NEWS: Coinbase launches L2

Transcript

we've got to go out there and like build an actually good product that people actually want to use that like actually solves their real real world challenges from a developer perspective from a user perspective I think we have the pieces with coinbase I think a lot of it's now like how do we put those together into a package that really really works all right everyone I think you will really enjoy this episode of Empire we have a pretty special one today there's a big announcement coming out of coinbase and we brought on uh Will Robinson the VP of engineering and Jesse uh who is the head of protocols uh and lead for another a new product that we're going to be talking about today but Jesse will welcome uh welcome to Empire guys Santi give you a big welcome too they're not even given interest to me

anymore it's just great yeah skip the intros for you um all right guys well I I think uh by the time people are listening to this the news will be out you guys are launching this thing called base which is I think how you're describing it as an L2 the way that I'd like to actually start is you guys might get mad at me for saying this but the way I think about coinbase is you guys are a web 2 company that plays in crypto and what I mean by that is like you raised Venture Capital money you have a board of directors you're probably a Delaware C Corp you're publicly traded and you have done this amazing job of like moving the space forward by uh giving people an on-ramp into crypto but really like at the core you're set up as a web 2 company and

I've kind of watched and Jesse I've really you've done this maybe more publicly uh than others at coinbase like watched your guys's journey into becoming more and more of a crypto native firm so I think the best place to start here I'd love to just hear you guys describe that journey and then we can get into talking about this new new L2 that you guys are building awesome sounds great um and maybe I can take the lead on this one well and then you can fill in the gaps around me um I'm Jesse hey everyone uh and I've been at coinbase for six years and so I joined the beginning of 2017 like right when like right before the bull market really started um and I you know I think your assessment is largely accurate you know like not only is coinbase all those things also coinbase was started in

2012. like cornice is 10 years old I'm a little more than 10 years old at this point and so when we started the business there was no ethereum there was no smart contracts there's Bitcoin and we provided a web 2 interface for customers to acquire Bitcoin and then over time we had the ability for customers to acquire ethereum and Litecoin and then more and more assets and I think really in the last five years um probably starting in around 2018 we started really proactively trying to figure out okay like we've done this whole exchange and trading thing and we see this future which is the global economy re-platforms onto the crypto

economy powered by millions of apps that you know billions of users use how do we get there both for the broader ecosystem and for coinbase itself um and really credit to Brian for seeing that early you know in 2016 he wrote the coinbase secret master plan which was like the 4 our plan it's like first we're gonna do the protocols Bitcoin ethereum then we're going to build the exchange coinbase then we're going to build the consumer interfaces coinbase wallet and you know coinbase app wallet and then we're gonna have these dapps that billions of people actually want to use and that's been the master plan we've been running but that final three to four stage three to four I think it's been a process of trying to

figure out how do we drive that um and I think bases our answer kind of it's phase 3.5 it's the developer platform that I think we realized we needed internally to change the coinbase way of building so we could start building as an on-chain native company um and then once we realized we needed that internally then we realized oh if we need this internally other people probably do too and that's why we're kind of launching it as an open ecosystem that everyone can build on and so happy to go into the like details of what that Journey has been over the last few years but that's kind of the high level path that I think we've been on yeah I I love all that I'll just add one thing I think

um for historical reasons or just where we are as an industry right now the the parts of the quadrant that are lit up the quadrants that are lit up rather are small web free companies and large web 2 companies and as a sort of accident of history and sequencing that those are really highly correlated but we all see and are moving toward a world where it's going to be what three companies big and small and Microsoft Adobe take your favorite big software provider will eventually have on-chain components of how they build and ship software that is a future that we are fully full conviction over and if coinbase can't be the large uh existing software company to lead the

way in that charge then who can so we we decided it was time to take up the mantle tell us about base Jesse yeah um so like I said you know I think our feeling is over the last 10 years we've done a really good job driving that kind of like trading exchange on ramping of funds into the crypto economy but mostly that kind of speculative side of things has been where um things have stayed and so I think base and bases in ethereum L2 uh that coinbase is incubating and congratulate decentralized and it's going to be the home for the coinbase ecosystem as well as a fully open ecosystem where anyone can build and we really see base as this platform that's going to make it

incredibly easy for the next wave of developers to build the dapps that will then bring in the next billion users um and there's a whole kind of story of how we got to you know building ethereum L2 um kind of what the the pieces we're putting around base are to make that really easy but I think that's the gist of it it's like we want to make it easy for developers to build really freaking useful apps that people actually want to use so we can get out of this kind of speculation driven world and into the next phase of the crypto economy which is billions of people finding real utility be on chain so a lot of the I guess a lot of folks listening to this might say wait a minute so like doesn't this actually isn't the whole purpose of

coinbase to keep users uh within the coinbase kind of ecosystem and might this just like once you open the door for people to go into this kind of open web3 land are you losing the user you know and this is this is something we hear often like with comey's wallet and then of course with this I'm curious like what you would say to that so I'll jump in here and say the purpose of coinbase is to increase economic freedom in the world you know I I hate to be hokey and cheesy and go to our mission statement but I've got the tattoo and we really actually do believe in this wait will you have a coinbase tattoo or you have this that statement so that that state metaphorically speaking metaphorically speaking uh

