Decentralized Governance and Security Insights with Jesse Pollak

Transcript

we need better identity uh infrastructure on chain so people actually know who other people are on chain and developers can build kind of world- class applications around the the kind of user identity that that exists on [Music] chain hello and welcome to the protocol podcast I'm Brad count here with my co-hosts Margot niker and Sam Kessler excited to dive into Today's Show with the latest news and developments in technology behind crypto and blockchains first please do not forget to subscribe to our Weekly Newsletter the protocol on

coindesk.com uh and now let's get right into it we have a pretty incredible guest today Jesse Pollock uh welcome Jesse he is the creator of Base which is coinbase is Layer Two um we spoke with Jesse last year when you launched bass uh and that was a pretty cool interview when you're just getting going we're gonna just get an update from you on how everything's going at Bas but real quick you know eth Denver for the ethereum's out there Margot and Sam are both headed out there uh Jesse you're gonna be there too right yeah I'll be there and you know we we just passed the oneyear anniversary of when we announced base

the world uh we launched it the the Thursday before eth Denver last year and then we were on the ground in eth Denver last year and it really felt like kind of a coming out party for us um in terms of getting to tell people what we were doing and kind of the vision that we had for the future and it's so cool to be here now a year later and to be you know getting ready to head to eth Denver tomorrow where I'll be there all week and feel like we've really accomplished a lot of our initial Vision in the first year and obviously we're just getting started but I'm excited to see everyone in person and um get to to have a bunch of conversations about how we continue to bring the world on chain yeah yeah well it's so I mean it's fascinating

just one year you know it seems like we've been hearing about bass for you know quite a while now so that is pretty incredible kind of reality check to hear that that's only been a year that was a test net I mean it's only been six months since we actually went to mainnet so that's amazing yeah we've done a lot in a little little amount of time yeah that is really incredible well okay so let's just dive in there a little bit you know six months in um for for mainnet uh you know what are some of the the lessons that you've learned or you know what are some of the things that that you've taken away from the those first several months uhing this yeah you know when we started working on base um

about a year and a half ago two years ago I think we really said that there were three big challenges that we needed to solve as an industry if we wanted to um kind of see the acceleration of consumer use cases coming on chain and those were lower fees so making it so that it was actually cheap to transact on chain and I think Bas has made a huge dent on that you know we went from ethereum where the fees are often dollars or tens of dollars to now the fees are you know in tens of cents we're about to launch EIP 4844 which is an upgrade to ethereum that's happening on March 14th Bas will be there on day one using the new kind of blob space that's created and we're expecting that to have a really dramatic uh decrease in fees as well and so um you know I think in the

last year we've made a tonon of progress on fees that was the first big kind of Roadblock we felt like we needed to solve the second two um the first is we need better wallets and I'm excited to talk a little bit about that today we still feel like there's a lot of challenges with um just the consumer experience from a wallet perspective where it's too hard it's too scary um there's too much complexity for people to actually use these apps we need to solve that now say the third one is we need better identity uh infrastructure on chain so people actually know who other people are on chain and developers can build kind of world class applications around the the kind of user identity that that exists on chain and so I I feel like we've made a ton of progress on the fee one um you know this

eth Denver we're we're really focused on on the wallet one uh and and figuring out how do we make smart wallets the default which is a big kind of strategic pillar for us this year and then we're also making a ton of progress on the identity one with things like coinbase verifications uh that let you kind of get full coinbase identity on chain we launched that last fall but then also the rise of um kind of other forms of identity on chain for instance the foraster social graph which I think is enabling all these new use cases like frames um that are predominantly built on base and so you know we really looked about a year and a half ago we said we need lower fees we need better wallets we need better identity and I feel like in the last six months we've dramatically decreased fees and we're

about to have another order of magnitude decrease we've made a ton of progress on wallets and I think a lot of the stuff we're going to talk about e Denver is is um going to push that even further and we've come a long way on identity and so I think all of the pieces are now finally here and we're starting to see this kind of uh creation and Adoption of real world utility on chain that's going to bring the whole world on chain over the next few years maybe we can shift gears a little bit and talk about what some of those use cases are so one of the really big things that happened on Bas that fueled a lot of your growth in the beginning was friendtech which was this social media platform that was kind of Novel allowed you kind of sell to to

se buy and sell access to like a kind of Twitter like or X like version of a of a social network again gated behind tokens but anyway um frch was huge and then it kind of fell um you know off off a cliff um in terms of usage and I'm curious to hear whether you think friend Tech you know in so far as it did contribute to your growth do you think that that kind of lack of sustained adoption um is something that continues to have an impact on bass and do you think that the you know friend Tech or any other use case is going to be you know the quote unquote killer app for for Bas like what do you think it's going to be yeah it's a great question um and you know I'm a huge fan of the

