Bankless - 1 Billion Users Onchain | Jesse Pollak of Base

Episode Date: May 2, 2024

While it's still early in the race, Base is now one of Ethereum’s largest L2s.  In today’s episode, we brought back on repeat guest and co-creator of Coinbase’s L2, Base, Jesse Pollak.  We cover: - How Base plans to bring billions of users onchain - How Base is increasing its scale by 400x - How Coinbase is using Base to be more onchain  - Onchain Summer II ------ 📣 TRANSPORTER - SECURED BY CHAINLINK CCIP | TRY IT OUT transporter.io ------ BANKLESS SPONSOR TOOLS: 🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE https://k.xyz/bankless-pod-q2     ⁠   🛞MANTLE | MODULAR LAYER 2 NETWORK https://bankless.cc/Mantle   🌐 CARTESI | APPLY FOR A GRANT https://bankless.cc/CartesiGovernance  🔗CELO | CEL2 COMING SOON https://bankless.cc/Celo   🏠 CASA | SECURE YOUR GENERATIONAL WEALTH https://bankless.cc/Casa   🗣️TOKU | CRYPTO EMPLOYMENT SOLUTION https://bankless.cc/toku   ⚖️ARBITRUM | SCALING ETHEREUM ⁠https://bankless.cc/Arbitrum  ------ TIMESTAMPS 0:00 Intro 4:41 Base’s First 8 Months 9:23 The Road to 1 Giga Gas Per Second 18:39 Why More Demand For Base?  21:26 Cost to Send Transactions on Base 23:59 Non-Ethereum DA Solution? 25:59 Scaling Via L3s on Base? 27:17 Parallelization Solution? 29:34 Will Base Make Transactions Free? 38:18 Coinbase's Relationship With Base  46:18 Base Is Centralized Critique  50:17 The Base Flywheel 57:46 Onchain Summer II  58:36 Next Target Demo to Come Onchain 1:00:42 Base Independence 1:02:19 1 Billion People Onchain 1:03:25 Closing & Disclosures ------ RESOURCES Onchain Summer II https://www.base.org/   Jesse Pollak https://twitter.com/jessepollak   Jesse’s 1st Base Episode https://youtu.be/7dGU0_eEjq8   Coinbase https://twitter.com/coinbase   Base https://twitter.com/base   ------ Not financial or tax advice. See our investment disclosures here: https://www.bankless.com/disclosures 

I think that this is the decade of the world moving on chain, and I think that we're going to see it faster than people anticipate. And so I don't know whether it will be in the next one to two years or the next three to five years, but I really do believe that this is the decade where we'll see it happen. And by the end of the decade, the whole world's going to be on chain. Welcome to Bankless, where we explore the on-chain frontier with Bass's Jesse Pollock, co-creator of Base. We're here to explore how Bass is trying to get to one billion users on chain. We also are trying to get to how base is trying to increase its scale by 400x to one billion gigagas. We'll explain what that is in the show. How Coinbase is using base to put more

of Coinbase on chain. And where all of this leads to is OnChane Summer Round 2. We've already done this once, but we're about to do it again. And then next summer, we'll do it again. And next summer, we'll do it again. Before we get into the conversation, a message from our friends and sponsors over at Transporter, a brand new bridging app called Transporter, great name. Why do we need it? $2.8 billion has been hacked from token bridges. So it's always scary when we want to bridge across chains. That's 40% of all the value that's been hacked in Web 3 has happened on a bridge.

How is Transporter any different? They are secured by ChainLink's CCIP. They got some fantastic U.X on their website and 24-7 support. So you can bridge ETH, Link, USC, and more. There is a link in the show notes to try out Transporter. transporter.io today. I think this is a cool conversation, David, because we're talking about something that's very important in crypto, which is number one, how we're scaling Ethereum itself. So this is a story about layer twos and how that scales, and especially in a world where we have

blob space. And also, this is a case study for how a centralized company, a coinbase, an exchange, is slowly migrating on chain, what that looks like. I think it's a fascinating case study and why folks should tune into this episode and be following in general. general, the base story. I think the most interesting part of this conversation was at the very, very end, just to tease the end of the conversation when I asked Jesse whether or not base would ever spin out of Coinbase, which was a question that was a means to an end of something bigger. But I'll leave that up to the imagination of the listeners. So let's go ahead and get right into the conversation with Jesse Pollock from Base. But first, a moment to talk

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This means that Selo needs you to weigh in and make your voice heard. Join the conversation into Sello forums. Follow Sello on Twitter and visit sallow.org to shape the future of Ethereum. Bankless Nation, we have Jesse Pollock. He's the co-creator of BASE, which is the Coinbase layer two. Jesse, how you doing? Good and great. Happy Monday.

Hey, guys. Hey, it's great to have you back on bankless. You know, we were just checking some of the stats on BAS recently and we thought we have to have Jesse back on to tell us what's going on. And a couple of stats that come to mind. Base is now number three in terms of layer two's by a total asset value. So total locked value at like $5.2 billion in terms of daily or weekly active users. It's trending of $1.3 million.

You've got fees that are, you know, between like $0.5 or under on base. And I think base launched in August of 2023, if I'm recalling correctly. give us a summary. So how have things gone so far and how far in the journey are we? Yeah, yeah. Well, we're still at day one. This is what I tell my team every day. It's like, it's still day one. We have so much more to build. There's, there's so much more work we have to do to bring the whole world on chain. That said, I mean, we're about eight and a half months in right now. And I think the team and I am are pretty blown away with the amount of progress that we've made. I kind of see this in three general kind of phases of the last nine months.

The first phase was on-chain summer. It was so exciting. We saw millions of people come on-chain-on-base, so much energy. I think a really great way to kick off the network and the economy and get a lot of that kind of culture that we wanted to make happen kind of thriving. And there's a big boom in metrics and all of the kind of outcomes that we were looking for. Then I'd say after on-chain summer in the kind of fall, we basically saw things kind of like tail off, flatline a little bit, like a little bit of trough of sorrow. Like we had this big launch.

It was really exciting. Now, like, we're met with reality. Our team was also candidly, just pretty exhausted. Like we pushed so hard for a year to get that thing out. Worked so hard during on-chain summer and took like September, October, November. There's a little bit of a reset where it was like, okay, let's get our like equilibrium back. let's also think a little bit broader of like, okay, we made this first push. Where do we go over the next one to two years?