don't let Brian hear this I don't actually have the tattoo but you know this is this is not a this is not a casual mission statement that we ignore or give lip service to and a greater supply of Quality Block space that settles to a credibly neutral decentralized permissionless settlement layer with ultra high security we are still really early on that Journey right like you can imagine five years out ten years out that space being sort of fully saturated this kind of background that we all take for granted but we're not there yet um so we think that the world needs more block space of that kind and that increases economic freedom in the world and you know I'll be honest I think we've chart a lot of different future

paths and sort of business impact that this could have we don't exactly know which way this will go or when or how quickly we'll get there but I think we're really excited to push this experiment along and make a high level bet that more people using crypto for more things both reflexive things like Investments and speculation and also non-reflexive things just to live their lives do social networking play crypto games this is going to the Horizon title lifts all boats and coinbase will participate in some of that I think that we have pole position in the West for example is a Fiat on and off ramp and there are lots of other places like that where our

sort of weakness from the point of view of a like die hard decentralization Maxi that we do have this web 2 component that we are a centralized entity that we've got an address that we that we talk to Regulators is actually a superpower because someone needs to create and man that bridge that says okay well how do you get your real world assets on and off chain um how do you know you're entering this space in a way that is safe that is well trod before you and I think coinbase is in a unique position to add and extract a lot of value to the ecosystem that way without needing to hold people hostages on Walled Garden to make a good business yeah strong personal into that and and

the only other thing I had is this is not our first time making this bet of like if we grow the ecosystem it's going to be good for coinbase's business in the depths of the bear Market uh in 2018 we launched usdc you know now usdc obviously has had a huge impact on the usability of crypto globally um and it's also turned out to be a good component of coinbase's business um uh you know we launched coinbase wallet uh that's self-custodial wallet you know those those people aren't creating coinbase accounts those people are just using that software to access the crypto economy um CBE I think is similar to that the DAP wallet you know I think our bet is that if we give users and developers better and better tools to make the crypto economy useful it will grow it

and that growth will be good for coinbase and we'll find ways to make that good for our business uh alongside it being good for the world yeah absolutely I'm curious as you sort of surveyed the existing L2 first L1 and then L2 kind of environment and options why go and and choose optimism and my understanding is you're coming on as a like a core contributor to optimism so maybe talk a little bit about that journey and the rationale behind it yeah this has been a really you know diligent thorough process that we've run a really a glass year and a half probably um and I guess it started about a year and a half ago when we started working

with our internal teams to try and figure out what do you need to build more on-chain products like What's blocking you and what we saw you know through writing some prototypes ourselves and through talking to teams was that folks were getting stuck like literally before they could start um and they were really getting stuck on two questions one was um like literally how do I build an on-chain product I.E what language am I using to write a smart contract am I writing an evm am I writing with Russ and Solana am I writing the app chain on Avalanche or Cosmos um and then most people were kind of figuring that out for themselves uh in the vast majority of kind of internal teams where by default just picking evm because it's the most widely used

toolkit but then they were getting stuck again was like okay now I've written these contracts like where do I put them how do I make sure that's cheap enough that we can actually scale it for coinbase users how do I make sure that it works reliably across all the coinbase products how do I make sure that when I launch this thing it's going to be like good for the coinbase ecosystem and people were again getting stuck being like wow there's a bunch of options I want to do ethereum L1 I know it's too expensive I want to do L2 we don't know what to do and so in the first half of last year we really um kind of did a survey of the first question the how um and uh talk to a bunch of teams both internally and externally basically a line that like ethereum and ebm is the

fastest growing developer ecosystem uh it's the largest ecosystem by uh kind of overall value and from a default perspective that's kind of the paved road that we pay for our internal teams um and then after that that kind of gave us two pieces of clarity one is well if we're going to be building primarily on evm we need to have a clear strategy for scaling ebm whether you know regardless of what L2 we're picking and so that's when we started working on something called eip4844 which is this thing called proto-dink sharding it's going to lower fees by 10 to 100 x on l2s and coinbase alongside optimism has been working on that now for a year and and we're we're hopeful we're going to ship it this summer which is about a year

earlier than it otherwise would have happened so that was the first thing then the other thing that we did was we went and talked with everyone and said okay like our teams want to be building on evm we're making out the paid road we know ethereum L1 is too expensive like how are are you thinking about L2 and we were just so blown away at the quality of talent across like literally every team working in and around the L2 space across the ZK side and the optimistic roll-up side and I think as we went through that process we actually had a pretty big perspective shift in our thinking and I think that perspective shift was when we started we were very much of the mindset there's going to be 1l2 it's going to be monolithic and if we

like tick the wrong one that's going to be bad for coinbase users it's gonna be bad for coinbases business like it's almost like zero sum and I think when we ended that process after talking to a ton of folks I think what we're very convinced of now is that there's actually probably many of these things um there's gonna be l2s there's gonna be l3s and they're gonna kind of all collectively scale ethereum and increasingly become interoperable um as this technology matures as it standardizes to form something like a match or a super chain um where you have a bunch of different execution contacts scaling the broader kind of ethereum layer one and I think in that world that was that Vision was the thing that kind of gave us the clarity of like whoa if that's the

future making sure that coinbase has a native home like in that mesh feels really really important um now rewinding a little bit now how did we in that context start working with optimism so closely um I think a lot of it actually came from ethereum uh when we started working on eip4844 they were the other team that raised their hand about a year ago that gave us the the context in which we were literally shipping code together um that built trust we got to go really deep on their technology literally as we were standing up uh devnets for eip4844 to like experiment with running a roll-up on the devnet um and I think across the board we were