friendtech team and the friendtech product user and and longtime follower the the team you know they they they built a number of viral apps before frch um and and that was kind of how I got to know them and you know the way I look at frch is they're building a consumer social product and building consumer social products is a really really hard challenge you know there there's a reason why there aren't that many new consumer social products over the last decade um uh it's because it's hard and because it requires kind of new breakthroughs in the user experience and and the kind of network creation flows um in order to unlock that sort of viral growth that that that they're looking for that many others are and the way I look at frch is they launched a V1 it was incredibly successful and now it's

just time to iterate and keep growing and they're working towards a V2 launch I think it's coming in you know March or April we've been supporting them on that and I'm really excited to see where they take the product and in general I'd say that friend tech for me um was really at the edge of showing what's possible on chain you know they did the embedded wallets really for the first time at scale I think that that opened up a whole design space that people hadn't really experienced before and that led to all of this Innovation um they were doing obviously onchain social we've continued to see the rise of a ton of really incredible onchain social including fch including farcaster including other things like that um and I I think they kind of kicked off alongside base this rise of consumer on Shain and I think 2024 is really going

to be the year consumer products coming on chain and I I think fex gonna be at the center of it I think forecaster is GNA be at the center of it and I think Bas is going to be at the center of it and so when I think about the impact that fentech had on on bass and in general this has had on bases I think it it's kind of pushed us to figure out okay what do we need to do to to ensure that we're providing best-in-class tools for developers to really easily build these consumer experiences I think one of the ways this kind of has showed up in a results perspective is foraster which is a you know onchain social network you know similar to Twitter or X um they launched this thing called frames about six weeks ago it basically lets you have mini apps in the

forecaster feed so with one click you can Min an nft or buy you know cookies whatever it is and when we saw that we immediately said hey this is exactly the kind of thing that we want to see people building on bass and the team snapped into action and now the vast majority of forecaster frames are built on Bas uh you know I think 60 70% of all of the transactions happening across the forecaster Network are on base right now up from 15% seven eight weeks ago and I think that's really indicative of this fact that we have said hey we want to make sure we're doing everything we possibly can to let people build this next generation of consumer experiences on base I want to follow up with what we were previously talking about um Bally I want to tap into the fact that you know

base is built on the op stack we've talked about this a bunch in the past about how they were the winner of of all the stacks you know who got coinbase um but also I I remember as well the fall we had talked a little bit about the pillars that as a result of this partnership with op the op optimism Foundation I guess um That Base would tap into the optimism Collective there are these pillars that you guys would follow I'm also curious and wonder wondering as part of this agreement is the optimism Foundation also allocating a bunch of op tokens to base um and if so how many yeah so we all this is public you know you can go and look at we wrote a big blog post on it in August I think when we when we brought the

mainten it live as we thought about kind of where we want to focus our energy from a technology perspective we we talked to kind of all of the different technology stacks and I think at the end of the day um we ended up working really closely with optimism um there were a bunch of reasons behind that the technology the team but I think one of the big ones was the the fact that they really have been pushing the limits on decentralization and decentralized governance and so as we thought about kind of base and bringing base to Market and we looked at what our strengths were I think for coinbase obviously scale distribution kind of the the rigor and and and uh impact that a large Fortune 500 company can make but it's it's still centralized business and I think when we thought about how do we complement that it felt

like optimism in the decentralized governance experience that they had was a really nice complement um kind of you know bring the scale and leverage of a large Fortune 500 uh combine it with someone who's kind of pushing the edge of what's possible on chain from a decentralized governance perspective you get a really powerful combination and so we actually started building on the op stack before we even had a deal like there was no you know deal that we made it was like oh we'll only build on the op stack if we get XYZ we actually started building on it uh we we launched the test net um we we made a ton of progress because we really like the team the technology and then kind of once we did that we worked with the optimism team to say okay we've contributed a bunch of value already because we've

been building on the op stack we've been contributing changes we've been uh helping out with governance um and we're going to contribute a ton more value over the next year what does this look like from a kind of fair value Exchange and where we ended up was um you know I think they're G they were earning out a grant of something like 117 million op tokens over six years um uh that allow us to participate in optimism governance uh and and kind of alongside that what we're doing is we're ensuring that base is a part of the super chain which is this kind of broader collection of chains that um is going to kind of come together to create kind of one Mega chain or super chain um that has shared governance that has uh kind of interoperability between it that has sh shared security practices um and and