How do we really crystallize our mission, our strategy? I think we did a bunch of good work there. And then I'd say the third phase was really like Q1 of this year, which we entered the year kind of in the top 10 by activity and TVL. And I think if you look at the metrics now, yes, we're third in terms of TVL, which is a very like lagging metric, I'd say. and there's people who've been building for three years, and so it's going to take a long time for us to catch up there.

But if you look at daily actives, dex volume, you know, developers, at this point, base is the largest layer two in the world. And most days were, you know, competing to be the largest chain in the world after Ethereum. And so that, I think, is pretty remarkable. And there were really two catalysts that I think we really saw kind of driving this in Q1. One was the launch of Farcaster Frames, which I think, you know, happened in January. we really leaned in, built a ton of developer tooling.

And as a result, saw our market share of, like, Farkaster activity go from 15% to something like 75%. And I think a lot of the best builders are on Farkaster. And so that was this Cal list that kind of got us having more and more of those builders building on base. And then I'd say the second big Cal list was EIP 4844, which we'd worked on for two years, starting in 2022, even before base was like kind of a twinkle in my eye. and we landed and were there on day one with support for. And I feel like there was this kind of moment that, I don't know if you guys remember that day, but I don't think our team will ever forget it.

It's like 4844 landed on Ethereum, base upgraded to support it, and like the internet broke. It's like every single post in my Twitter feed with people being like, oh my God, look at how cheap fees are on base. And that, I think, kind of like, we'd been flat. We saw a little up curve from the farcaster stuff,

and then post 4844 went kind of vertical in all of the metrics that we care about. And that has kind of been the story of Q1. And now I think we've established ourselves as the market leader, the place where everyone wants to build. And I think it's mostly about, okay, how do we make sure that we're further solidifying that kind of place, that role, and invest more heavily in our ecosystem and our economy to ensure it can keep growing? Because kind of going back to the beginning of my answer, it's day one. If you look at how many people are on chain, it's still, you know, hundreds of thousands a day, probably,

and we have to get to billions. And so that's like a 10,000 X. So a lot more work ahead. There's been just this iterative cycle that exists before crypto between infrastructure and apps, right? Where infrastructure gets built out, apps consume that infrastructure, then apps get constrained by the scale. So then the scaling goes back down to the infrastructure. It takes the infrastructure a little bit of a while to scale out, but then it provides more scale to the apps. And then this is the iterative cycle. And we've seen this happen with a handful of protocols, a handful of layer twos and also layer ones. Salana is experiencing the same thing, right? Like demand for Salana block space, produce some of the growing pains out of the Solana ecosystem. Not too long after 4844 happened, we actually saw the constraints of base.

Despite all of the abundance of block space, there also seems to be an abundant demand for block space. And we saw some of those constraints hit thereafter. So you've been on this campaign, Jesse, of the road to one gigagas per second. Maybe you can talk about just like why this goal is important. And where is a gigagas per second? What is that a measure of? And like why is this North Star important for the base vision? Yeah, absolutely.

And maybe just to kind of refresh folks. So on like middle of March, we upgraded Ethereum with 48444. What that did was it basically brought down the L1 costs for base and other L2s. So now we have this new. place where we can store data that's purpose built for roll-ups. That makes it so instead of paying a ton of money for all of the data we're storing on L1, we pay a lot less. You know, really incredible solution I think is going to enable L2s to scale as a part of kind of Ethereum's roll-up centric scaling strategy. And so post that launch, we saw base fees drop really, really low, but then we also saw a massive

increase in demand. You know, I think we 5xed demand over about like a week and a half. And what we started seeing on base as a result is now the L1 costs were very low, but because of the increase in demand, we started to see actually like somewhat high fees on the L2. And this is because like Ethereum, base has a fee market, which is defined basically based off of two things. One is what's called the gas target, which is basically, you know, what is the target amount of gas per block, or per second that the base network can kind of process. If it's processing above the target, fees start going up. And that's the second part of the mechanism.

It's 1559, same as Ethereum. They start going up exponentially. If the amount of gas being processed, every block is below the target, they start going down. And so it's kind of this like automatically recalibrating system where if there's more demand on the network, then the network can support. You have rising fees. If there's less demand, then you have lowering fees. And so we saw more demand than our target could support, which kind of drove up our fees very aggressively.

Now, the thing to know about the target is it's a variable, so you can kind of change the target. But if you change the target, it has a bunch of other downstream effects. And you can't change the target willy-nilly because those effects can be really problematic. And so instead, you need to kind of apply a very principled approach to how do you change the target such that the network can scale healthily. And so we kind of look at that as three primary problems to solve. One is when you increase the target, you need to have more data availability. You can actually put all those transactions in. More gas means more transactions, means more storage that has to put on the L1.

So we need to continue scaling the amount of L1 data availability through things like PIRDAS and the whole Proto-Ding or dank sharding roadmap. Yeah, this is an Ethereum Layer 1 roadmap question. Ethereum layer one roadmap question, but we're going to keep investing in that. We're working on peer dash prototype. Like we've been contributing to Ethereum L1. We're going to continue contributing to Ethereum L1. The second kind of challenge is like how much gas can the actual L2 node process?

Like literally how fast can it run? If we're running two second blocks and we want to process, you know, 10 million gas a second, can we get all of that gas processed in those two seconds or in less than those two seconds so that all the nodes can keep running? And that's just a lot of kind of like EVM optimization. Can we do things optimistically? Can we change the database format so it works better? So that's the second thing.

And then the third thing is, and there's a kind of, actually in that second thing, there's kind of a related point around hardware. It's like, can we increase the hardware requirements? And the cool thing about L2s is that they don't necessarily have the same hardware requirements as the L1 because of how they're designed. So we can, but we don't want to go too far because it makes it too expensive to run the nose. So that's the second big thing. And then the third big thing is state growth,

which is basically like if you run the chain very fast and now you have it running very fast, you have all the data availability on it, then you get this really, really, really big chain. And it's all this data that people have to store. And that causes a bunch of other downstream problems. And Ethereum's been kind of starting to think about these problems and solving them with things like vertical trees

and state expiry or state kind of like offloading to other parties. And that's a third kind of open research problem that we have to solve. And so in order to feel confident increasing the target, which is just this variable, behind the scenes, you actually need to solve really, really, really hard engineering challenges. And so when Bayes started seeing these increased fees, I think the feeling for me was like, okay, we kind of need to change our focus and narrative a little bit. We've been just focused on this L1 thing of increasing data availability and lowering costs for two years. And now we need to kind of like shake the team and shake the industry and be like, okay, the rules have changed. Like now we have a bunch of L1 data availability.

