Coinbase turns security evaluation into contest with $100,000 USDC incentive despite pressure from regulators

  • Coinbase plans to release a new Ethereum L2 network dubbed Base, developed in collaboration with Optimism.
  • The plans come after multiple series of security checks, with $100,000 USDC up for grabs for whoever finds a loophole.
  • The contest lasted 14 days as security experts explored the network’s smart contracts, bridges, and other areas.
  • With this level of integrity, Base is up for a good start even before its premiere.

Coinbase Exchange has doubled down on vigilance, leaving no stone unturned in its new product release. In its new venture with the Ethereum Layer-2 network, Optimism, Coinbase turned what was meant to be a security exercise into a competition, with the winner bagging around $100,000.

Also Read: Coinbase slams SEC in new filing, argues regulator has no jurisdiction over cryptocurrencies on the exchange

Coinbase fights negative publicity

Coinbase Exchange is the subject of a class action lawsuit initiated by the US Securities and Exchange Commission (SEC). The regulator alleged that the platform operates as an unregistered security exchange. The negative publicity impacted the platform’s stocks while slashing down 11.8% of CEO Brian Armstrong’s networth, Bloomberg’s Billionaires Index, and Forbes data shows.

With a particular focus on Coinbase stocks and volume outflows recorded after news of the regulator attack, Coinbase cannot take any more blows. This level of vigilance has inspired double efforts in its new product release with the Ethereum Layer-2 network, Optimism.

Coinbase, Optimism prepare for Base mainnet release with a deep security probe

Coinbase joined hands with Optimism for the Base, an L2 network expected to reduce transaction costs while delivering greater efficiency. To do this, Base will process transactions separately and give feedback to the network taking oversight.

Compelled to steer clear of any issues, Coinbase incentivized the Code4rena security team with a $100,000 USDC reward for any significant vulnerabilities in the network. Remarkably, the team, composed of over 100 experts, found nothing after a 14-day deep dive into what seemed like an audit of the network’s architecture.

Citing Coinbase in an official blog:

We [...] are happy to report there were no significant vulnerabilities discovered.

The team spanned through the Base network’s smart contracts and bridges, among other areas, yet no one won the prize money. Nevertheless, several minor issues were identified, which the exchange has committed to address.

Due diligence is key, especially during a time dominated by bad actors looking to take advantage of system vulnerabilities. While Coinbase must have spent a lot bringing in the team of experts, chances are that the investment in the security will pay back good returns as traders and investors would fancy interacting with a platform where security is a crucial consideration.

The dramatic security investigation is expected to bolster the platform’s standing among centralized exchanges, giving Coinbase an edge over its industry peer and the largest cryptocurrency exchange by trading volume, Binance.

Notably, Binance continues to suffer regulatory woes, with the latest being a directive to cease operations in Belgium over allegations of law violations. The exchange has also lost its banking partner in Europe, Paysafe Payments Solution Limited, after it indicated plans to stop supporting the exchange beginning September 25.

Data from Nasdaq shows that Coinbase (COIN) stocks are up 2.37% in the last 24 hours, and a whopping 30% in the last week. 

COIN 1-Day Chart

Coinbase and Optimism's Base product will go live with a mainnet launch sometime in 2023.

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