those kind of combined things allow us to get that decentralization from optimism um but ensure that as we're kind of getting that decentralization participating in that decentralization uh Bas continues to have a voice so that when you know important governance things are are kind of coming up uh we have an opportunity to kind of share our perspective uh and so we've actually already started doing this so if you go into the optimism governance forums you can see the kind of mission and kind of value statement that we've shared about how we're going to be participating optimism governance uh we're going to be partially voting ourselves um we're also going to be delegating uh a significant portion of our uh tokens to other community members so that they can have more kind of voice in these systems um and we're going to be continuing to

learn and iterate and improve how we kind of participate because at the end of the day this is totally new you know you've never really had a company like coinbase participate in De centralized governance we want to make sure that we are both working really hard to show up uh our our best and also kind of acknowledging that this is just the beginning of what's going to be a long journey we want to be learning as much as possible I guess that also kind of ties into just like broadly you mentioned you know coinbase it's a big company um and this is one of the kind of force first fouras we've seen of a larger company like a coinbase engaging in a decentralized governance process another time that that happened was when you all kind of engaged in the debate around 4844 when it should be

prioritized and there was some controversy around then around whether you know coinbase before it had announced base was kind of trying to to weit into this governance discussion in order to push again I I'm characterizing things as you know in terms of the the debate around it but there was this idea that coinbase might have waited into this governs discussion to to force um you know the the community to take on an upgrade 4844 which we're going to talk about which is ultimately coming earlier than it might have otherwise in doing so it might have been an example of coinbase kind of as a large corporation trying to shift the governance apparatus and a way that might not have been in the best interests of the larger organization organization being ethereum

but was instead in its own interest I I gave like the kind of you know Devil's Advocate argument there but I wonder if you can talk a little bit about that and how you can engage in a more you know transparently and what your principles are around that yeah absolutely and you know we started working on for8 for for two years ago way before we started working on bass so I think we originally started working on it in March 2022 um and the reason why we started working on is because we we basically started building on chain products as a business and what we realized was okay we're going to build on ethereum layer too we hadn't picked an L2 at that point we hadn't decided to build one ourselves but even looking at the l2s then we were like this is too expensive like you

can't operate at coinbase scale on L2 if the fees are are kind of where they are right now um you can get started but you can't do Millions tens of millions hundreds of millions of people doing things and so in March 2022 again before we started building base um we said hey we're going to start allocating resources towards um uh fixing that and we started working on 4844 with the optimism Collective uh and we allocated you know some of our best engineers at the whole company to basically figure out okay how do we push this forward and what that led to is we wrote the first implementations of 444 and gu uh and prism and others um we I personally drove the um working group for for for for a year where I was running the

meetings every week or every other week taking notes um sharing it out and we did all that because at the end of the day regardless of whether we were working on base or not we felt like this was a critical upgrade in order to push uh the fees down uh and bring the use cases forward and I think when you look at the the kind of outcome that we've driven from that uh you know I think you'll see that probably without those contributions from coinbase we wouldn't be where we are today from a a kind of timeline perspective now there's been a huge amount of uh other folks contributing to making this happen but having that urgency from someone saying hey we really need this um uh I think was an important input and I think we did that in a really transparent way you

know I was at Devcon that year and talked about why is this important to coinbase um uh you know I I showed up at all that we showed up at all the ACD and ACD calls um talked about why is this important to coinbase why is this important for the broader industry it was at the core Dev retreats in uh core Dev retreat in Austria in January 2023 where again we talked about why is this important why was it important back then before you had an L2 like what was kind of the pitch in terms of this is important for coinbase because of XYZ because coinbase Builds on chain and all of our experience is on chain and when fees are higher on chain there's less experiences that we can build sure when you were working with the optimism Collective just curiously like were had

you already made a commitment to build using the op stack or did it just so happened that just so happened that ultimately you made that decision you know further down the line ultimately made that decision forther down the line we started working with optimism on 444 in in again like March 2022 at that point we weren't just thinking about building an L2 we we were thinking about building onchain apps um we worked for about six to nine months I think in in that world and then kind of like post Devcon basically after we'd had a bunch of conversations in Devcon and we we'd kind of gotten down further down that path we we decided hey maybe we should actually build this hell to and I think we wrote the first like real lines of code um at least for our production stuff um in like November December 2022

we need to go to the break real quick but uh we're getting going here so all right we'll be right back with Jesse Pollock of base calling all developers score a consensus 2024 developer pass for just $19 but Act Fast only a limited number of these passes are available you may have heard that consensus ain't for devs but here's why you're wrong consensus is the only place you can fully immerse yourself in a multi-chain environment and learn directly from 20 plus chains including arbitrum chain link salana and more enjoy 3 days of intensive learning with technical talks 40 plus expert speakers and 20 plus in-depth workshops