You know, we're going to use it. But we also need to focus on EVM scalability. We also need to start focusing on state growth. And so I kind of came out there and said, hey, we're going to start solving this. We're going to set a really aggressive goal, which is one giga gas a second. And that goal had kind of come from conversations with the paradigm and ref team who we've been working really closely with. with huge shout out to them. And if you look at where we started,

which was 2.5 million gas a second, or 2.5M gas a second, one gigagas is 1,000 million gas a second. So it's 400X where we started in this process. So we kind of set that really aggressive North Star, and then we basically started working internally to be like, okay, like how do we 400X? And so what we pretty quickly initially figured out

was we had enough headspace to do a couple increases. So over the next two weeks, we did about a 2x. We went from 2.5 M gas a second to 5 M gas a second. We're now in the process this quarter of trying to get to 10 M gas a second. We feel like there's a pretty clear line of sight there. And then we're going to continue just trying to double until we get all the way up to a thousand M gas a second or one giga gas a second. And along the way, we're going to solve or push forward at least, a lot of these really hard challenges that are kind of invisible constraints that are limiting our ability to continue scaling the network.

So this is just what it's like to be a base engineer. It's like this is the landscape that you have to work with and the North Star that you need to get through. I remember post 4844, I think Vitalik released a blog post where he said that the end of Ethereum zero to one moments is upon us. Like now that's in the rearview mirror and now it's more about getting from one to 10. And what he meant by that is a bunch of incremental steps rather than a buy. binary like step function of like the introduction of 4844, right?

Like a binary improvement in Ethereum. Now it's all about just like incremental steps in like seven different directions that are all kind of slowly multiplying together. There's not one silver bullet here, but now it's just a bunch of incremental improvements in like five or six different directions, which base has its fingers in all of them because it's a network. But the beautiful thing about this is that like if base solves any sort of, you know, frontier problem, this is.

it actually gets to be scaled out for the rest of the Ethereum layer two space, right? So like you guys are building for yourselves, but also for the rest of the industry. Yeah. And I think this is really like one of the most important things about how we've decided to build base. It's like all of our contributions to Ethereum L1 obviously impact the whole industry, but we also decide to build on an open platform in the OP stack. And so all of our contributions to the OP stack also really help the industry. And if you look at the current OP stack core development process and outcomes, the base team, the base team, team just led the most recent upgrade.

We did almost most of the work. We did the governance proposal. We're also leading the next upgrade, Fjord, where it's more scaling stuff. We're gonna decrease L1 cost 10 to 20%. We have a bunch of other really positive changes going in there. And all of those benefits, they accrue to any other network that's running on the OP stack.

And I think that that's been really essential to us from the beginning. One of our values has been decentralized in open source. And it's because we believe that this really is a collective effort. And the more we can contribute to things that accelerate us, but also accelerate the industry, the better outcomes we're going to get for everyone building on chain. You said with the introduction of 4844, there was just a marked increase in the consumption of base transactions. And this was more or less expected. We were all chanting the

chant of induced demand ahead of the 4844. But it also seems to be that there was actually more than some induced demand. This is the kind of my gut take. Do you know where that demand came from? Like why were people doing extra things on base? Like what was driving some of that, that demand? Yeah, it was definitely more than I think we anticipated. I think if you look at across the whole industry, though, it maybe wasn't, like, it wasn't more for everyone. It was just more for base.

And that, you know, there's some exceptions to that rule. But like, there's a reason why base is now, you know, processing twice as many transactions and arbitrage or other networks. It's because there's been more transactions that have moved to base than elsewhere. I don't have like a specific answer for you there of like, oh, yeah, it's this specific thing. I'm more thinking that there was something about like the combination of the developer go-to-market we've been running and the timing for our launch and just the moment of all these pieces fitting together where when people like kind of saw this 4844 thing happened,

they projected it onto base the most. And they were like, oh, this is where this is unlocking us to build more better things. I think if you look at the kind of builder metrics, that's what you see. Like one of the metrics that we look at the most is what we call like revenue generating deployers, which is basically like how many people deploy smart contracts onto base and other networks that go on to generate meaningful revenue. Because it's basically a measure of like substantive high quality developers. And if you look at the graph, it's like we were flat and then the Farcaster Frame stuff happened and we did like a slight upperclass. curve and started growing. And then 4844 happened and we started going through the roof. And today, base has more revenue generating deployers than every other L2, then Polygon POS.

And I think we're about across Ethereum. And that has just been like up into the right. And I think a lot of that is basically the moment and the like convergence of a bunch of different factors that caused a lot of developers to come on chain for the first time on base, as well as a lot of developers to refocus their efforts onto deploying things on I really like that metric of revenue generating deployers. Like one framing for this is it's basically entrepreneurs. It's basically small businesses that have decided to set up shop in this new area. We've often talked about Ethereum in the context of it's Manhattan.

It's busy. It's grown up. It's really expensive. Right. And now with these layer twos, we've got new suburbs that are opening. And when you're talking about revenue generating deployers, you're just talking about like businesses popping up. There's businesses.

There's restaurants, right? There's movie theaters. There's all of these small businesses. is popping up. That's very cool. I want to ask some kind of like dumb questions, maybe from a user perspective. No dumb questions for you, Jesse. Okay, so like maybe some obvious questions to you, but you're talking about it from a system perspective. I want to look at this from a user perspective. So it costs, I believe right now, is just looking at the charge coming to this, about one cent to transfer eth on base. That's the cost for a user for a transaction. If I want to send

you some eth, Jesse's going to cost me one cent. What was that prior to EIP 4844? Yeah, I think like our meat, I was just looking at the metrics. I feel like our median fee decrease was something like 80 to 90%. And so that makes it so like the, you know, but that actually impacted like higher gas usage things more than the else. EAS ends. And so I think that that would have probably been in like the 10 to 30 cent range basically for doing an ETH. And then what do you want it to be? Or is that an impossible question answer?

