Ripple CTO Weighs in on Base Misconception: Details

In a recent X discussion, Ripple CTO David Schwartz weighed in on a common misconception about Coinbase’s layer-2 platform, Base.

Coinbase CLO Paul Grewal pointed out a common misconception about the Base platform. In a tweet, Grewal stated that framing sequencers on L2s such as Base as exchanges misrepresents their function as a marketplace. Sequencers act as blockchain’s “air traffic control,” taking unordered transactions and organizing them.

To clear up this misconception, Grewal provides the SEC’s definition of an exchange as that which provides a marketplace for bringing together buyers and sellers of securities. Grewal added that L2s are general-purpose blockchains that operate as infrastructure. These process messages as code (calling smart contracts) and batch all transactions (payments, calls, messages), while deferring any formal order or interaction/matching rules (AMM, CLOB, auctions) to an app’s smart contracts and frontend.

The Coinbase CLO explains his point further using an illustration of an off-chain infrastructure such as AWS. Just like Base, infrastructure like AWS runs code that developers provide. This code can include payments, calls, messages and exchanges, being run deterministically. “If an exchange runs on AWS, is AWS an exchange? Obviously not,” Grewal asked.

Ripple CTO weighs in

The bottom line of Base, for Grewal, is this: L2 sequencers enable scalable, secure on-chain transactions that scale Ethereum computing and enable a wide range of applications in a new global economy. He added that mislabeling L2 sequencers might be spreading FUD, overlooking the critical role they play in scaling.

Ripple CTO David Schwartz joined the conversation on X, buttressing the point made by Coinbase CLO Paul Grewal with an illustration of an off-chain infrastructure.

Schwartz stated: “The argument is that the sequencer is no different from a CPU or cloud hosting. It just does math in a precisely agreed upon way with no right or ability to impose any other rules on the data it processes.”

In response to an X user, Schwartz added, “No CPU does AML. Amazon cloud hosting doesn’t do any KYC or AML on the endpoints of payments or trades their systems process.”

In a recent development, Ripple has provided an update on the institutional DeFi roadmap for the XRP Ledger, which recently entered the top tier of institutional DeFi with $1 billion monthly stablecoin volume and top-10 RWA activity.