Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Jesse Pollak: Base – The Optimistic Gateway to Crypto Adoption

Episode Date: March 3, 2023

Layer 2 scaling solutions are widely regarded as the next step forward in the mainstream adoption of crypto as they enable higher throughput and lower transaction fees. Coinbase’s recent announcement of building an optimistic rollup solution called Base is proof (no pun intended) that major centralized actors view this as an opportunity to onboard new users in a decentralized crypto economy. The following years will abound in innovation as both optimistic and zero-knowledge rollup solutions still have plenty of room to grow, but the involvement of centralized entities will act as a catalyst from a technological, as well as a regulatory standpoint.We were joined by Jesse Pollak, Head of Protocol at Coinbase, to discuss the thesis & business model behind Base and how it will act as an interoperable bridge to onboard the next billion users on-chain.Topics covered in this episode:Jesse’s background and his role as Head of Protocol at CoinbaseBase’s business model & thesisBuilding on the Optimism stackPermissionlessnessHow regulations are going to influence users of Base (vs. Coinbase)Learning from the competition (BSC)Different fee markets to offset transaction costsWhy Base chose the Optimism stackBase’s upgradeabilityTackling Optimism’s withdrawal periodBootstrapping BaseFuture roadmap and mainnet timelineEpisode links: Jesse Pollak on TwitterBase on TwitterCoinbase on TwitterOptimism on TwitterSponsors: Omni: Access all of Web3 in one easy-to-use wallet! Earn and manage assets at once with Omni's built-in staking, yield vaults, bridges, swaps and NFT support.https://omni.app/ -This episode is hosted by Brian Fabian Crain & Friederike Ernst. Show notes and listening options: epicenter.tv/485

This is Epicenter, Episode 485 with guest Jesse Pollock. Welcome to Epicenter, the show which talks about the technologies, projects, and people driving decentralization and the blockchain revolution. I'm Brian Crane and I'm today here with Frederica Ernst. And we're going to speak with Jesse Pollack. He is the head of protocols and the base contributor, number one, base being the new roll-up based on optimism that Coinbase is launching. So really excited to have him on. And just before we get started, I would like to tell you about our sponsor this week. So our sponsor this week is Omni, which is a fantastic multi-chain mobile wallet. They support 25 protocols so you can manage all the assets in one place.

And what's really cool about Omni is what you can do inside the wallet. If you want to get yield, then they allow you to get the best API fees in a few taps. If you want to swap, then they aggregate bridge. and decks, so you can do that from in there. If you like NFTs, they also have really broad NFT support, so you can collect and manage your NFTs across chains in one place. So it's really the easiest way to use Web3, and it's fully self-custodial.

It means you don't have to trust anyone with your assets except yourself, and it also has ledger support. So give it a try at omni.com. So with that, Jesse, thanks so much for being on the show. Thanks for having me, all. I love Epicenter. Long time listener, huge fan. Aw.

Yeah. Like what you said before that you've probably listened to like all the episode. That's pretty amazing. I don't think there's a lot of people who've done that. I've been listening for like four years, five years. However long it's been going. We should give out NFTs for people who've actually listened to at least like 95% of the episodes. Because I don't think there's all that many of those.

It's almost 500 episodes. So it's a lot. It's a lot of episodes. I run three or four times a week and if there's a new episode, an epicenter episode, I listen to it. Cool, cool. Now we're going to have this be a whole quiz about my knowledge of epicenter for the next time. No, no, we will just trust you.

So yeah, let's get started. I mean, maybe before we get into base, I'm wondering if you can talk a little bit about this role of like head of protocols. Like how did that come about and like what is sort of your role? been within Coinbase? Yeah. I've been at Coinbase for six years at this point. I guess I'm about to hit my six year anniversary.