We want it to be as low as possible. I think our kind of like internal North Star across all of Coinbase is one second, one cent, which is we want average and median transaction fees to be less than one second, less than one cent and processed in less than one second. And that's just kind of like, I think for us, a thesis around kind of like the on-chain broadband moment, where it's like if you have cheap enough transactions and fast enough transactions, anything is possible on-chain. And so, yeah, we want to scale

probably another 10,000 X in terms of the number of users while keeping those kind of costs and speed down subsec and sub-scent. Okay, so you're talking about the three buckets of costs that go into a transaction. So of that one cent, how much of that is that first bucket

that you're talking about, which is Ethereum layer one versus the other two buckets? Yeah. So today, most of the cost is actually not Ethereum layer one. because of the kind of usage of the L1 gas market, like we aren't using all of the blob space.

And what that means is it means that blob fees are very, very cheap, essentially free. I think that that will change in the next few months. We'll start using that. And then we'll have a market-based fee, which will bring it back to probably something like, you know, 5 to 30% of the L-1 fee. And then there's kind of the like L-2 market-based fee.

which is like depending on how much the target is and how much demand there is, there's going to be higher or lower fees. And so that will make up the rest of the fee. The way we've described the IP 4844 is it's almost like another lane that's opened up, like a high occupancy vehicle lane. And right now it's cheap because it's not full, right? But that could change in the future. Let's say if that changes and that HOV lane becomes expensive yet again.

So Ethereum blob space is full and all of the layer twos are kind of competing for it. would you ever consider using a non-etherium DA solution? Because there are some of those springing up, and that could be a source to reduce fees as well for base. Yeah, I mean, like, look, we think pretty expansively always of like, what are the different options for scaling? I think our current perspective is there's a very clear roadmap for Ethereum data availability scaling that just needs to be executed.

Like PureDAS is the next milestone. That gets us another 10x potentially of data availability. And so our top priority is executing on that, just like our top priority previously was executing on 4844. And we think that that's going to be more than enough, at least data availability for the next phase of base is growth. When we think about the mission and vision and strategy of base, we're really trying to build a global on-chain economy that increases innovation, creativity, and freedom. And I think one of the things that is required for building a global economy is trust and security and surety. And when I think about the trust and security and surety that you get from depending on Ethereum for data availability alongside settlement and kind of all the L1 logic that sits there for L2s, it's just so much higher than I think the trust that you get from starting to kind of like fragment those things and introduce basically new trust systems into your technology stack. And so I think for base itself, it would have to be pretty extreme.

extreme costs for us to, to, I don't even know if there would be a scenario. I think like, again, we're optimizing for trust and, and kind of that, that long-term outcome. And I think we're going to be able to solve all of our needs on the Ethereum side. So, Jesse, if layer ones are expensive and layer twos are less expensive, why don't we just scale with a whole bunch of layer threes on base? I think we, I think we, well, A, I think there will be a lot of layer threes on base. And my thinking on this is somewhat evolved in the last year, as I've started to kind of build a better mental model. for how these pieces work. I generally think like layer 3s can be analogized to just servers.

They're just servers that run a slightly more connected on-chain and let you more easily bring in the on-chain assets into your kind of dedicated compute environment. And there's a lot of people who want to run servers. And they run all kinds of different servers with different trust characteristics and different stacks and languages and tooling. And I think we're going to see the same proliferation at L3, you know, on base in other places.

You know, today I think we are tracking like six or seven L3s that are running actively on base. I expect that to grow to hundreds this year, potentially more. And I think it's going to be a really fertile ground for experimentation because it's going to be way cheaper because you're going to have easier on RAMs for users. And an L3 on base is just another chain that, you know, it deploys on top of the base L2. And so settlement on base L2 and data availability on base L2. to or elsewhere. What about another solution to your second and third bucket for low,

like high transaction fees and gigagas, which is just like parallelization, right? So like, there are a lot of, Solana has kind of like pioneered this, but now there are other EVM compatible parallelized execution environments as well. What do you think about that in terms of roadmap items for base? Yeah, absolutely. I mean, I kind of, I bucket this into the like EVM optimization, which was kind of bucket two of the what do we need to do to increase target, there's a lot of stuff you can do with kind of parallel, like optimistic parallelization, just in the EVM that doesn't break EVM compatibility. You know, it doesn't get you always all of the gains, but you can still do a lot there,

and we're really excited about that. And again, like, we've been working closely with Paradigm and Rath team, and, you know, they've been thinking a lot about that. And we're excited to collaborate with them further there. I also think there are some things that could be like breaking changes. For instance, you can do a lot more with parallelization and in general kind of like state isolation if you require access lists where developers actually have to specify here are the things I'm going to access in this contract because it then lets you, or in this call because it then lets you kind of do a lot more in terms of figuring out how it's going to execute. That would be a breaking change. Like, you know, there's all the stuff that's deployed that doesn't have those kind of access list defined, and we need to change it for new things being deployed.

I don't have a strong opinion about is that the right thing to do or not. I do believe that there's value in thinking expansively about kind of this L2 problem space and how we evolve the EVM at L2 and how that might change versus L1. And I think it's been exciting to see efforts to start to do that in a way that is both kind of thinking expansively and staying kind of aligned and connected. You know, there's this thing called RIP or roll up improvement proposal. And that's like run by Ethereum Core Deves in collaboration with L2s working to evolve the L2 EVM while still staying connected. And I think we'll see a lot of progress and impact as a result of those sorts of experiments. So Jesse, crypto natives, they're used to paying fees for transactions, right? So you go from Ethereum to go to base and you're like, oh, man, this is so much cheaper.

Isn't this great? Okay? But Normie is out there mainstream, the billions that you're talking about that you want to bring on chain. They're not used to paying transaction fees for doing things at all in Web 2. So what's your thought on that? And like, why generally? So someone comes externally and they're like, Jesse, you know, one cent is great. But you know, it's better than great is what than one cent is free.