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innovation at consensus 2024 and we're back thank you so much um well you know just to switch it a little bit here you know um Jesse you're talking about denune and 4844 coming up and the fees lobs you know I I'm I'm curious you know can you give us your estimate of what is the magnitude of fees reduction and is that is that something that is like a pass through to customers or is that automatic to customers like how does that work good question and before I sh

that I I just want to say again I'm so excited about 4844 and so grateful for all the hard work of all of these different teams that have been coming together to make it happen and obviously Bas and coinbase have played a big role in it but so has arbitrum um so has optimism so have all of the core development teams like G and prism and others and um it's just been an incredible example I think of this decentralized collaboration model of ethereum actually working uh and actually being able to take an idea all the way through shipping execution pretty much on time um and so I'm just so impressed with um the whole ethereum core development process and I feel like through this process it's actually got a lot better and we're even better set up I think for the next year of execution

in terms of the the concrete impact of 4844 it's impossible to predict exactly and that's because what 4844 does is it actually creates a new market for something called blob space which is basically where rollups are going to start storing all of their data and so because that market doesn't exist um you can't say for certain okay here's exactly how it's going to be priced um it's going to use the same pricing mechanism uh EIP 1559 as the existing market so as there's more demand you'll see these spikes and then it'll level off it has this Target and Max um but exactly how much demand is going to be in the market it's hard to know because the rollups will kind of provide demand they're going to be consuming that Bob space but there's also other applications that could use that

theoretically for instance like inscriptions or other things that say hey we want to have a storage uh kind of data availability on ethereum let's try and use that now if you look at um existing rollup usage today and the targets I think it's like 4X less than the amount of data availability that's going to be available on target um and so if we stay in the same situation where rollups are consuming Forex less than the data availability that's provided by default by ethereum it's going to be really cheap really really cheap right like we're talking you know 90% reduction 95% reduction like massive reduction in costs but then as demand creeps back up it's going to find some

stable equilibrium and so the thing I've been kind of anchoring myself on is like be really excited if we got somewhere between like a two to 5x reduction um you know 5x reduction in average fee would be something like you know sub five cents um sub three cents for for the average fee across ethereum and and I mean across base and op stack and other chains um a 2X reduction would would be like you know in the 10 to to 15 cent range a 10x reduction would be you know pushing us closer to one cent and when the base team thinks about our Northstar it is Subs send transactions and so 444 is really just the start there's gonna be a ton of work that the base team and others are going to do over the next few years to increase that capacity of blob space so we can

continue to drive fees down and then do a bunch of other work on things like the evm to make it so we can increase gas limits and and and further drive down fees and just is that like what are your costs versus what the users see I mean is that question so today the vast majority of user costs are ethereum data availability I think it's like 90% um maybe even higher than 90% uh and so when the the fees come down from 4844 for data availability that will get pass through to the users the the way that the fee Market on base Works um is the same as the way the fee Market on ethereum works so basically as there's more demand for for Block space in the

form of transactions you'll and when the demand passes a certain threshold I think our Target is like 10 million or 15 million gas right now um maybe it's actually five million I don't know it's somewhere five to 10 million um but once fees uh once transactions start using up more than that Target per block um you basically have a 1559 mechanic where the fees start to get increased every block um and people have to pay that base fee and then they can add a priority fee on top and so the fees for Base today almost never have priority fees you know most people are setting their priority fees or their base fees to 0.1 uh gay which is very low um and that means that the vast majority of fee that users are paying is going to ethereum

and uh base is actually making very very little margin um in a future world you know day one where the fees come down all of that's going to get passed through to users um because there's going to be the same demand uh and so there's going to be the same lack of priority fees because we're not reaching that Target consistently but if you assume that there's some level of induced demand where now fees are way lower therefore we're gonna have way more transactions then you can imagine a world where we're gonna actually start to have more um kind of competition for Block space on base and that will push up Priority fees which could potentially increase the margin for for for base now I'd say just to kind of re anchor us on what our Northstar is our Northstar is to continue to drive down fees like we