impressed with the quality of the technology the quality of the team and the ethos around the the technology being open source freely available and something that contributes back to the underlying public good infrastructure I think that's really really important um we believe that like ethereum layer two must be open source freely available and something that is built to be as decentralized as possible because that's the only way we're going to be able to create this Global crypto economy that's open and accessible to everyone we felt like optimism really had that those those values that the technology represented that um and then obviously that we we built a relationship through building together

on ethereum that could kind of stay on the test of time so you know a bunch of different factors but we're super excited to be working with them and I think we're we're super excited to be working with everyone this is going to be a massive team effort we are on Day Zero of scaling ethereum we have you know I think there's about a million one to two million monthly transacting users in ethereum uh today uh we need to get that to billions and so over the next five years the amount of growth the amount of opportunity for people to come together and scale this thing together um in a positive some way and everyone benefit from that upside just feels uh incredible um can you guys explain I think I'm not fully understanding where like you guys sit in

the tech stack so actually like this sounds like an L3 to me which is like you've got like e this is the L1 then like optimism's L2 and you guys are building on opt on optimism so that's in L3 can you explain why I'm wrong here yeah great so we are we're not building on optimism we're building on the op stack which is an open source uh toolkit that's basically four running chains and so what's gonna happen is basically optimism may now will be running here and then base will stand up next to it and then what we're going to do over the next two to three years is we're basically going to figure out what's the like integration work that we do by being on the same staff so those things can actually be more and more interoperable so you can have transactions happening between them so

you can have Bridges happening really easily between them and so you can add a bunch more l2s or l3s that also have that same level of composability that's going to enable us to kind of collectively scale ethereum something before you jump in just one more question because I want to make sure I actually understand that what if block Works would probably not give someone the underlying like open source software if we had it to go build a media company because then they'd be competing with us so like I'm trying to think about the business model behind optimism and like op stack it's like op Stacks giving you the operating system to go build an L2 which like on paper competes with optimism but has this premise that in a couple years it'll integrate and like bring business like one plus one equals three but really in

the short term it does sound like a competitor to optimism so tell me what I'm missing here no I think you're actually spot on in the tension and I think that the the the thing that's allowing us to do this is kind of the the trust and belief that we can build this thing that's greater than the sum of the parts um and I think that's what we're working on with optimism and one of the things we're excited about is as part of running base we're actually going to be contributing back to the uh like retroactive public goods funding mechanism and the optimism Collective uh to make sure that we're sustainably funding that infrastructure alongside them and so I feel like the the thing we are doing here is new right I know we haven't actually previously had a large

public company do a agreement with an open source technology provider that also has a dow that's building the future kind of Technology infrastructure of the world um this is a first and it looks a little different maybe than other business deals but I think the thing that's built into that is this shared belief that if we build an open source interoperable Layer Two there is so much upside there's so much growth that we're going to be able to basically find the complements uh in the various people who are working together make sure that they they get to win-win outcomes and that's exactly what we're doing with optimism I can be more excited to be working with them I want to get a little bit more of the history context behind just even

thinking about building base you know Jesse you you mentioned you've been around and looking at Perhaps Perhaps on the table of engineering projects that you could have had and or have at the moment why decide to do this now like what were some of the other things or what are some of the other things on that like whiteboard that before you kind of made the decision to to like throw a bunch of engineering resources to l2s building base like why why now and what were some of the other things that you could have focused on instead of this no I think that's right I mean I I've been at coinbase for six years at this point I spent the first four and a half years um building and leading all of our

consumer facing teams on the engineering side So coinbase coinbase Pro coinbase wallet and then mid 2021 mid 2021 um I basically took a step back and said like I want to figure out like how do we make this change like I've been building these consumer-facing products that are web 2 products with crypto in them and like I want to figure out how do we unlock this incredibly talented incredibly uh generative business to be building web 3 native on-chain products and like will said I came to will and you know our exact team I think like fall of 2021 and it was like we need to do it all and like we need to do it

right now and that began what was a total journey and Kennedy for me like I felt a lot like wandering in the desert whereas like we I think we went through four different iterations over a year where I was like we're gonna do this and we did that for three months and we got to the end of three months and said um it doesn't feel quite right like we're not getting the customer feedback internally that we're looking for um let's like try again um Jesse what what were those ideas that you guys did and then like shut down tell us about the failed ones uh I'll yeah so the two the two failed ones that were that were most recently

um to be clear I don't think I actually don't think about these things as failed um one was like we I think what what basically happened is we we started having this conception of um like coinbase and our broader Suite of products including the consumer interfaces all the way down to to the underlying infrastructure almost as a Marketplace um where there are a bunch of different layers and something you could almost analogize to like an app store or an app platform um and that meant that we over like a period of nine months we basically worked our way down through the marketplace and so the first thing that we were at was like oh what if like this thing is an advertising Network and like

that's what we're building and what the goal of it is is to basically figure out how do we connect up the distribution of coinbase to all of these developers that are building these incredible products but right now have really inefficient acquisition tools like that's what token airdrops are they're really inefficient ads products um and so we're like okay let's build that Marketplace and we built that for a little while and we learned a lot but like didn't feel like it quite stuck although we're also in the process right now rolling out the first iteration of that and I think it's going to be awesome um uh you know kind of a lot of that you know it came from the same place so then the next thing we really focused on was identity um and looking at like uh basically could we bring a representation of