So how do you go make my transactions free? Why can't you do that? Yeah, yeah, I totally agree with that. And I think this is one of our theses that's starting to play out, which is that as costs on the L2s and other compute environments go down, you'll actually see developers internalize more of the costs into their own business model and structure. So whereas right now, because fees have been so high and because the technology hasn't really been there, like users are paying for those fees. I actually think we're going to move towards a world increasingly where developers, cover all the kind of gas compute costs. And then they make money from their business in some way.

And they use that to cover their expenses. And this is not like some crazy novel idea. This is the way businesses have worked online forever, right? Like you don't pay your AWS costs to use Google Chrome or to use Riverside or TikTok. That would be weird. But instead, TikTok or whoever pays those costs, they make revenue, they pay those costs. And I just think it hasn't been really possible. but now with lower fees and with things like paymasters,

which are now possible with smart wallets and 4337, we're seeing more and more of that happen. And so one of the ways we're trying to accelerate that is we're actually giving away gas grants to developers all across base. So today if you go to Coinbase Cloud or Coinbase developer platform or Alchemy or Byconomy or StackUp or Pimlico or pick your favorites account abstraction tooling, you can go get a grant from base.

to fund transactions for you, to give your users free transactions. And that kind of gives you the opportunity to experiment and learn about how do you kind of evolve your business model and product such that you can continue to provide kind of a gassless experience while generating revenue that you can use to then cover gas. And so I think that this is going to be a really, really fruitful place for innovation. It's something we're pushing on really hard because it will make the user experience much better. So this isn't something that you are actively working on as part of the base like protocol you're this is something you're kind of pushing responsibility towards

the app layer devs and then giving them the support and the tools that they need to be able to execute on like a gas-free vision yeah yeah exactly we basically think that like building infrastructure on top of the chain is the best place for this because i think if you look at um this sort of compute like it always is going to have to be priced in some way because that's how you get this kind of like efficient market where people are paying however much it's worth. And I think you run into a bunch of other challenges if you don't have that. If you talk to Salana folks, I actually think this is one of the things that they're running into a little bit right now is you don't have economic model for priority fees in getting transactions submitted on Solana right now. And so what that's leading to is

people basically trying to gain the system by submitting, you know, thousands, millions of transactions and that then leading to network instability. And so like economic kind of mechanisms are really, really valuable for designing the sort of highly available, highly decentralized, highly resilient systems that and compute that blockchains can offer. So I think they need to exist. But I think by kind of working up one layer above and then building a bunch of infrastructure there that enables us to build on top of that in a really seamless experience, we can get a lot

done. And one, I was actually tweeting and casting about this the other day is like one primitive that I think is missing today that I think we really need is better kind of like hedging and market infrastructure for both L1 gas prices and L2 gas prices. Like ideally we'd be able to create a market on base where we could efficiently price future gas costs and the gas market such that we could give developers actually more consistency. So they could say, oh, we're going to spend, you know, 10 million gas over the next three months of running our app. Let's commit to buying that up front and have a like known cost that

we can understand and then kind of smooth that out with the market so that someone else is kind of taking on the risk and you know willing to trade that. So I'm talking to a lot of teams who are doing that right now. I think that's going to be kind of the next big primitive that will unlock a lot more design space here. Yeah, it sounds like a gas credits. And then of course there's that famous Ray Dalio story of like he did some like crazy financial engineering with some sort of like chicken futures thing. And at the end of that, at the end of that financial engineering,

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I want to open up the conversation to CoinBase. relationship with base. There's a tweet that I want to read from Max Brandsburg. He says, going forward, Coinbase is going to be storing more corporate and customer USC balances on base. This enables us to manage and secure customer funds with lower fees and faster settlement times with no impact to the Coinbase user experience. We are excited to continue to move our business on chain and hope other companies will follow our lead. Since this tweet went out, the supply of USDC on base is just absolutely parabolic. I can only imagine because Coinbase followed through

on exactly what they would said of actually using base as their, its own backend. Can you talk about the just this decision? I'm assuming it starts with USC from customer and corporate accounts, but it might increase in scope from there. Talk about like what this means and where this goes. Yeah, I mean, I think if you look back at kind of the mission vision strategy of Coinbase,

what you see in a blog post, you know, Brian wrote in 2016 is, you know, we've had this four phase plan for building the on-chain economy for eight years at this point. You know, he laid it out. He was like, first we're going to build the protocols, then we're going to build the exchange, then we're going to build the consumer interfaces, then we're going to have millions of apps that billions of people use.

And I feel like right now we're kind of between phases three and four, where we have the starts of these interfaces and Coinbase and Coinbase wallet and other kind of browsers and wallets. We're also starting to see kind of the start of these apps where we have lots of apps that are being built on chain on base and other networks that people are starting to use. But we're obviously like pretty far away from having millions of apps that billions of people are using. And I think the thesis with Coinbase is we too are going through this transformation where we started from a place of 2012, you know, Web 2, let you buy Bitcoin.

That was all we did. And now here we are 12 years later. And in many ways, we're still a kind of off-chain custodial centralized business with crypto in it. We're letting people do things with crypto, but they're doing it off-chain, you know, in their kind of like Web2. products. And I think we see an opportunity for kind of us to lead the way in showing everyone what does it look like to take these users, these assets, these products, and move them on chain. And what are the actual benefits that we get from that? And I think when we think first principles about the benefits, it starts to become pretty obvious to us why we would do this.

