Coinbase Announces Base🔵, an Ethereum L2 Powered by Optimism

Bagel Station we have a special breaking episode for you today wanted to get this out to the nation because the news is fresh as of this morning coinbase is launching a layer two chain called base that is the news that just hit the headlines and we've got the scoop David who do we have on what's the significance of this we're bringing on Jessie Pollock who is the protocol specialist protocol lead at coinbase who uh I've titled him as the guy who's responsible for growing coinbase's D5 mullet which is getting a

lot longer with this news coinbase launching its own specific layer 2 for the coinbase ecosystem it is built on top of the op stack and is going to be the place that coinbase deposits its millions and millions of users into the world of on-chain activity without having to push them into the high gas fees low latency speed of the ethereum layer one I think this is Ryan the biggest news I can think of since a long time this is massive news coinbase is building its own chain of course binance

has binance smart chain uh now coinbase has base uh so what are the decision points that went into making this base chain uh what did coinbase really consider when they decided to do this how long has this been in production why did they choose to build on optimisms op stack what is base going to look like is is it going to be permissioned is it going to be open how like what what are you going to be able to do there there's so many questions and we ask Jesse all of these questions in this coming episode yeah I want the bankless nation to realize the significance of this

event because I feel like um David for you and I the reason it's so exciting is because it validates a lot of the core bankless thesis one all at once this uses ethereum as the settlement layer okay and a layer two means it settles to ethereum this is something that that we predicted this is definitely the defy mullet thesis these crypto companies even crypto exchanges will start to build on D5 protocols that are credibly neutral rather than uh cussing everything themselves this is also the way out of all of the 2022 traps that we

saw with uh exchanges running away with people's money SPF and you know the block files and the Celsius and all of these things this is a completely auditable open transparent chain I I could go on David but the protocol call sync thesis didn't even mention that all of the bank list thesis culminating in fact we explicitly called um it we explicitly made the call that a major exchange would launch a layer two at some point in time that we predicted that to happen in 2022 turns out we were just a few months late it's happening in

2023. uh great validation really a cool direction that this is going in the first publicly traded us company to launch a major effort on a chain all this boom boom boom a lot of check marks here and this is why this is such exciting news today yeah so we won't hold anything back let's get right into this episode with Jesse before we get in there though we have to make a note that Ryan and I are advisors to the optimism project which is extremely relevant to this story because bass chain like I said bass is built on the op stack and

Jesse and the op team have been working very closely with each other so this is very relevant to the uh to the optimism team we are talking with the optimism team on Friday at 10 A.M eastern time for an additional live stream to get at their perspective as well because that is the other half of the story but first we're talking to Jesse from coinbase we're going to get to Jesse from coinbase to talk about all of this amazing news coinbase launching in layer two man I can't say it I could say this other for the rest of the day coinbase launcher Layer Two that's pretty damn cool uh so we're gonna get to that

conversation with Jesse but first I want to talk about some of these fantastic sponsors that make this show possible especially Kraken who is our strategic sponsor for 2023 if you don't have an account with them you should get one started right now so go there while you listen to the Kraken ad which is going to start right now Kraken has been a leader in the crypto industry for the last 12 years dedicated to accelerating the global adoption of crypto Kraken puts an emphasis on security transparency and client support which is why over 9 million clients have come to love kraken's products whether you're a beginner or a pro the Kraken ux is

simple intuitive and frictionless making the kraken app a great place for all to get involved and learn about crypto for those with experience the redesigned Kraken Pro app and web experience is completely customizable to your trading needs integrating key trading features into one seamless interface Kraken has a 24 7 365 client support team that is globally recognized Kraken support is available Wherever Whenever you need them by phone chat or email and for all of you nfters out there the brand new Kraken nft beta platform gives you the

best nft trading experience possible Rarity rankings no gas fees and the ability to buy an nft straight with cash does your crypto exchange prioritize its customers the way that Kraken does and if not sign up with Kraken at kraken.com bankless arbitrim1 is pioneering the world of secure ethereum scalability and is continuing to accelerate the web 3 landscape hundreds of projects have already deployed on arbitrum 1 producing flourishing defy and nft ecosystems with a recent addition of arbitrum Nova gaming and social dapps like Reddit are

also now calling Arboretum home both arbitrim1 and Nova leverage the security and decentralization of ethereum and provide a builder experience that's intuitive familiar and fully evm compatible on arbitrum both Builders and users will experience faster transaction speeds with significantly lower gas fees with arboretum's recent migration to orbital Nitro it's also now 10 times faster than before visit arboretum.io where you can join the community dive into the developer docs Bridge your assets and start building your first app with arbitrum experience web 3