I joined at the beginning of 2017 after having started a company that worked with crypto companies back in 2013. And for the first four and a half years at Coinbase, I supported all the teams that built our consumer-facing products on the engineering side. So Coinbase, Coinbase Pro, Coinbase Wallet, I joined when those teams were really small, you know, a handful of people and then helped grow them to a couple hundred people. And then in the middle of 2021, I took a step back from that role and stepped into a new role at Coinbase, which is the role I'm in today, which didn't have a name at first and kind of had a

singular mission. It was me and a really small group of people. And our mission was basically figure out, how do we bring Coinbase on chain as a business? Now, what does that actually mean? If you think about Coinbase, it was started in 2012. At the time, you could just buy Bitcoin, there were no smart contracts, there was no kind of on-chain economy. Eventually, we added the support for buying Ethereum, like Bitcoin, a bunch of other assets. And then really in the last few years, with things like USDC and Coinbase wallet and CBE, we've started to have more what I would call natively on-chain products, which are products that are written as smart contracts or interact directly with smart contracts, and give our users, whether they're individuals or businesses or developers,

access to the kind of the full power of this platform that's emerging. But those products are still a very small percentage of our overall business. The vast majority of the users, the activity, the assets are still in custodial centralized systems. And so for the last, you know, almost two years, I've been working inside, you know, this, I think, 3,500 person, Fortune 500 public company trying to figure out how do we change that? How do we go from having 90% off-chain, 10% on-chain, to having 100% on-chain over the next few years?

And that's been a wandering journey, a lot of learning, a lot of failures, and out the other side of that came base, which we think is going to be a really powerful platform, both for Coinbase, but also for the broader world to come onto the on-chain platform and start building really useful things that billions of users want to use? So Coinbase is famously a publicly listed company, which means you have fiduciary duties to your shareholders, right? So what's the high-level business case behind introducing base and bringing Coinbase on Shane?

Because basically, kind of just justifying that with ideology isn't enough for share. how it is, right? You have to have to have a business case. Yeah. Yeah. And if you look at what Coinbase, what's made Coinbase's business over the last 10 years, I think what you'll see is that we've made money by making it easy for users to interact with and access crypto. And for the longest time, the thing that users have wanted to do in crypto is trade. They've wanted to speculate. And so we've made money by making it really easy for them to buy crypto, sell crypto, hold crypto, do that in a secure way that's trusted with easy interface. But I think from the beginning, and this is pretty well laid out in Brian, our Armstrong,

our CEO's secret master plan for Coinbase, which you wrote in 2016, the vision for Coinbase is to bring about an open crypto economy where there are millions of gaps that billions of people are using, that are not just trading, not just speculative, but are actually things people have to use on the day-to-day life to go about the things they care about. And I think our thesis is that if we can accelerate the number and quality of those applications, then there will be tons of opportunity for Coinbase to continue building easy-to-use interfaces that are trusted for our users to use those applications.

And we'll be able to make money off of that because users will be able to continue, you know, users will be excited about paying for the privilege. We're paying for the access that CoinMates will provide as kind of a gateway to Web3 or a gateway to the on-chain economy. And we're already starting to see this. You know, for instance, in Coinbase wallet, we have a swap function there that works a lot like the swap function or trade function in Coinbase.com. But it's powered by decentralized protocols. It's powered by zero X in Uniswap. But Coinbase can still charge a fee because it's really easy.

Users can also go into the browser and interact with Uniswap and not pay the fee if they want. But lots of people decide to pay the fee because it's easy for them. And I think our thesis is the more of those applications, the more growth for the business, the more things for users to do, the more users who are going to be coming on chain. And all of that will be good for a Coinbase's business long term. So it's kind of like an App Store business model. Exactly. Yeah, it's an App Store business model, but I think the thing we're excited about is it feels like

it can be an App Store, but it's not going to be a coercive App Store, where everyone's locked in and you have to build in a certain way or you have to, you know, pay certain fees because we're building on these open platforms, you know, things like EVM, things like the OP stack, it's going to be easier and easier for developers to opt in to being on base and being in the CoinMates product. It's going to be easy for users to opt in to using base. But if people say, hey, we don't want to be here, hey, we want to go use applications elsewhere, I think our goal and thesis is awesome. Like that's what it's all about.