coinbase identity including like the verified as a human um and and potentially kyc on chain and would that allow our internal teams to basically build products that were more tailored to the real human beings that were behind wallet addresses um and again there we launched uh the first version of the product and we're expanding on it to cb.id um we have plant plans for the year ahead that's going to bring more coinbase identity on chain which I'm super excited about but um I think at the core we also didn't feel like this is the thing and and I think we worked to like the bottom layer of the stack which is like we've been trying to build these products we've been working with all these internal teams and like when we tried to build

the advertising product we tried to build the identity product there I we got we got stuck like we tried to figure out where do we deploy these things how do we make it low-cost enough how do we make the tooling good enough and we came back to this question of like how do we build where do we build and I think after having done that three times um in kind of second half of last year we basically said okay let's take a month and be like what would it look like for us to build the developer platform like the base of this ecosystem which we can then on top of build all of this other infrastructure that will eventually come together to make this like a powerful platform for distribution and for people building products to use real world identity

um and that's that's when bass kind of originated and like will said I feel like I had gone through a year of every quarter trying to pitch to Will and our executive team like this is it you know advertising this is it identity this is it and got honestly like pretty lukewarm responses where people were like we don't know if this is it and then we got to the conception of base and I think for the first time it really clicked yeah can you dissect a little more of the the actual thesis itself you know you've you've enabled support for L2 withdrawals um so presumably users can now go directly from coinbase to some of the

l2s right I believe it's Paul like pretty much most at this point um so what is what is this enhancing like what does this actually add when you talk about a secure low-cost developer friendly L2 you're building on the OB op stack but I'd love to dissect that a little bit more to understand like what is the value add of of what are you already doing today which is enabling withdrawals to an L2 environment where the user is already getting a lot of the benefits yeah and the way that I think about this is basically like if we pull back into the user experience for like the everyday user I think for the last five

years um we have been in a very kind of like chain-centric mental model where we are basically saying hey users you need to pick which chain you're going to run your application on you need to pay the fees for the compute of that application running on this chain and for a small segment of the world that's worked right like that's the million monthly transacting users that we have and I think we've seen pretty consistently that like it's not working more broadly right we're not seeing month over month growth of real world applications that people are using um they're bringing kind of like joy into their lives and increasing their economic freedom I think one of our Theses is that a lot of that

chain-centricness basically came from us like trying to figure out like what's the right infrastructure for building applications and I think our perspective is that is is shifting from this like undefined unanswered question into like a relatively defined and executable question which is we now what know what that infrastructure is roughly going to look like and what our sites have to turn to is okay now how do we enable developers to build applications really really easily for that infrastructure and then how do we make it really really easy for users to use those applications without having to worry about any of the complexity and I think this is where coinbase has a really unique position right we can

launch base we're launching base um we have an incredible Suite of developer tools that that that will have been kind of building over the last year and a half that means we can offer this like platform for developers to build really high quality applications and then we have the most trusted easiest to use um consumer interfaces and coinbase and coinbase wallet for leveraging applications that are deployed into crypto economy and we can plug base into those interfaces and make it so that for our users it all just works they don't need to be like uh how do I worry about it it just works and that's not to say that we won't we don't want our users to keep going everywhere and keep using

other teams um and it actually one of the values in base that we cite very frequently is this concept of a bridge non- Island which we can talk about in a second but the thesis is basically like most users don't want the complexity of having to make a bunch of Technology choices of where their applications are going to run we can give them same defaults that are easy to use secure and low cost and then we can create experiences that allow them to go elsewhere so they can explore the full crypto economy um by creating a native platform in the crypto economy that coinbase can build infrastructure around to connect users to those other places and I think like what I've seen pretty consistently as

I've transitioned from doing kind of the more often world to the more on chain world is the level of Leverage that you can get from building applications on this new on-chain platform is really incredible right you look at like unislop V3 or V2 like those are massive financial pieces of infrastructure that were built by a handful of Engineers and that's because the platform that they are building on because it is global because it has this in intense level of composability and an open source is just very very powerful and so I think one of the things that I'm very convinced of is that um on chain is the next online as like a kind of seismic shift in the way

developers build where in the early 2000s we saw this thing happen where like if you could build online applications you could reach 10x more people at 10x less the cost um and it was the superpower where you had new applications start to emerge that like did things that were previously totally impossible and I think we are right on the cuffler and so I probably have already passed where that's starting to be true where we're going to be able to build um on-chain applications that are 10x higher leverage built by 10x viewer engineers and have 10 to 100 Exit distribution and impact um on this new platform and I think that's and that's what it's all about that's why we're building base so that we can create a home and a native platform

where coinbase starting with our internal teams but then obviously with the broader Community can accelerate that on-chain platform and make it really easy for us to think about this as like a business decision of like do we want this in our Legacy off chain POA side chain or would it be more efficient higher leverage more accessible to more customers if we put this in the kind of like new platform that's fully on chain yeah let me let me just maybe play Devil's Advocate so one of the things so I heard this announcement I was like oh that's fascinating like I love that you guys are doing this and then the second thing I was thinking is like how will Wall Street respond because you guys have the really enjoyable experience of being a public company

um and so you do have to think about how the market will respond and one way the market could respond is they're building something that could eventually compete with them and um like I think of uniswa I think of coinbase competitors and like there were periods of time during defy summer when like uniswab's volume outpaced coinbase volumes and like I just have to argue that coinbase that uniswap is not a competitor to coinbase I think you guys are directly competing and with base some of the things that you guys will some of the things that get built on top of Base will directly compete with coinbase's core products I'm curious how you guys uh how you guys think about that I think that I think that's exactly right and I think one thing we didn't really talk about is um