First off off, it's way cheaper. You can build the same products on chain as off chain at 10x lower cost. And I think Uniswap is a great example of this. You know, took like two engineers to build the first version of uniswap versus building a centralized exchange can take you know tens or hundreds of engineers from an engineering perspective so that's one benefit way cheaper the second benefit is things are globally available from day one right like if you build something on chain it's available to everyone by default whereas if you build things off chain you run into more challenges in terms of how you make it available to people and what the different kind of engagements you need in different places in order to unlock that so so that's a that's a really big

benefit. The third benefit is composability. If you build something on chain, it automatically works with everything else that's on chain. Things just plug in. People can build on top of it. They can leverage it. Versus if you build things off chain, then everyone needs to integrate with you through legacy APIs. And so when we kind of evaluate this from a business perspective, from a coin base perspective, I think, you know, folks like Max, who runs our consumer businesses, they look at this and they're like, yes, we need to do this because it's going to be good for our business. But also because if we do this, we're going to build a bunch of tooling and playbooks and knowledge that then's going to let us help everyone else make this

transition. And so I think this is really what the USDA kind of announcement from him is indicative of. It's us trying to find kind of what are the steps we can take to move more and more parts of our business on chain. And I think the thing that I'm really excited about is if you think about Coinbase today, you kind of think about it's like a glacier. It's a massive company with so many things going on. And today, most of that on-chain stuff is like underwater. Like, it's not happening yet. And people are seeing the tip of the of the iceberg where it's like, oh, USC balances are starting to come on-chain. Awesome. Like, Coinbase is starting to let people do things on-chain on-base and wallet. Awesome. But I think what's going to happen over the next year and change is like that whole iceberg

is going to rise out of the water. And it's like, oh, no, every single part of Coinbase can come on-chain. Wow. All of our products. all of our users, all of our assets, they can move onto these new platforms where they're gonna be cheaper, faster to build, globally available, composable with everything else, and better experiences for our customers. And I think that transformation will both blow people's minds.

It will lead to a bunch of better products from Coinbase. It will accelerate the base ecosystem, and it will set the playbook for millions of other businesses around the world to make a similar transformation. And so that's what this is about. It's about showing the base of the playbook world that this is possible and showing our customers that it's not only possible is better.

USDC on base is definitely like the most proximate thing to put on chain. It's like the first step, right? And you can only imagine where it could go from here. Is the idea here that like Coinbase kind of like unbundles itself as it discovers ways to put more of its own business logic on the actual chain? I don't know if unbundled necessarily the right word because I think some things, like users like bundled experiences, right? They don't want to have to go to a bunch of different places. I do think that as we move on chain, we will find the obvious places where we can be decentralized and open source and bring in additional protocols to provide more value. But I do think we're going to try and move on chain in a way that still lets users have a really

consistent product experience. And one of the things I think is going to enable us to do this is this new smart wallet that I've talked a lot about. And I think folks have been talking a lot about on the internet. The way I think about this smart wallet is that, like first we had to build base, which was kind of a developer platform where you could just like build applications. But even in that developer platform, you have all of these really, really hard problems for developers to solve. It's like, oh, well, how do you integrate the on ramps and like how do you actually make the wallet experience is really good for users? Like, it's still super complex. The smart wallet is the next platform that we're building, which is it's going to sit on top of base and

And it's going to make it so both users and developers have an incredibly simple, unified experience that lets them use all these applications. And so right now, every developer needs to worry about, okay, how do I get users to bridge from L1 or other chains? How do I get users to on ramp? Like, how do I do gas subsidies, all these things? In this new smart world, like, you don't worry about any of those things. The onrams built in, the bridges are built in.

You don't have to worry about multi-chain balances. you don't have to worry about the kind of like doing custom gas stuff you can just use the paymaster interfaces you worry about building your application and similarly on the user side it's like you don't have to worry about moving your funds from coinbase to your wallet because you can just spend your coinbase balance it just works right you don't have to sit your friend down every time you onboard them and give them the talk about how if they mess up they're going to lose all their money because there are controls that are going to be built into these wallets that make it so users can't lose all their money just like with our existing tools, financial tools.

And so I really think that what's going to happen over the next year is we will have built this underlying compute platform that let people build applications. And now we're going to build the kind of next level application tooling that lets developers build applications. And users are finally going to have a front door that just works.

And that will then allow us to build a bunch of first party Coinbase products into that wallet and that wallet can access, but also let developers build a bunch of of third-party products that are incredibly powerful and vibrant that just work because they have this new platform that lets users more easily use them. One thing I thought about when I read this tweet, and this might be me reading into just some tea leaves and projecting my desires and imagination.

So, Jesse, either corroborate me or pull me back into reality, but the idea that just reading the line again, this enables us to manage and secure customer funds with lower fees in faster settlement times. When I saw this tweet, I was thinking like, okay, like Coinbase centralized company front end in the front, base in the back, right? Like user accounts in the back. And to me, this has always been one of the visions of what it even means to like go on chain in the first place or why blockchains were even invented, right? Like if we had the level of transparency of Coinbase using customer funds on chain, back in 2008, we wouldn't have had such a crazy catastrophe of spaghetti messes of credit default swaps with no. sort of accountability or like and this is why courts had to step in because like we don't know what

the hell's going on we don't know what contracts are being settled by who or who owns what and so when I see a financial institution say hey we're going to use this like blockchain thing to manage customer funds and it's all oh by the way it's totally like public and open and permissionless and therefore user auditable to me I just see like 2008 like insurance like a shield a protection layer against any sort of like things that like motivated the creation of the space in the first place. That's at least what I'm projecting and hopefully is true. No, that's that's exactly how I think about it too. I think one thing that is maybe, I think a lot of people have talked about like,

oh, we can use blockchains for like proof of reserve by like putting out testations on the chain that everyone can see. And I think we may be like a little bit more galaxy brain than that. It's like, no, we don't need to do proof of reserve where we like take these off chain things and put them on chain as a representation. We just put it all on chain. You can put it on chain. Defi is proof of reserves.

Like, defy is proof. It's the best proof of reserves you could ever ask for because your money is sitting on chain in a place you can audit and verify. There's no, like, these systems go down and you don't have access. No, it's like if the interface goes down, you go use another interface

because it's on an open system that anyone can access. And I think... Not to harp on Bitcoin here, but Bitcoin is a proof of reserve system because it doesn't have defy. That's why I like proof of... reserves came about because like that's the best that it's got that's the best that it's got yeah yeah yeah so

i think that is like definitely our mindset it's like we're just going to move it all on chain because if we move it all on chain it is the open global economy that we want it is an on chain global economy that increases innovation creativity and freedom and it's it's transparent it's decentralized it's all of those things that everyone's wanted but it's just that we're building on this new platform And there's so many things you can build on that new platform. I think it's going to be pretty incredible. And I don't think most people really grok what exactly this transformation means or how transformative it's going to be. And to like maybe push on that point a little bit further, sometimes people are like, why do you have to do this at Coinbase?

