 daily, signaling a thriving ecosystem.

• Daily Transactions: Back in March 2024, transactions hovered at 386,000. Today, they exceed 8 million, marking a 20-fold increase in activity.

These metrics aren’t just numbers; they’re indicators of a blockchain ecosystem rapidly outpacing competitors and redefining expectations for Ethereum Layer 2 solutions. Some of the data were taken from Coingecko and Defillama.

Why Is Base Chain Generating So Much Hype?

It’s not just the numbers or the technology. The buzz around Base Chain stems from the perfect storm of factors making it a compelling project:

• Coinbase’s Influence: Coinbase’s involvement as a trusted exchange is a significant endorsement. This backing has positioned Base as a secure, scalable solution that users can trust.

• Liquidity Magnet: Protocols like Aerodrome and dApps in the ecosystem contribute to deep liquidity, making Base a hotspot for DeFi activity.

• Accessibility and Adoption: Base prioritizes user-friendly onboarding. By integrating with Coinbase’s exchange infrastructure, it reduces friction for users entering the ecosystem.

• Innovative Projects: From SocialFi platforms to gaming and NFT marketplaces, Base attracts innovative use cases, fostering growth in multiple verticals.

Its modular design, future decentralization plans, and broad use-case compatibility make it one of the most versatile Ethereum scaling solutions.

Caption: According to Defillama, Base has more than doubled its core developers and amount of commits since April of last year, although this data is not that accurate, recent developer activity and commentary on X has been fairly positive, highlighting the same builder hyper and sentiment as when Arbitrum was pre-launch

How Base Chain is Generating so Much Hype!

Base’s success isn’t just about numbers; it’s about the confluence of strategic advantages and innovative growth. Here are the core reasons behind its rise:

1. Frictionless Onboarding: Coinbase’s integration provides easy-to-use wallets and bridges, reducing barriers for new users.

2. Developer Magnet: Full EVM compatibility and robust tooling make Base a go-to platform for decentralized applications.

3. User Accessibility: Low fees and high transaction speeds create an environment ideal for DeFi, gaming, and NFTs.

4. Strong Network Effects: Projects like Virtuals.io and Aerodrome are driving capital and creativity into the ecosystem.

5. Broader Ecosystem Alignment: As Ethereum’s L2s grow, Base stands out for its unique blend of scalability and user-centric design.

Is It Sustainable?

Critics argue that Base’s meteoric rise could be fleeting—a symptom of speculative mania. Yet, the ecosystem tells a different story. Capital inflows are steady, transaction counts continue to climb, and key protocols are thriving. The alignment between Coinbase’s vision and Base’s performance suggests long-term sustainability.

Moreover, the growing narrative of Ethereum resurgence further strengthens Base’s position. As ETH enters what some are calling a new “season,” the spotlight on Ethereum L2s like Base only intensifies.

Caption: According to L2BEAT Base chain has a score of 4 out of 5 on its  risk analysis data.

Base Season is Here

The numbers don’t lie: Base is having its moment, and it’s not slowing down. With TVL skyrocketing, transactions breaking records, and fees generating substantial revenue, Base has cemented itself as a key player in the blockchain landscape. Whether you’re a builder, a trader, or simply an observer, one thing is clear—Base is a chain to watch.

But as with any burgeoning ecosystem, the question remains: is this growth sustainable, or will it become another chapter in crypto’s cyclical story? For now, the data suggests Base is far more than a passing trend—it’s a blueprint for blockchain scalability and adoption.

Disclaimer

All information provided in The Yield Quest is for educational purposes only and does not constitute financial advice. DeFi investments carry inherent risks and can lead to capital loss. Readers should do their own research and assess their risk tolerance before implementing any strategy.

Stay yield-savvy,
The Yield Quest Team