just like the cultural impact that we've seen over the last six months as we've started building this like the it's right before we're going into that can we yeah I want to get the answer to the competitive thing because that's one thing and then I'll do it and then we can go into that so some so basically basically the question was around like how do you think about building uh baseball and a product that get built on base will end up competing with coinbase's core products and how do you think about that trade-off yeah yeah um so I think again going back to kind of Brian's secret master plan that he wrote in 2016 which always blows my mind um I think we from the beginning have felt that there's going to be thousands or millions of dapps that create the billions of

um users that come into the crypto economy and uh we're not the first company to kind of like see uh platform shift happen in that way and anticipate it and engage with it and make that something that's you know successful for our business I think apple is the canonical example here Netflix is another great one where those were um you know large-scale consumer companies that were aggregating user demand and basically saw hey we're about to experience a massive platform shift for for Netflix it was digital for Apple it was mobile and both of them said okay what if rather than us being kind of the sole point of distribution us being the one that built the products we figure out how to build the platform

that we can obviously still distribute first party products on but also create a Level Playing Field for third parties to build businesses on and if we can do that could that be so much more than us just doing everything ourselves and I think that's that's the same bet here um it's a bet that yes there will be things that compete on base with coinbase you know when we're going out uh tomorrow or whatever whenever we launch a Thursday um with a bunch of partners that are directly competitive with components and coinbase's business and that's okay that's good that's healthy that's part of what we're doing here is we're trying to build an open ecosystem that we think can grow the crypto economy and bring these use cases into the crypto economy

and we're confident that coinbase and coinbase's business will only benefit from us going from a million monthly transacting users to a billion monthly transactions transacting users the pie is so so big um and if we can enable that next wave of growth um we're gonna we're gonna we're gonna have a lot of upside for our business I think this is something that is I mean not to get into too much of the psychology of Wall Street but you have time and time again they don't seem to understand like when social media was coming around like Facebook was doing its IPO like they didn't get it like that it was all about like you know how social like they didn't truly understand the power of social networks um and in this case like it's it's actually like pretty

I'm not surprised that they're not getting this open source model uh and how it actually works and you're seeing like a public company like kind of like morph out of its current shell and like move into different lines of businesses and as you said kind of like admittedly like cannibalizing certain lines of businesses um but you're right I mean if if this is really gonna work you're you need to believe that this space is going to grow to billions of users otherwise just close shop like it's just a side experiment it's yeah this is you know reflected in Wall Street still primarily thinking about us as an exchange or a consumer brokerage whereas internally for the last two years are North Stars we're going to be the gateway to web three

that's like that is the is the exchange a part of that Vision absolutely but being the gateway to web 3 is just from our perspective such a huge opportunity it's it's the gateway to the crypto you're still gonna you're going to need an on-ramp a credible really reliable trustworthy like on and off ramp and then you're gonna you're gonna allow people to interact in this you know App Store of sorts um and then ultimately come back to coinbase to do other stuff right um I want to do also touch on um we recently had will uh had a power outage uh and I think it's fairly symbolic what I want to ask next which

is sometimes you see attention of like projects that want to build on a particular chain and then either you know you have these like competing l1's like you have the evm compatible like Avalanches of the world it took a lot of like the source code of ethereum and and design and then like modified their own because admittedly it was like they had their own token they could control more of their Destiny then you have stuff like Cosmos for like you can just Fork the SDK like tender it's pretty battle tested in this case like um I want to explore a little bit more of the the decision of when you're building on the open like the optimism like SDK um

what are some of the things that you like envision like having more degrees of freedom versus just like trying to work with them they obviously have their own like the optimism token and that's a governance token you could just like acquire a bunch of that and then like have more sway but here you've decided to like just take your SDK and like build your own base which I don't think is going to have a token or at least you don't plan on having a token so what kind of relationships you're gonna have with developers um of like what kind of Committee of like there's there's gonna have to be things that are gonna have to be you know determined by a committee so I'm kind of curious how all this is gonna

work great question um and first thing I want to be clear about we're working super closely with optimism on this um this is not a kind of like four can go do our own thing I think that will said this earlier but we've looked at doing a chain many times before two times before specifically in 2018 2020 and we said no those two times and the probably the biggest reason why we felt comfortable saying yes this time is because we felt like we could build it as a part of a bigger whole and that's a part of a bigger hole in two ways one is a layer two we are part of the ethereum ecosystem which means we get the interoperability the composability the ability for users to move assets on and off base and onto ethereum and then two 2 by building on an open source

technology stack we're going to be part of this larger super chain that we think is going to emerge at layer too and so that um commitment to not doing an alternative outline not creating an island but instead explicitly designing this working really closely with optimism to be deeply integrated into the largest crypto ecosystem in the world um I think is the thing that goes over the hump and say yes this is a good thing a good thing for us to do so in terms of the the kind of outcomes that we're able to drive by um uh kind of taking the technology stack and and deploying our own instance of it and make your own I think a lot of it is about

um alongside being a part of the broader whole um having the reason and the context where we can invest in that core infrastructure to make it work really really great and to give our teams our business the surety that you can kind of only get if you're running your roadmap I mean you're in control of your own destiny and so specific examples of this are things like scaling right like we look at it today like the fees are still too high it's not feasible for people to be paying 10 to 50 Cent fees on there too and have that globally kind of scale and so what do we need to do we need to lower the fees before we could do that and out of the goodness of our hearts