Isn't Coinbase a crypto company? I'm like, yes, Coinbase is a crypto company. Coinbase has started in 2012. Like even the biggest crypto company in the world, that's the most crypto forward public institution in the entire world, it still takes time. It still takes convincing. It still takes a lot of understanding and infrastructure to get to this kind of galaxy brain perspective, which is we're going to move it all on chain. And that's still happening internally. It's still a process we're working through. But I think we're every day moving faster and faster and faster. And so I think what will happen

after we figure it out is like the whole world is going to figure it out because they're going to start to have these examples. They're like, oh my God, you're telling me, I can have cheaper everything and more leverage for all my developers and be totally global and be transparent and open, like why wouldn't we build on chain? But it's going to take time for that to settle in and to kind of percolate through every single part of the world that we know it today. Jesse, some people see a Coinbase being kind of a centralized exchange and a publicly traded company, all of these things, and they look at base. And so this is all being incubated and developed at base. And they say, base is centralized. And so what do you do with that criticism

in general. And I don't know how you kind of look at that. Maybe there's multiple ways to address it. But just the general concern that base is centralized and it's not within a kind of crypto decentralization ethos. What do you make of that? Yeah. Yeah, it's a great question. And from the beginning, one of our values I said earlier has been decentralized and open source. And everything we've done has been in that direction. And there's a level of deliberateness that I think we need to bring to building an incredibly trusted place for people to grow their economy. And I think that deliverness also means that we have to pace ourselves appropriately. We have to move really slowly when that makes sense. And so when I think about decentralizing base, there's really

two kind of tracks. There's kind of governance decentralization and then there's technical decentralization. When we set up the network for main net, day one, we had certain requirements in terms of getting to what we consider a sufficient level of decentralization. to let us keep base open and permissionless and global. And that was that there could be no single point of failure or single point of control that would be able to change arbitrary things about the network. Because if that existed, then there were a bunch of kind of knock-on effects from how regulators might look at this thing

and how we could authentically position it and kind of talk about what we were building. And so from day one of base, that has not existed. There has not been a point of control that Coinbase has had as a single decision maker where we could change things. But there's definitely still components of the network that were more centralized versus decentralized. And so a couple examples of this are when we first launched the network, the way the contracts could be upgraded required a two of two multisig, which actually went down to two much bigger multisigs, one managed by the opposite. Optimism Foundation, one managed by the base core team inside of Coinbase.

And those big multisnics need to come together to make changes. That meant that, like, Coinbase can't arbitrarily make changes. Neither can the optimism foundation. We both need to. But it's still just two institutions. And so what we're working towards right now is expanding that to a security council that's geographically distributed, that has way more parties that's been built in collaboration with optimism that's rolling out right now.

And so that's going to remove one of the big points of failure. will further kind of remove those Security Council controls, decentralized it, et cetera. A second point of failure was that in the kind of first version of the network, there were really only two people who had the ability to verify the chain on chain and react if there were malicious behaviors by a sequencer, which Coinbase is running. That was Optimism Foundation again in Coinbase.

It was one of two. So either of us could challenge some bad behavior from the sequencer. What we're working towards right now is launching fault proofs, which will make it so anyone can challenge. And that's on TestNet right now. We just finished all of our audits working towards a main net launch shortly. And so those two kind of major technical changes, I would say, are the next big focus for us from a technical decentralization perspective. They'll take us from stage zero to stage one in terms of kind of Vitalix framework. And then we have a pretty clear path from stage one to stage two over the next year.

That's, by the way, that's Vitalx framework. it's also the framework on L2B, which puts some methodology to what decentralization actually means in layer 2. And what you're talking about is like there's a pie or some people call it a pizza with five different slices. And right now on L2B base has two of those slices is green. The other three is red. And you're talking about getting to stage one of turning these all to yellow and green, yes? Yep, yep, that's exactly right.

And we're making really good progress on that. So that's kind of the technical decentralization. path. The second kind of decentralization path that I think about is more governance essentialization, which is in kind of that technical system that is the layer two roll up. There are certain points of governance decision making. For instance, like the role of kind of being that participant in the multi-sake, like who does that or like setting the gas target, like who does that? Those are governance decentralization. And today those governance decisions are made by the base core team at Coinbase. And over time, we want to expand who can participate in that governance decision making.

And we're still working through exactly what this looks like, but we are committed to doing that. We're making good progress. And there's a bunch of ways that we can think about this. One of the things that I've been most excited about with base is that because of our absence of a token and kind of this monolithic governance decision making structure that could be existing with a token, we've actually started to see a pretty incredible kind of bottoms up emergence. of kind of these like cultural institutions, organizations, movements inside of base that are starting to have real cultural weight. So this is things like base management or yellow collective or base God, like all of these communities that people now look to as like kind of flag bearers in base. And one of the things I'm really excited about is exploring and experimenting with governance

decision making models where we actually leverage those like kind of systems and those those cultural institutions to build meta-governance that kind of aggregates their perspectives to get us to a great outcome. And so one example of us actually doing this really, I think efficiently today, which we just did, is if you look at a lot of the, like, one of the responsibilities of governance has been like to allocate funding in the form of grants. I mean, mostly the way people have done that is they built processes that let people apply for grants and then kind of have built systems that evaluate them and And it's pretty expensive. It takes a lot of time.

You have to, like, build all these systems. We, in the last couple weeks, just launched this thing called base builds on Farcaster slash base dash builds. Every week, starting on Friday through Sunday, it's a weekend activity. You can go in there. You can post this week I built and then say something you built. And every week we've allocated two weeks of funding, although we'll probably scale that. And if you post in that, and then we've kind of defined on the back end, a set of participants,

who can like and recast and when they like in recast, it will basically upvote you. We'll then proportionally distribute that ETH to you. So we've basically built a kind of self-perpetuating system where builders are sharing what they built on chain in a social format. You have a bunch of people who are organically liking and participating and engaging with it.

That is then creating a feedback loop that lets us understand what are the most valuable things that are people building. And then we just put money in and fund those people. And that is us leveraging this organic kind of substrate, of the base ecosystem to do something that previously governance would have had to do and do it in a decentralized way. And that's something that no one else is doing in the industry right now. And so it's been interesting to see how kind of some of the constraints, I think, that we've had

have then led to us innovating and actually like opening up new ways of doing things that I think are more efficient, more effective, and getting us better outcomes. It's also just interesting to see the flywheel of infrastructure that both Coinbase is using and also leveraging from third parties like Farcaster in order to facilitate growth and development, right? Like there's a big flywheel going on here. Yeah, and that grant program, it's actually not run by us. It's run by this team called rounds that came out of the Nouns ecosystem.