development the way it was meant to be secure fast cheap and friction free hey bankless Nation if you're listening to this it's because you're on the free Bank list RSS feed did you know that there is an ad-free version of Bank list that comes with the bankless premium subscription no ads just straight to the content but that's just one of many things that a premium subscription gets you there's also the token report a monthly bullish bearish neutrals report on the hottest tokens of the month and the regular updates from the token report go into the token Bible your first stop shop for every token worth

investigating in crypto bankless premium also gets you a 30 discount to the permissionless conference which means it basically just pays for itself there's also the airdrop guide to make sure you don't miss A Drop in 2023 but really the best part about bankless premium is hanging out with me Ryan and the rest of the bankless team in the Inner Circle Discord only for premium members want the alpha check out Ben the analyst Degen pit where you can ask him questions about the token report got a question I've got my own q a room for any questions that you might have at bank list we have huge things planned

for 2023 including a new website with login with your ethereum address capabilities and we're super excited to ship what we are calling Bank list 2.0 soon TM so if you want extra help exploring the frontier subscribe to bankless premium it's under 50 cents a day and provides a wealth of knowledge and support on your journey West I'll see you in the Discord bankless Nation I want to introduce you to Jesse Pollock who is the head of protocols and lead of bass at coinbase Jesse is leading coinbase's efforts to

build support and integrate protocols into coinbases products so basically if you put this into a bankless speak Ryan it's Jesse's job to grow coinbase's defy mullet and he's got some exciting new developments on this front of coinbase's D5 mullet Jesse welcome to bankless thanks thanks for having me I'm super excited to be here hello uh Community are you some are you are do you have a mullet right now I can't see the back of your head you know okay it's coming in

it's going in you shape it so there is some massive news out of coinbase this morning uh Thursday morning 9 A.M the news just drops that coinbase has base which is a layer two on ethereum Jesse what is this coinbase has its own chain is that what's going on yeah you're exactly right um you know our mission is to create the global crypto economy we believe that crypto economy is on chain and over the last many years we've been trying to figure out how do we bring more of our

business on chain and how to enable more developers to build useful applications um and that's what base is base is a platform that we we hope is gonna make it really easy for developers to build dapps make it really easy for those dapps to reach massive scale through the 108 million verified users and 80 plus billion dollars of assets in the ecosystem and Shepard in the next era of the crypto economy that gets us to billions of users using crypto every day well we love all of those words but I really want to dive into like what is

base so it's just like a new Layer Two that's joining the ranks of optimism arbitrum a polygon how is how is base similar how is it different like help us get the lay of the land here yeah so base is an ethereum Layer Two um there's no token we're using eth as the native gas token and we're actually building based on the op stack which is an open source toolkit for building chains built by optimism we've been working really closely with optimism on this for the last while we're actually joining as the second core developer of

the op stack and we're going to help make that platform freely available open source and as scalable secure and decentralized as possible in the years ahead so this is a huge win for the op stack I've always been bullish of uh the the op Stacks design philosophy which is to do exactly this which is to allow teams easier times to for fork the op stack code base and build up their own layer too so it sounds like coinbase is taking that advantage that possibility and running with it but how is base going to

be different so like when we're spinning up a new generalized Layer Two like how is it how is it going to be different from optimism and arbitrum and why what will people find on base that they won't be able to find anywhere else yeah I think our thesis is that um one of the things that coinbase really uniquely has is we have this whole Suite of products both on the developer side and on the consumer side coinbase wallet uh coinbase and the DAP wallet there a bunch of developer infrastructure and I think we believe that if we bring those things together with bass kind of at the center of it

it's going to make it easier for two things one is it's going to make it easier so that when developers build applications they can actually then connect those applications to mainstream audiences uh and that's kind of the base offering for developers and then on the user side I think we've seen that it's still too hard to actually use crypto and we're going to be able to integrate base into our products we're gonna be able to make it work by default so that users are increasingly less nervous about am I picking the right chain am I paying the right gas fees and instead

they're just able to access the applications that they actually want and I think that like next phase where instead of us being very very chain Centric we start to be more applications Centric and users start to say hey am I getting the actual value that I want am I finding useful things that's that's the kind of next error that we want to be separating in this is kind of cool because this is somewhat of a coinbase's uh Legacy right and making making uh crypto easy and bringing it to uh to mainstream and there was a time when buying a Bitcoin was an incredibly

difficult experience and I I recall very distinctly coinbase helping to to make that process a little bit easier one question I have about this base layer too so um it's an evm it's so is evm compatible how open is it so is it open in the same way that an optimism or an arbitrum are open in that any third party can come develop an application on top of it or is there some kind of permission layer is coinbase doing some gatekeeping around this is there like an Apple App

