Every Fintech Firm Will Run Its Own Blockchain ‘in Next Five Years:’ Optimism

OP Labs, the creator of Optimism, an Ethereum overlay protocol, predicts that every cryptocurrency exchange and fintech firm will operate its own blockchain within the next five years. This prediction is based on the remarkable success of Coinbase’s Base layer-2 (L2) network, launched in 2023. Base boasts a thriving ecosystem of users and developers, significantly bolstering Coinbase’s position. Crucially, Base, in conjunction with Coinbase’s bitcoin-backed loans, allows for the monetization of dormant crypto assets held in custody through lending.

Base, built using Optimism’s OP Stack, exemplifies the industry trend toward independent blockchain operation. The OP Stack facilitates the development of L2 blockchains offering faster, cheaper transactions than Ethereum’s base layer. Base’s success, achieving the highest total value locked among L2s, strongly supports OP Labs’ forecast.

The core advantage is the ability to leverage assets. For instance, users holding Bitcoin on Coinbase can readily transfer it to Base to borrow USDC, enhancing usability. Both Optimism and Arbitrum utilize optimistic rollups, verifying transactions off-chain and publishing results on the Ethereum blockchain, significantly improving transaction throughput. This contrasts with zero-knowledge proof rollups, which use cryptographic proofs for off-chain transaction validity.

McIngvale, previously involved in Coinbase’s custody business, highlights the inherent costs of traditional crypto custody due to security concerns. This contrasts with equities, where lending practices offset custody expenses. Crypto is evolving towards a similar model, mirroring Base’s impact.

The success of Base has spurred similar initiatives. Kraken’s Ink L2, also built on Optimism, is a prime example. Bybit, Bitget, OKX, and Robinhood are also exploring their own Ethereum-linked L2s. Optimism’s vision of an interoperable “Superchain” aims to streamline transitions between blockchains, enhancing user experience. The shift towards smoother, more efficient transactions reflects the maturation of the cryptocurrency landscape, moving beyond the early days of high fees and slow confirmation times.