They originally built Prop House, and this is kind of V2 of their product. And they've been running this for, like, they've been running it as a experiment. And it's showing incredible results. Like, if you go to their rounds page right now, this is the first week we had it. We had hundreds of submissions. And you look at the top 100, 200, there are. all high quality, literally every single one, and they're incredibly diverse. And our team, like, we didn't have to go through and manually review them. It leveraged our ecosystem to do that,

to get us to a great outcome. It's incredible. Well, I know it's always a good season to build on base, but I think there's a season coming up specifically around summer where maybe it's an especially good season to build on base. Jesse, can you walk us through on-chain summer round two? What is this initiative. Yeah, well, last summer we did on-chain summer. It was kind of our coming out. We think it's bigger than base. It was really this moment where we want to start telling the story of on-chain to the world. And we saw like a pretty incredible response, so much energy of people just coming and building. And I think what that led us to do was make it so like on-chain summers every summer. Like from here on-out, until the entire world is on-chain, we're going to be helping,

supporting, and amplifying on-chain summer. Every single summer is this time to be on-chain. Every single summer. I mean, every season is a time to be on chain, but particularly summer. I think there's just something about that energy of summer where it's like, you know, kids are on break. Like, let them out. Let them build. Like, let all of us have some fun on the internet, on chain.

And so this summer we're running it back. It's the whole summer. So beginning of June to the end of August, if you're in the northern hemisphere. If you're in the southern hemisphere, it's on chain winter. And we're going to be doing some funny things related to that. We'll be making sure that there's a good meme there. But the whole summer, build incredible things. on summer. We have, you know, I think like 600, 700, 700, eth worth of funding that's going to

builders more than $2 million. They'll support people building. We're running a month-long hackathon in June. That's going to be global, tons of incredible, like, partners who are helping us run that. We're going to be amplifying everything people build to as many people as humanly possible, you know, like think getting millions of people in front of the app that you built. There's going to be a ton of really cool brands and communities and products that are launching new things this summer. Coinbase is going to be launching new things this summer. We're going to be blanketing the airwaves as much as possible. And in general, we're just going to be trying to bring the world on chain. And last year, we brought millions of people on chain.

My hope is that this year we bring tens of millions or hundreds of millions of people on chain. And we're just going to be pouring all of our energy into lifting up the builders who are making this happen. So of course, base wants builders. It wants devs. The devs here like grants and they understand what that means. But like who's the marginal person who's curious, who's on the cusp of becoming on chain or building on base or just being an active base business? Who's the next most furthest out person that you're really trying to reach? Yeah, well, one thing I think is really important and we sometimes lose this in our messaging too is when we say builder, we don't just mean devs. Like developers is a subsection of builders for us. When we say builder, we mean anyone.

Anyone can be a builder on base. You can build your brand. You can build your creative practice. You can build your business. You can build your application. You can build your identity. You can build your wealth. Like literally every single thing you've done on off chain, you can do on chain and it will be better.

And so I think when we're thinking about on-chain summer, we're really excited about supporting developers and engineers and helping them build applications. But we're also really excited about helping all those other people find their home on-chain. and bring their vision of the world on chain. And so we're going to have coffee shops coming on chain. We're going to have pizza parlors coming on chain. We're going to have artists coming on chain. We're going to have small businesses coming on chain and do payments. We're going to have students coming on chain.

Like literally every single part of the world, we want to help get on chain this summer. We're going to be putting a ton of resources into making that happen. And so if you are doing something on chain, you are a builder. And you don't have to write code to be a builder. You can use any of the tools that exist that make it possible. for you to create on-chain. And I think that's one of the really powerful things about what this next generation of the internet enables.

Is there ever a world where base as an org spins out and becomes independent from Coinbase? Is there ever a chance that you guys just want your independence and splits? Yeah, I mean, I think when we talk about governance decentralization and technical decentralization, we are looking at all the options. And we've said from the beginning that base is incubated by Coinbase

and we're decentralizing over time. And so we don't know exactly what that looks like. But I will say that today the base team operates with independence inside of Coinbase. I report to Brian. You know, I have my own budget and P&L. And I basically operate as kind of like CEO of the base labs team. And we execute on what we think is highest priority for growing the base ecosystem and then collaborate with the rest of the business really closely. And I think that level of independence and trust and support and autonomy and really the feeling that we are being incubated by Coinbase is what's enabled base to be based.

And so I think that the best versions of these things are going to be the decentralized versions of these things. We can't build an open global on-chain economy without decentralization. And I expect that we will continue leaning into that over the next couple of years. So, Jesse, this has been great. And as we close this out, I think you've been key to accepting this meme, OnChane is the new online, which I really like because it compares on-chain to the Internet in a way that is, you know, like harkens back to the 90s. And everyone's very excited about that. It also gives us a way to sort of measure our progress.

And if you think about the bankless journey or the crypto journey in general, it's about doing more and more on chain over time. So I want to end this episode with the question we sort of started with, kind of the, how far along are we in this whole journey? And maybe put you on the spot and asked you this question. You said you called out a number. You said a billion people on chain. Okay. How long is that going to take? When are we going to achieve that?

Yeah, well, I'm an optimist. And so I'm always a little bit too optimistic, I would say, on timelines. but I think that this is the decade of the world moving on chain, and I think that we're going to see it faster than people anticipate. And so I don't know whether it will be in the next one to two years or the next three to five years, but I really do believe that this is the decade where we'll see it happen. And by the end of the decade, the whole world's going to be on chain. By the end of the decade, the whole world is going to be on chain.

Jesse, thanks so much for joining us on bankless. This has been a blast. Thanks for having me, guys. Appreciate it. Bankless Nation, some links in the show notes will include a link where you can find out more about on-chain summer. the second edition, the summer that never ends. And of course, got to remind you with this, crypto is risky.

Going on chain is risky. You could lose what you put in. But my God, it's so fun. We are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the bankless journey.

Thanks a lot. I love it.