A big debate is brewing in the world of cryptocurrencies. It’s all about how to make blockchain systems faster without giving up their core idea of being decentralized. At the center of this argument is Base, a network from the well-known crypto exchange Coinbase.
Vitalik Buterin, a co-founder of Ethereum, recently weighed in. He pushed back against people calling Base a “centralized custodian.” Buterin stated his views on Monday evening through his X account, answering criticisms about how Base is run and how secure this “Layer 2” system really is.
Buterin believes Base is “doing things the right way.” He explained that Base uses some centralized features to make things easier for users. However, it still ties its security to Ethereum, which is a decentralized base layer. This means user funds stay safe, he argued.
Vitalik defiende Base: no es custodio centralizado
L2 anclada a ETH; contratos en ETH aseguran retiros
Etapa1: consejo limita control de Coinbase
Críticas: contratos modificables; Base explora token pic.twitter.com/XDRLHTC2Zz— Diario฿itcoin (@Blaze Trends)
Buterin stressed that Base does not hold user funds itself. He said that Base “cannot steal funds or prevent withdrawals.” This is because smart contracts on Ethereum ensure funds can always be taken out, even if a Layer 2 operator has problems. For Buterin, systems like L2Beat aren’t about strict ideology. They are about practical ways to protect users.
In April, Base moved to “Stage 1” in Buterin’s decentralization plan for rollups. The network added a security council. This group limits Coinbase’s power and needs independent members. Even so, some parts of Base still rely on central control.
Traffic Controllers, Not Exchanges
Buterin also responded to Jesse Pollak, the head of Base at Coinbase. Pollak defended centralized “sequencers.” These are systems that gather, sort, and group transactions before sending them to Ethereum. Pollak called them neutral “traffic controllers.” He argued that users can always work directly on Base through Ethereum. This links transactions to many validators, making them resistant to censorship.
Pollak disagreed that Base is like an unregulated stock market. He said, “Today we are actively working towards Stage 2 and investing in further decentralizing block building.” He believes this setup helps Ethereum grow without losing its neutrality. He called it “a critical piece of the global onchain economy.”
Paul Grewal, Coinbase’s chief legal officer, also joined the discussion. He compared sequencers to services like Amazon Web Services (AWS), not exchange platforms. Grewal pointed out that the SEC defines an “exchange” as a market that brings together buyers and sellers of securities. But, he noted, Layer 2s are general-purpose blockchains. He stressed that just as AWS runs other companies’ code, Base processes transactions without acting like an exchange.
Community Concerns and Risks
Buterin admitted that Base is still in Stage 1 of decentralization. This means a large majority of the security council can still change contracts. However, he highlighted that there are rules in place. These rules prevent Coinbase from blocking transactions or taking funds on its own. He believes the path to Stage 2 is clear. In Stage 2, even councils could not change the code on the blockchain. This will happen as more people use the system.
Still, criticism quickly followed. Eric Wall, co-founder of Taproot Wizards, insisted Base is still “a custodial system” when it comes to fund security. He said this is because governance can change the contracts. Wall believes this makes Base act more like a custodian than a fully decentralized part of Ethereum, as reported by The Block.
Lane Rettig, a former core Ethereum developer, warned of risks like government pressure on Coinbase. Other experts, like Alex Thorn from Galaxy, felt Buterin’s defense missed a key point. They asked if Layer 2s should face exchange-like oversight when securities are traded on them.
A New Token on the Horizon?
This ongoing debate comes as Base shows signs of launching its own digital coin. Last week, Pollak announced that the Layer 2 network was “starting to explore” this idea. Supporters see a native token as a way to speed up decentralization. It could also increase participation in creating new blocks. Critics, however, warn that it might actually give Coinbase more power, even if it looks like community governance.
Some critics even question if a new token is needed at all. They point out that Layer 2s can already use Ethereum’s coin (ETH) for transaction fees and security. They suggest that sequencers could become decentralized using staking or bond systems with existing digital currencies, without adding a new asset.
Ultimately, the discussion around Base highlights a bigger struggle in the blockchain world. It’s about finding the right balance between making systems faster and keeping them decentralized. The goal is to do this without losing the security and neutrality that made Ethereum famous.