and it would help the ecosystem but now we're in the trenches every day trying to run our own chain trying to figure out how do we make this work how do we make this scale how do we make this more effective for our business and that's a massive motivator for us to put more resources more energy and to set our own timelines on getting that chain to scale that's one example another example is account abstraction which will mentioned where it's like today wallets they're still too hard to use that's a mix of wallet interfaces but then also chain level infrastructure before we could do the wallet stuff and then we could go and like kind of find people and be like hey can we line up our road maps can we make this work um now we can say no we if we believe account abstraction is important let's

put the team on building the core infrastructure and the wallet and have have them work really closely together with the customer mindset if we're going to deliver an incredible product and actually ship that thing and that's what we're doing I think that uh like autonomy and ownership and the feeling of like we can make the sustained Investments and the underlying infrastructure because we know that's going to have a direct impact on our user experience kind of uniquely comes from having like feeling ownership over the platform um and feeling like if we invest in this platform it's going to pay dividends for our business for our ecosystem for our community and I think the important thing is that we're not just doing that for us we're doing it on an open source platform

that's freely available that's plugged into ethereum so all of the investment that we drive from coinbase into this platform then gets pushed out into the broader ecosystem so everyone can benefit from it and that kind of gives us the best of both worlds uh we can be a part of the larger ecosystem and we can have our own home that drives that investment and puts the full force of coinbases you know capabilities behind scaling the underlying infrastructure which I think is the big the biggest blocker right now for us making the crypto economy happen yeah um in open source a lot of the the value capture and like continuity really rests on having a token I believe um versus traditional open source

um now we can talk about like there are different kinds of tokens and value cruel it's still TBD and for some but nonetheless [Music] um to incentivize developers like tokens become a really valuable currency I think um do you envision base having a token at some point so we have no plans to have a token um I think our thesis is that tokens obviously have been incredibly powerful tool for driving activity um but also sometimes they have obfuscated what has been a lack of product Market fit for either like protocols that are products or chains that are platforms uh for people building on you know I'd go so far as to say that

from a developer perspective I think ethereum is probably the only chain at this point that has real product Market fit um in a scaled way maybe there's some other ones that are very early on but I'd say ethereum has real product Market fit for like large-scale Financial use cases um from a developers perspective and then you have a bunch of other players that are basically trying to figure out like how do we find product Market fit for developers who are building dapps that can reach like massive scale and say everything is pretty much pre-product Market fit at this point and I think what we're seeing a lot with tokens is we're seeing people commentating for a lack of product Market that as a result of Technology not being there or whatever by saying

hey like we're going to use an incentive to drive people here I think that that's reasonable right you can use incentives to kick-start markets but I think our thesis is that that's not the only way to make this work the other way to make it work is to build a platform that has real product Market fit and I think where we believe that that's going to come from is a chain that has the low-cost secure and decentralization characteristics that we're focused on in building with base and then interfaces like coinbase and coinbase wallet that provide user distribution to applications on that chain and that if we do that thing well that can stand alone that can just deliver value to developers because they

can build apps and get distribution to users and they can deliver value to users because they can access all these apps that are emerging and so I think one of the things that kind of gets me excited about not having a token is like we're running on the metal right like we've got to go out there and like build an actually good product that people actually want to use that like actually solves their real real world challenges from a developer perspective from a user perspective I think we have the pieces with coinbase I think a lot of it's now like how do we put those together into a package that really really works and I I think we're going to do it yeah when you talk about like the actual metal itself like you you mentioned in in the kind of earlier parts of the episode of this

idea being a bridge not just for optimism but like other l2s potentially other chains talk to us a little bit more about how you envision that process that sequence happening yeah and you know this is a value the value internally around bases and there's a few of them but the one that this one is the bridge not an island and that's the thing that we like Hammer our home into our team and what that means is in building base we do not want to create a island where we are locking users into coinbase products where we're locking into them into like our part of the world instead we want to think about it as a way where we can take users who are currently off King bring them on chain into a reasonable default that has a great foundation and

then basically build on-chain native Bridges and interfaces from that home into all of the other parts of the crypto economy and so in that way bass basically becomes this vehicle through which we can Bridge users from the off chain world into the entire crypto economy so that's the kind of like Vision um uh that that's the approach that we're taking in terms of how we actually do that um obviously you know the way we're building this as the ethereum L2 we're going to have that bridge to ethereum by default um that felt really important to us because it's you know the largest by TBL the largest developer ecosystem uh most interconnected from a hub perspective by building on the op stack I think we are working to basically figure out how do we build an

interoperable standardized open source freely available Layer Two that anyone can run and basically plug in that's going to take time um you know over the next one two years I think for us to figure out exactly how do we make that work as well as we can um and then we've started you know conversations and and uh you know I think are are making progress with a bunch of the other ecosystems folks like Solana folks like uh polygon um who obviously is building l2s but also has their kind of L1 uh POS ecosystem um Avalanche and then a bunch of the kind of uh already existing multi-chain Bridge providers um uh around like how do we make it so all this works really well on base so

you can get from basis line different based apples you can get them from base to um uh polygon POS and that can be done in a secure scalable EV to use way for both users and developers and you know that's going to be a process as well but I think the the important thing for us is like we don't want to silent people on this chain that's not our goal our goal is to use this as a platform that allows us to bring everyone into the crypto economy um uh by creating that bridge Jesse you may well uh will this be permissionless or permissioned at the beginning to go build on top of permissionless employee permission do you think that coinbase will end up