Store type model tell us about the openness of this ecosystem yeah and and we you know just kind of as a first principle really believe in decentralization at coinbase uh we believe that that's the thing that enables uh the crypto economy to be open accessible to everyone globally and so we're continuing to upload those values with base the uh Layer Two will be permissionless um anyone's going to be able to deploy on it and then on top of that kind of permissionless platform like on top of the permissionless platform of optimism

or ethereum we're going to see uh coinbase and others build infrastructure that makes it easier for developers to do things that they want to do so for instance a good example of this is identity I could imagine us providing infrastructure so developers could more easily recognize who people are recognize that they're humans recognize uh that they live in a certain jurisdiction but all of that's going to be kind of at this application layer and the actual infrastructure layer like ethereum like optimism is going to remain open uh and and Built For This

global economy that were creating in the crypto economy so Jesse uh I remember over a year ago it was October in 2021 we had Brian Armstrong on on the podcast the bankless podcast and uh we asked him the question of when is coinbase going to launch its own chain and so we brought up the you know the comparison of uh at the time FTX was going down the Solana path no FDX is no longer a bit like there so I mean like I guess that's gone uh binance was certainly

going down its own chain path with what was called the binance chain now the BNB chain we asked Brian hey when coinbase chain when is that going to happen and he seemed to indicate to to us at the time that the timing wasn't right but that when coinbase does enter the market for a chain and and kind of uh throw their support behind some sort of a chain um the values of crypto would be very important values like decentralization values like openness values like like permissionlessness

um Brian said like when the technology is ready and he exactly see a path forward that allowed coinbase to have crypto values in a way that could also allow them to create their own chain so I imagine like Brian and the team over at coinbase now saw that that day had come what what is different between I guess a year ago when we asked that question and now this big splash of coinbase launching its own end yeah and we've actually looked at like very seriously launching a chain twice before

once in 2020 and once in 2018. um I think both times the the the thing that we've ultimately landed on why we said no was that um we felt like there was too much of a risk of It kind of siloing coinbase off from the broader crypto economy um you know in an alternative L1 or some alternate ecosystem that wouldn't be deeply plugged into all of the incredible building that was already happening in the community and I think the thing that really gets us excited and that really unlocked the potential

for us to be doing base is that for the first time we felt like we could do this in a way that was integrated into the crypto economy and that upheld those values and so that's as an ethereum layer too we're deeply integrated into ethereum which is the largest crypto ecosystem in the world the most value of most assets the most developers um we're going to be plugged into that from day one and then also from a technology perspective we're building on the op stack which is open source MIT licensed freely available and adhering

to the values that we've seen uh kind of upheld in the ethereum software layer where those kind of values are freely available in open source are super defended and I think for us the feeling was if we can both create a native home for us in this new on-chain economy and take our resources and put them into open source uh decentralized tooling that everyone can benefit from whether they want to build on base or they want to Fork that code base and build somewhere else and we can have that

deeply interconnected into ethereum and interoperable with all these other chains whether it's Solana or Avalanche or polygon that's us living our values that's us making coinbase not the place not a island but a part of the crypto economy and the internal value that we say over and over again about this is a bridge not an island we want base to be the way that we take users who are off chain and bring them on chain and they might start on base but then we want them to be so deeply interconnected into

ethereum L1 and the other their l2s and the other l1s that they can go anywhere and our products are going to continue supporting Every Chain we're going to continue investing in those bridges and we're going to continue working to bring users into the crypto economy and let them go wherever they you know find the value that they're looking for just yeah I really really like that answer and I want to unpack that a little bit because I think there's a lot of layers to it layers to it it's like that one uh and so like this really is emblematic of the ethereum layer 2 design philosophy and what I've personally enjoyed about the

design strategy of the layer 2 roadmap which is that if you decide to build a layer 2 on ethereum you are also synergistically plugged into all other layer twos on ethereum as well and so this is answering the problem the ethereum's layer 2 roadmap is answering the problem of coinbase would like a chain but it doesn't want to create its own Silo it wants to be a part of the broader Global crypto networks and the layer 2 design philosophy does that but that's just one layer of of this it's also specifically the op P stack also

does that and so the replicatability of the op stack and the reproducibility of optimism's op stack allows for the base chain to have more synergies with other layer twos because you not neither did you Fork off and create your own layer one but you also didn't Fork off and create your own layer too you also are building on optimism's op stack which makes you synergistic with the optimism uh network network effects and so like this Synergy with the broader crypto landscape at least with the ethereum

