Outstanding loans on Base reached an unprecedented $2.75 billion on September 10, marking a significant milestone for Coinbase's Layer 2 network. The record reflects accelerating lending activity that began in late August and underscores the rapid expansion of credit markets on Base.
Morpho and Aave dominate Base's lending landscape. Morpho holds approximately $3.94 billion in total value locked with $1.93 billion in active loans, while Aave V3 follows with around $513 million in total value locked and $354 million in active loans. Together, these two protocols account for the vast majority of Base's lending activity.
Coinbase's Role in Expansion
Coinbase has amplified lending adoption by integrating a crypto-backed loan product powered by Morpho directly into its platform. The service allows qualifying US customers to borrow USDC against Bitcoin and other crypto assets, with rates advertised as low as 5% and a maximum borrowing limit of $5 million in USDC for Bitcoin collateral.
This integration abstracts away the complexity of decentralized protocols, presenting lending as a conventional financial transaction while leveraging Morpho's on-chain infrastructure. The arrangement positions Coinbase as a significant distribution channel directing borrowing demand to Morpho.
Broader Market Context
Base lending growth reflects wider institutional interest in decentralized finance. Galaxy Research estimated that Aave and Morpho accounted for 53.1% of total DeFi lending share across all networks in July, with Aave holding $13.9 billion in total value locked and Morpho $7.3 billion.
Morpho has grown rapidly, raising $175 million in June and reaching $5 billion in outstanding loans across all networks.
Concentration and Risk
The concentration of lending among a small number of protocols and collateral markets presents potential risks. Base lending increasingly depends on Morpho and Aave, with Coinbase serving as a major distribution channel. While this concentration can improve liquidity and capital efficiency, it heightens the importance of smart-contract security, oracle reliability, and collateral-risk controls.
Analysis of Base activity found that approximately 50% of adjusted USDC volume in January was driven by a small number of DeFi contracts, and some Morpho transactions involved flash loans that are borrowed and repaid within the same transaction, indicating that high volume does not necessarily reflect sustained economic activity.