building so obviously you will want as many devs as possible to come build on it I'm assuming you'll I think I saw you'll do like an ecosystem fund I think that you guys are announcing that as well do you um do you think that coinbase will also start to break out teams to go build on this and and if so like what could you envision building there yeah uh definitely I mean coinbase already is starting to to have teams build on base I think again there the perspectives folks are going to build on base base is probably gonna be the default it's going to be the Hub but we want to make sure our products are accessible everywhere and so let's say we launch an identity product maybe we're going to put all the rights and the data on base um but there should be interfaces where

you can go and use that identity on Optimus main net on ethereum on polygon and Solana and all that should just work and and we think that that's really possible um uh and that the Technologies there to basically make it so you can have that interoperability across chains um so so teams of coinbase are already starting to to do this um some of the things that I'm really excited about obviously identity um we we started uh we rolled out our cv.i.g enf integration where you can claim subdomain of enfdb.id um that's free for users um we're doing work to bring that on chain and make that more inoperable posable there's a lot that we're doing and thinking about around distribution

um how do we basically make it so application or protocol developers can say hey we're looking for these kinds of users and we can help them find those users in the coinbase user base and make that a win-win for the developers and for the users by kind of connecting up those incentives so that's another one that I'm really excited about I think all of the financial services um uh offerings I'm really excited about you know if you're going to coinbase wallet today or you go into a Dap wallet and coinbase you you we have first party interfaces for swap for bridge for borrow for lend um those are powered by third-party applications and I expect we're going to continue having them powered by third-party applications but we also have the first party interface

that feels really important and so those things are going to come to base and be supported and and so you know especially like if you don't so like right now I haven't actually gone into that and to see like the Swap and borrowing land I got to play around with that but like let's say like swaps is powered by I don't know matcha like our Xerox or like a Paris swap I don't know who Powers it but um like if I were coinbase I would think about I want to eventually own that so could we one day see coinbase build their own uniswap like competitor or you know on top of base or like build their own swaps mechanism on top of face and and try to actually own that relationship I think you know uh as you talked about this is like an ecosystem we want it to

be an open ecosystem and in that ecosystem we expect that we'll have first party applications and and third-party applications and I think the the thing that becomes problematic in an ecosystem is if the first party starts to crowd out all of the third party applications and so I think that's the tension right like if we went and said hey we're just going to replace every dap out there I don't I think maybe that would short-term be good for coinbase but in the long term I think it would mean users would be less likely to use our products because at the end of the day the ecosystem the crypto economy is the thing that's going to be the most creative and we're going to have some wins in there we're going to find a place that we can uniquely contribute

but we can't do it all we're like we're a big company but we're not that big a company and no one company can do it all and so I think the the goal for us is to figure out where the places that coinbase can uniquely contribute value um and how do we uniquely contribute that value enable developers uh and also Leverage The Incredible Brilliance and incredible products that developers and ecosystem are building to offer great experiences for our customers I think as we start to wrap this up oh actually I should have one more question here you might have already explained this or maybe I just uh wasn't smart to follow along enough here but uh the business model Jesse like when I think about the business models of l2s like the way I understand

arbitrim for example is like one they've got the token that can help fund the business but also like they auction off the sequencer um and there's like an Mev component as well like what is the business model of Base yeah so I think the the long-term goal from a business perspective is create more applications that users want to use um that is the North Star um because at the end of the day if there are more applications that users want to use and they're using them through coinbase interfaces that's a great business for us right like if you go into coinbase wallet and you use the swap interface yes it's powered by zero X but also we're providing a service of making that really easy and we're

comfortable taking a fee for that and users are comfortable paying a fee for that and so I think our base thesis and the primary uh business kind of motivator for doing this is create a bunch more applications that users want to use so we can then expose them to our consumer interfaces and generate revenue and growth to the business through that so that's the primary kind of motivator it's create more Innovation more useful applications and then let those kind of get surfaced through the consumer interfaces I think from a kind of pure chain perspective there's two potential sources of revenue um uh gas fees which are kind of net the cost of bundling those transactions and putting them on L1 and then Mev on the

Chain Mev is not something that we're enabling right now we're just going to be ordering everything by priority and the time it comes into the sequencer we think it's really important that we don't do that we don't want to be trading against our customers or doing anything that looks like that in the future we'll we'll decentralize the block building uh and that will open up opportunities for other people to be doing MVD and in that context I can imagine that being a revenue stream um and then the other one is kind of transaction fees on the Chain which we expect to be relatively small uh in the grants to our overall business and I think think we're we're still trying to understand exactly how that will shape up as fees continue to get driven down

through 4844 um so again I'd say there is revenue here that we think we can we can drive at the chain level but we expect it to be smaller than the revenue that we'll be able to drive through the business by enabling more applications that people actually want to use through our consumer interfaces it's nice Santi anything we're missing here yeah no Jesse I mean we've covered a lot um it's really great to get your insight into all the decision making process that happens in an organization and I think a minimum people really gain a better appreciation of it's pretty remarkable to see a public company we we used to think of coinbases as like slow moving organization invariably as you grow and as you become a public company but it's really interesting to see the inner

workings and sounds like there's a lot of stuff happening in there and I'd almost love to see that whiteboard and how it evolves um because it's really great that you guys are contributing to the ecosystem and really just re recognizing that for you guys to survive in this kind of fast-paced Open Source environment you're going to have to adapt really quickly otherwise you're going to fall prey to you know the innovators dilemma so to speak um we covered a lot I don't know if there's anything in particular that you want to emphasize or leave uh you know want to focus more on um for the benefit of Road listeners so I guess two thoughts um one is I I think you know one of the things that's been most exciting about the last