layer 2 landscape I think is really really strong and so I I just like to say thank you and I'm proud of I'm proud of coinbase and thank you for also seeing the same synergistic Vision between chains that I see in ethereum's Layer Two philosophy now am I just espousing my own biases or is this also what you see Jesse and what coinbase use as well no you're spot on I think that you know two and a half years ago when the ethereum community shifted there the road map from being kind of this

execution sharding at layer one into the roll-up Centric scaling roadmap I think this is exactly the vision it's that we're going to have many Roll-Ups that work together to scale ethereum and they're going to be open source they're going to be freely available and they're going to work really well together and that's exactly what we want and interestingly you know one of the the ways we actually started building a relationship with optimism was we started working with them almost a little more than a year ago on eip4844 which is a part of this roadmap for

scaling ethereum and I think what we found was that the the the context of working and I guess before I go into this erp4 a44 is also called Proto dank sharding it's going to create a new form of data availability on ethereum that's going to lower cost of Roll-Ups like base and optimism and Arboretum by 10x and likely even more in the years ahead um and I think what we found in working on EIP 4844 with optimism the other client teams was that context of like writing code and contributing to this

platform was such a powerful context for building that trust for building the vision uh the shared alignment around what this future looks like and for doubling down on those values of decentralization Open Source interoperability and interconnection into the broader crypto economy so Jesse coinbase has really waited for the technology to get there and the technology is here so you guys are doing this now um you're not first to the party though when it when it comes to kind of other exchange competitors let's

say binance has been doing this for a few years now do you think coinbase has kind of a second mover Advantage here whereas like the BNB chain not even the right Benchmark like what is kind of the uh the um the success metric and can you catch up to some of these uh chains that have been in existence for a while in particular some of the exchange chains yeah I mean I I think in the grand scheme of things we're at Day Zero of the growth of the crypto economy you know even if you add up all of the transacting addresses on every chain in

the world it's still like less than 10 million transacting addresses probably less than a few million real humans who are transacting on chain every month a few million every month there are billions of people in the world and over the next five to ten years we're going to get all of those billions of people transacting on chain that's the future we're headed towards and so I think first and foremost we just believe we're at day zero on this and there's so much growth and so much opportunity for everyone to grow the pie and work

together and growing that pie um in terms of binance smart chain in particular I I think that binance has done a really admirable job like pushing the limits of what's possible on chain you look at the activity that's driven on that platform there's probably more real user activity on chain through binance smart chain than any other environment kind of in the world and so I think as we look to that there's a lot there's a lot to like there's a lot to admire I also think that when we think about how we want coinbase and and base to operate it is this value of kind of

interconnection into the the crypto economy contribution back to the public goods that are that are kind of supporting this work that's why we're building as an ethereum layer too not as no alternative L1 that's why we're committing as a core contributor to the op stack um not just taking the technology and going doing our own thing with it that's why we've been working over the last year to ship code in ethereum to scale ethereum for everyone not just coinbase but every L2 and everyone in the world I mean I think that uh prioritization on

the decentralization on the interoperability and on the the open source Foundation that we're building together is what's going to make bass really stand out as a contribution to the broader ecosystem that's that that you just pulled out that we probably have just a couple million maybe a few million users who have ever gone on chain that is a subset of the total amount of coinbase users so how many coinbase users are there right now like in total yeah I think the the number that we shared uh yesterday in our earnings is about 108 million verified users

um as of the end of last year um and so most of those users are using our custodial products um where we have pooled wallets where we're managing their crypto for them whether it's Bitcoin or ethereum or any of the other hundreds of assets that coinbase supports um and we think that's a really great first step for people you know you have to start somewhere and I think the thing that we've seen over the last few years as we've built products like usdc and coinbase wallet and CBE is there's so

much opportunity for the emergence of really powerful applications that are on chain native and that's where we increasingly want to be bringing our customers with coinbase not just serving as an exchange and a custodian but really the gateway to web3 where users are going to get access to these apps that give them like real world value every day yeah so Jesse I'm just kind of running the number so uh just a few million people on chain right and so like this is the population of like a reasonably sized U.S city that that's all that we have of people going

bankless for this entire Movement we only have a few million right now but coinbase has 108 million is that what you said registered users not even verify verified users who have gone through the whole verification you know done their identity verification we're just looking at like your platform one to two percent that have converted to full on-chain users right and so I'm wondering if like success for coinbase looks like well you get that to like 10 you get that to 20 you get that to 30 imagine if you had 30 conversion from a

