In a recent discussion on X, Ripple’s Chief Technology Officer, David Schwartz, shared his thoughts on a common misconception surrounding Coinbase’s layer-2 platform, Base.
During the discussion, Coinbase’s Chief Legal Officer, Paul Grewal, highlighted a common misunderstanding about the Base platform. Grewal pointed out that labeling sequencers on layer-2 platforms like Base as exchanges is misleading, as their function is more akin to that of an “air traffic control” for the blockchain, organizing unordered transactions.
To clarify this misconception, Grewal referenced the Securities and Exchange Commission’s definition of an exchange, which is a marketplace for buyers and sellers of securities. He explained that layer-2 platforms are essentially general-purpose blockchains serving as infrastructure, processing messages as code and batching transactions while leaving formal order rules to smart contracts and frontends.
Grewal further explained his point by likening layer-2 infrastructure to off-chain services like AWS. Just as AWS runs developers’ code for various functionalities, including exchanges, Base operates deterministically. Grewal emphasized that running an exchange on AWS does not make AWS an exchange.
Ripple CTO’s Perspective
Grewal underscored the significance of L2 sequencers in enabling scalable and secure on-chain transactions to enhance Ethereum’s scalability and support diverse applications in a global economy. He warned against mislabeling L2 sequencers, which could spread fear, uncertainty, and doubt (FUD) and undermine their crucial role in scaling.
No CPU does AML. Amazon cloud hosting doesn’t do any KYC or AML on the endpoints of payments or trades their systems process.
— David ‘JoelKatz’ Schwartz (@JoelKatz) September 23, 2025
Ripple’s David Schwartz chimed in on the conversation, reinforcing Grewal’s points by likening sequencers to CPUs or cloud hosting that perform specified tasks without imposing additional rules on processed data.
Responding to a user on X, Schwartz reiterated, “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 update, Ripple shared insights on the institutional DeFi roadmap for the XRP Ledger, highlighting its significant milestones in institutional DeFi with $1 billion monthly stablecoin volume and top-10 RWA activity.