That's what the open crypto economy is about. It's about having choice. And we're going to continue supporting users to go elsewhere. And then we're going to let the Coinbase products win on their merits by making them easy to use, making them secure, making the things that people want to use because it makes their life better. I'm still totally following sort of the rationale behind base. I mean, I guess one thing you're saying,

seems to be like, hey, we need to have more, you know, daps, more stuff. And then that's good for crypto. And of course, like that, I understand that. But, I mean, if it's just about building daps and you feel like, oh, Coinbase needs to have a role in building more daps so that you get more usage, then, I mean, there's lots of, like, chains or related to user roll-ups that are coming where you could put those on. So what's the case?

Like why build your own roll-up? Yeah. This is something we thought a lot about. And in the beginning of 2022, the way this really started was we were working with our internal teams at Coinbase, trying to understand what was holding them back from building daps, from building on-chain. And basically what we saw with teams were struggling with how do we build on-chain, i.e. like, are we writing solidity in EVM contracts? Are we writing Rust and Solana contracts?

Are we writing, you know, app chains and Cosmos? And then most people were kind of by default picking EVM because that was, you know, the most popular thing. But then they were getting stuck with where do we build on chain? You know, do we put it on L1? I don't know, it's too expensive. Do we put on L2? We're not quite sure where on L2.

And so first half of last year, we aligned as a business to EVM as a kind of primary development platform. That's what we saw, the most growth, the most kind of network effects from a developer perspective. Ethereum L1 is kind of the place we wanted to put high value applications.

And then L2 is this place where we could start to deploy large-scale consumer applications, things that would reach millions of users. But even then, I think with that clarity, we still have the question of like where in L2. And so in the second half of last year, we went and talked with all the L2 teams. were kind of like blown away by the level of creativity and innovation that was happening in the space.

And I think as we went through that process, we had a really big change in perspective about what L2 was going to look like from an architecture perspective. I think we started with the thesis of there's going to be one L2, it's going to be monolithic. And like, Coinbase kind of has to pick the right one. And like that's the most important decision for us to make. And then I think by the time we went through that process, we ended with this vision of much more. There's actually many of these things. They're going to kind of run in parallel. They're going to gradually standardize and interoperate and work together to scale Ethereum.

And I think in that context, like the YL2, why should we build NL2 question became more obvious. It was like, we should build NL2 because we want to contribute to that mesh or super chain. We want to help scale Ethereum. We want to invest our resources in the platform. We want to give our teams and people who want to be building for our customers an easy, like default way to do that. And we can do all of that without being a silo, without being an alternative kind of like, you know, ecosystem being an island, but instead being deeply interconnected to what right now is the largest crypto ecosystem in the world. And then with a clear strategy and plan for how we can make sure that we like have even more interoperability between all the other people who are working there.

And so I think that kind of like having the best of both worlds of like creating the platform where a coin base from a developer perspective could really start to like make that transition, have the surety. from a business perspective to invest in it, while also being deeply interconnected was the reason why we chose to do this. I think we'll speak much more about that, right? But you guys are building on like the optimism stack. And of course, there's like other types of layer two as well. Like what in what ways do you see base differentiating or like, you know,

what are you trying to do different than other L2s? Yeah. Yeah. I think, you know, building on the OPE stack, And so we're obviously going to share a lot of the core technology with other L2's building on the OP stack like Optimism Mainnet. And we're joining as a core developer of the OP stack, which means that we're going to be kind of dedicating our resources to making that as scalable as possible, as secure, as decentralized, which I think is going to pull up timelines on a bunch of things we really care about. I think in terms of the place where we think we can really differentiate, it's about kind of bringing together the kind of holistic group of Coinbase products to make it easier for developers to build

and then make it easier for users to use applications. So on the developer side, we have a whole kind of developer organization in Coinbase. And plugging base into that as kind of like, this just works out of the box with all of our developer tools is going to be really powerful for making it so, you know, someone who's just been writing JavaScript can get started and, you know, get started with an application

and build it in, you know, 30 minutes instead of 30 days. And then on the user side, And I think this is the thing that I'm really excited about. We have 110 billion verified users, something like 80 plus billion assets in our ecosystem. And like I said at the beginning, the vast majority of those are off-chain. And that's because it's easier right now for those people to hold their assets in custodial systems. I think one of the these things that we have is if we take base and we integrate it into the Coinbase products like Coinbase and Coinbase wallet, we're actually going to make it just as easy for those users to use the