while building based is the cultural impact of having this platform internally and in many ways like that's been the thing I've been most focused on for the last two years it's like how do we actually start to change our internal culture so people want to build on Chain by default because there's all this inertia that's you know our Revenue our activity the the infrastructure that exists off chain I think for the first time after like two years of trying something about having this platform has started to change the culture where people now feel a new level of energy excitement Resurgence to be like I want to try and build this thing on Jane instead of off chain and so I'd say like one thing that might be interesting for

your listeners who are likely you know maybe some are in uh kind of web web three companies but there's probably a lot of people who are in web 2 companies and who might be in a similar place of feeling like how do I get these companies to be you know the company I'm in to be more crypto forward crypto native I'd say like think about that and think about this story in the context of that it's like what is the cultural change that you're going to be able to make and how do you make that like a structural change that can drive um you know long-term Behavior change among the employees um so I'd say that's one thing and then the other thing and I know we talked about this before but I I just want to go back to coinbase the secret master plan you know and and a

shout out to Brian on this in 2016 Brian Armstrong our CEO wrote a four-part plan that was build the protocols build the exchange build the consumer interfaces and then enable the next wave of gaps that are going to bring a building users into the economy and crypto economy and for the last seven and change years that's what we've been doing and I think the thing that I'm most excited about is in 2023 it feels like we have a line of sight to make it so that those gaps can actually start to emerge and I think we've seen the beginnings of that over the last few years since D5 summer where we have a small set of financial applications that have product Market create but the combination of the the cost of change going down the developer

tools getting better identity starting to be figured out and accountants action making wallets easier to use feel like right now is this moment where we are about a cross over from phase three to phase four and I'm so excited to be bringing base into the market in that context and just doing everything we possibly can to make it easier for developers to build useful applications that a billion people in the world want to use so so that's what it's all about yeah that's awesome uh maybe a last question now that because I was hearing you say that is if we were to have you you know a year from now and do a recap of bass and progress what do you think is going to be the thing that surprises

you the most I think probably it will be I mean this is good I think at some point we're gonna in the next year and I'm an optimist and so I've been wrong on timing before but I think sometime in the next year maybe the next two years we're gonna hit a inflection point in crypto where instead of after literally 10 years of being flat except for when they were hype driven growth we start to have month-over-month growth of users using crypto to do real things that the instruction point is coming in the next

two weeks and it's going to start being 10 to 20 month over month growth and that is going to be the beginning of this up curve that somewhere between five and ten years from now we'll have every single person in the world using crypto every day and I think the thing that's going to surprise me against surprise people is once we hit that up growth that inflection point it's just going to be obvious like that this was coming and that this was like now was the right moment and my hope is that a year from now when we're back on here we're having that conversation instead or instead of being like is this a you know big bad how does this type of business like oh my God the world is literally migrating on chain just like the world migrated online just

like the world migrated to mobile like wow what's happening in that context I think that that's the thing I think we might be surprised by that's such a great answer because I think all three of us live through like the growth of smartphones becoming ubiquitous and like it was just like the first iPhone was like internet was like really slow and expensive and there weren't many apps there's like a lot of infrastructure deficit from the wireless kind of network side of things and then and then all of a sudden like it was like two three years and I was like okay like I but like when you're living through it you look back and you're like yeah of course like yeah like you know

the idea of having everything your Walkman your Palm Pilot and then this thing becoming like a computer like it's so obvious now but like Nokia missed it Microsoft missed it and you and we were all living through it and like we were getting a lot of benefit from it but we kind of truly didn't see like the full like repercussions of how impactful it would be to our day-to-day interactions that you can stream a movie on your phone you can listen to every single music on your phone and how it changed the music industry that you can you know do pretty much everything from banking to Consumer stuff to shopping like to the point where like you might not even need a computer like

it's pretty crazy and I think very few people have that vision and even really kind of up in that moment like realize how impactful it would have been and still probably will be and so I think it's a great answer because even us that we've been here in space for so long we kind of believe in this and this is why we're like staking our lives or reputation everything it's not easy right being in the space um it will happen and sometimes like it's the people that like I've been in for so long that you become skeptical of these things actually happening and once they do you're like I guess it's happening yeah I do hope it happens within a year Jesse it does feel like the fact that we're

seeing you guys really build base and the rationale behind it in this episode I think hopefully listeners appreciate like it does feel like a lot of things are clicking finally on the infrastructure side to really enable credibly Millions up to billions of users um and it's kind of primed because there are really also really great teams that we've had on this podcast that full you know disclosure I'm an investor in um that I think are building really cool front-facing applications that are delivering like True Value not just nfts but like a lot of other stuff yeah I said I said it's on the internet yesterday but it was you're in a bear Market crypto bear Market we're at an all-time high of on-chain creativity and that's really there you go

we have never had a more creative moment in the history of cook with them right now and yes it's a bear Market but like boy are we in for a ride um but you shoot that too because will has another tattoo but I'd like to talk about it Jesse man we uh we love having Eternal optimists on uh you would do well uh with uh what's up to me and I'm uh I'm excited to hopefully see in person soon and uh thanks again for for coming on and just big congrats on everything that you guys have built definitely rooting for you and uh excited for you thank you yeah congrats guys pleasure having you as and we should definitely have you on in a year from now love it let's do it chairs [Music]