don't think about base as a a revenue or profit driver we're not really interested in that what we're interested in is making it as cheap as possible for people to transact in a secure decentralized evm block space environment that we think is going to be the center of the onchain economy that's going to be a global economy that increases Innovation fre freedom and creativity one thing that optimism has always had is its fraud proofs it does not currently have a mechanism on the ethereum blockchain to Val valid what's going on base and you use that technology that might change um the the fault proofs might come soon can you talk about like when you think those are actually coming and how you communicate the current state of the technology to users with regards to security and decentralization yeah great question um

and you know we obviously communicate it uh ourselves but I think one of the really great things about ethereum is that there's tons and tons of resources for how people uh you know interact with and learn about this technology and one of my favorites is L2 beat uh and so you can go to L2 beat and you can look at by the way we we check it out all the L2 beat creators they're really really incredible um but you can go to L2 beat uh and you can look at kind of what stage is a rollup and generally that's our favorite way of communicating it to Everyday People because it's just easy to understand you have stage zero you have stage one you have stage two stage two is kind of maximally decentralized stage zero means there's tons of training wheels and stage one means that there's some training wheels

but you're in a pretty good spot and so Bas right now is a stage zero rollup that means that you know there's a lot of great things that come with it but there's also a lot of training wheels that are in place and if uh coinbase or optimism or actually if both of us were to collude there could be risks for for user funds um uh one of the things that was really important to us from the beginning was that it couldn't just be coinbase it couldn't just be base we actually wanted to make sure that from day one we set up the network in such a way that um it was actually sufficiently decentralized that coinbase or BAS as a single actor would not be able to do that and that's what we've done um and so we're already starting from what I think is a pretty solid amount of

decentralization but we're pushing towards that stage one goal and I think it's coming faster than people expect so we have you on here today because you have an announcement for us I guess about uh smart wallet so why don't you go ahead and explain to our audience what this announcement is yeah absolutely and I'd say less of a single announcement and more of a announcement of a ton of different things that are happening that we're really excited about um and and like I said said at the beginning of the episode um you know we really think that one of the three most critical things to solve in order to bring the next wave of adoption is wallets and making them easier and we think smart wallets are one of the ways we can do that and what smart wallets do is they take kind of the the wallet

experience that all of us have had for a while which is pretty confusing um has a lot of complexity and a lot of kind of fear and uncertainty that comes with it of like if I lose this 12w phrase my entire identity all of my money everything will be gone and they simplify it because they let developers build much more uh kind of uh complex but simple experiences around wallets and so the thing we're really excited about is we've been supporting coinbase to launch a smart wallet um which is going into testet live for developers at e Denver um it's awesome experience uh it lets you go from users having nothing to a fully setup onchain wallet that works across all evm chains uh in

seconds uh with a pass key uh works everywhere no apps no extensions required it's fully non-custodial and so that's a pretty incredible uh product coming from coinbase um another wallet product that coinbase is launching is a fully embedded wallet this is enables users developers to fully wh label uh a wallet experience so if you're an app and you don't want people to even know about crypto you can just drop this in and it works right out of the box you can log in with Google you can log in with Facebook whatever and those two combined the coinbase smart wallet and the coinbase embedded wallet are going to work really well together so that developers kind of regardless of what they're building building have really easy wallet experiences that let users go from never having interacted with crypto before to it just working in their app out of the box and so those

are kind of the headline things coming from coinbase alongside that base has been working with teams across the industry to push this narrative and push this reality of smart wallets as default so we now have gas subsidies for smart wallets across I think like five different providers um pimo uh bomy Alchemy uh zero de stackup um coinbase Cloud which is also launching an account abstraction toolkit so you can go get free gas if you're a developer get started building today we've been working on compression to lower the cost of smart wallet contract uh transactions so they're actually way cheaper um and then we've also been pushing core development with things like EIP 7212 which again is lowering the cost making

it easier for developer abilties experiences and so I think our narrative for this e Denver is basically like it's time everyone smart colr wallets are becoming the default the technology is better it's going to let users have safer easier more secure experiences and we want everyone to Rally around that and make it actually happen that's super fascinating thank you uh Jesse I mean that is clearly one of the big themes that you keep hearing over and over again is just trying to make the ux a lot easier andt you know the the pass Keys instead of the you know the phrases or whatever uh private keys but what do you call those the uh Secret seed phrase seed phrase yeah um all right thank you

so much Jesse really appreciate your time thanks for having me on y'all this was awesome love yeah yeah good luck out at uh out at eth Denver um and that is a wrap for this week's the protocol thank you for listening if you have any questions about any stories or comments please reach out to us at podcast coindesk.com subject line the protocol you can listen to US Weekly on coindesk pod Network or wherever you get your podcast And subscribe to our Weekly Newsletter the protocol on coindesk.com see you next week