coinbase verified user to an on-chain user uh going bankless well I mean that would massively like we're just talking about 10xing the on-chain ecosystem I'm not going to say overnight because that will take some time but but coinbase has traditionally been a gateway to crypto and can become this gateway to layer 2 into on-chain experience now that the bandwidth is ready the transaction fees are cheap is that the idea here 100 we believe that on chain is the next online and that over the next five years

we're gonna onboard billions of users and that is our goal onboard billions of users uh help them obviously come on to base but also help them go to other layer twos help them go to ethereum help them go to anywhere they want in the broader crypto economy to access the you know good services and products that they're looking to oh so when you first uh said that bass was going to be a fully open fully permissionless new Layer Two on the scene my first reaction was like well how are they gonna compete with all the other layer twos like like optimism

arbitrum like polygon already have like a flourishing app app layer and bass is showing up for like like you're a year or two behind like how are they going to compete but then but then like unpacking this is like oh coinbase has all of the people like it's got all of the users and like that's what like Arbitron optimized us they'd love all of those users and so my question to you Jesse is how is coinbase users how are they going to be presented with bass like is this going to be is bass going to be the like the first on-train experience you think

for many coinbase users and coinbase maybe bass is like this safe playground before you venture out into the wild unknown of crypto world first just start with bass and and so like coinbase will funnel their users into base first and then perhaps you can go on to the ethereum only one overall like how how will coinbase receive coinbase's users yeah so I think you know uh like Ryan said it's going to be a process where it's going to take time to integrate based into all of our products and to bring all of our users on chain I think

your head's going to exactly the right place you know what we're seeing is anytime you're helping user come on chain um you know you have to present them with options or help them make decisions for instance I want to bring my first five dollars of usdc on chain where do I do that um and I think right now a lot of the experiences are like well here's 10 places you can do that and the users are like okay well like yeah like how do I make those choices and I think we want to continue making sure those choices are available like

that's so core to the ethos of crypto that there's no lock-in that's open and for the 99 of users who are just looking to use the applications whether it's payments or borrowing or lending or trading or games or social we want to take away the fear and uncertainty of I have to pick between 10 different infrastructure providers and make it so they have a default experience that works out of the box for them puts them on chain where they can go everywhere else so I think that's that's like you know the first big place that you'll see uh based starting to get integrated into

coinbase product Suite I think the second place and this is like a broader thesis that that uh I haven't that we have which is that I think over the last few years as we've kind of seen the rise of tokens um we've seen what amounts to a lot of like very inefficient um ad spend or user acquisition where people are spending huge amounts on token airdrops to acquire user a small amount of users um to use their products and what that says to me is like there's a lot of missing infrastructure for helping users

figure out what the valuable products are that are going to help them you know live their lives better um and I think that's another thing that we're really excited about is basically how can we build tools both from an organic perspective but also from a paid or you know I yeah like paid perspective to give developers access to those users to put you on the front page that users are interacting with and then help you find the users that need your product and bring them to your application and one mental model that I really use for

this is if you look at pretty much any Financial Service that exists outside of crypto whether it's a credit card or a bank account all of those things users change primarily as a result of a financial incentive you get a credit card bonus of points you get a bank statement bonus that's usually motivated for the vast majority of consumers by some Financial incentive to change their behavior from bank one to bank two from credit card one to credit card two and right now I think we're missing a lot of the infrastructure to do that in an

efficient uh and user-friendly way and so I think one of the things we're excited about is how do we help the industry build a lot of that infrastructure So eventually we can go to all 108 million years and say hey here's an incentive to come on chain because on chain is actually the best financial experience you can have and not only are you going to get the benefit of doing that from just being there we're willing to pay you to move because it's going to be so much better for your day-to-day and I think that connection of bringing in the incentives

and helping users make that change is going to be really powerful I I totally see that vision and I'm wondering about if we can take the uh perspective of a coin based uh shareholder uh how does base chain uh impacts the value of coin or just like where's the value proposition here like what's the value proposition for the base layer two for the value of coinbase as a whole yeah um I think what we've seen over the last 10 years is that the key thing that

coinbase offers consumers is um being an easy and trusted interface to access crypto and I think what we've also seen is that for the last 10 years mostly what users are using that interface to do is to speculate or to trade um and that has been valuable for coinbase because we provide an easy trusted interface to trade and then we generate revenue on that from taking fees I think our thesis is that um over the next five years there can be many many more things that needed easy

trusted interface and if coinbase can continue to provide that easy trust in the interface there can be many many more ways for coinbase to generate revenue from making it easy and trusted for users to do those things and the problem that we've seen is basically there just aren't enough useful things to do in crypto yet and so our bet with base is if we create a platform that makes it really easy for developers to build the next generation of applications that make crypto super freaking useful then that's going to create the opportunity for coinbase to