CMC News

#VitalikButerin Defends Base Amid #Layer-2 Exchange Classification Debate

Coinbase's #Layer-2 network Base operates as an infrastructure extension rather than an exchange platform, according to its technical architecture. Users maintain the ability to transact directly through the #Ethereum mainnet, preserving full decentralization and censorship resistance capabilities. The network processes transactions through centralized sequencing while relying on Ethereum's decentralized base layer for security guarantees.

$ETH co-founder Vitalik Buterin praised Base's approach to balancing user experience improvements with decentralization principles. He emphasized that the layer-2 solution cannot steal funds or prevent withdrawals due to its non-custodial design. True layer-2 networks function as Ethereum extensions rather than independent servers submitting transaction hashes.

Securities and Exchange Commissioner Hester Peirce raised regulatory concerns about centralized transaction sequencing in layer-2 networks. Her Sept. 7 podcast comments suggested potential exchange classification if matching engines operate under single entity control. However, she noted that non-securities asset matching falls outside #SEC jurisdiction.

Base co-founder Jesse Pollak clarified that sequencer functionality differs fundamentally from traditional exchange matching engines. Sequencers determine transaction processing order without pairing buy-sell orders at specific prices. The system functions like traffic controllers, ensuring smooth flow rather than marketplace facilitators executing trades.