In a recent discussion about X, Ripple’s CTO David Schwartz and Coinbase’s CLO Paul Grewal shared insights on a common misconception surrounding Coinbase’s layer-2 platform, Base.
Grewal highlighted that framing sequencers on L2 platforms like Base as exchanges is misleading. These sequencers function as the blockchain’s “air traffic control,” organizing unordered transactions rather than operating as traditional marketplaces.
To clarify this misconception, Grewal referenced the SEC’s definition of an exchange, emphasizing that L2 platforms are general-purpose blockchains that serve as infrastructure. They process messages as code and batch transactions, leaving formal order and interaction rules to smart contracts.
Grewal likened L2 platforms to off-chain infrastructures like AWS, where code provided by developers, including payments and exchanges, is run deterministically. He emphasized that labeling L2 sequencers as exchanges might lead to fear, uncertainty, and doubt (FUD) while overlooking their crucial role in scaling.
Ripple CTO’s perspective
Schwartz supported Grewal’s argument by comparing sequencers to CPUs or cloud hosting, stating that they simply perform mathematical operations in a predefined manner without imposing additional rules on processed data.
Responding to a query from a user, Schwartz highlighted that neither CPUs nor Amazon cloud hosting conduct anti-money laundering (AML) or know your customer (KYC) checks on payment endpoints or trades they process.
In a recent update, Ripple shared insights on the institutional DeFi roadmap for the XRP Ledger, which achieved significant milestones with $1 billion monthly stablecoin volume and top-10 RWA activity in the institutional DeFi space.