applications that people are building as they can use the first party offerings from Coinbase today. And so what that's going to do and how it's going to differentiate the chains, it's going to bring all this demand from kind of real users into the on-chain economy where these useful applications are starting to be built. And I think connecting up that distribution both through kind of the organic components of it, where users are just finding the applications that they want through listings or search, which are products we're building into Coinbase and Coinbase Wallet, is going to be huge. And then also, I think one of the things we're going to be able to do is we're going to be able to

pull or start to build some of this infrastructure around paid distribution, where developers can be like, hey, we have this great product, we know what kind of users we care about. And Coinbase can help them find those users and help the users find the product and connect that kind of market of demand in a way that's a win, win, win for the user, for the developer, and for the ecosystem. Because now instead of this user kind of holding their assets, off chain, they're bringing them on chain.

And they're starting to be a part of this broader crypto economy. That's bigger than base, bigger than coin base. And we think is the kind of like platform for, you know, the whole world coming on chain over the next few years. Jesse, you'll have to spell out one thing for me a bit more. So basically having a venue for your own people to kind of build depths and having a venue to which you can kind of funnel your 110, million users. In principle, you didn't need a fresh chain for that or fresh roll up for that.

Right. In principle, you could have partnered with any L2 or even L1 to kind of make this happen. And basically, you know, you could have contributed to the technology effort and so on. In as how much is kind of this starting from a blank slate, a regulatory question in a And in how much is that a business decision? Because kind of it lets you gatekeep in some shape or form? I think it's, I think it's, and first of all, we're not starting from a blank slate. And that was really important to us.

We didn't want to go out and build our own technology. That's why we're working on the OP stack. It's why we're building as an Ethereum L2. It's why we're, you know, contributing to and building on top of these open source public goods. But I think in terms of like why it is a business. reason, but it's not about gatekeeping. It's more that there's a ton of a ton of value in us having our own on-chain home. And here's an example of this, right? For the last year, Coinbase has been investing in EIP 4844, which is an upgrade to Ethereum that's going to lower the cost of all

roll-ups by 10x. We've put a few engineers on that, and we've brought up the timelines on that being live from like what was previously undefined sometime in 2024, now to summer 2023. That kind of investment is now like totally make sense for our business because we now have a clear rationale of like we have this home. We know that we need to make it more scalable because it's too expensive for our users. Like let's figure out what the underlying infrastructure is that we need to build in order to invest in that. And I think there's a bunch of things that are kind of like that across the whole company where before we had basically uncertainty around like, okay, we have this application, where do we put it? Is here better than there?

Is this going to work with all of our products? And now we've created certainty and surety. And we say, oh, no, we have the home. We can invest in the infrastructure. You can build the application. It will work by default. Like all of these pieces start to work together in a way that is much more powerful than any of them individually. And so I feel like one of the big drivers for us on this from a business perspective was like the shelling point of the chain where it's like now we have the reason to do.

all these things on chain and we have the place where we can feel confident that if we do them here they'll work for us and they'll fit into again this broader map their super chain of other l2s of other l1s of Ethereum so we're not just off on our own but we're actually connecting people into the broader economy okay I do want to sort of clarify a little bit or you know expand a little bit on the question that friorek asked which is around you know, to what extent is there some kind of permissioning here? Or is it completely, you know, anyone can deploy like any kind of application on base and, and, you know, there's no restriction on bridging, no K-Y-C, or like, are you introducing any kind of,

you know, sort of degrees of control in base? Yeah. So we think about base as a layer two, and we think about layer two as a scaling solution and extension of Ethereum. And if you look at our track record over the last year and a half, I think what you'll see is that Coinbase

has been a very staunch defender of the permissionlessness of Ethereum, of the right for users and developers to write and run open source code, the right for people to run validators, and to have those validators execute that open source code. You know, even on things like tornado cash, you know, Coinbase was, you know, the one of, I think the first and biggest company to activate around in, we're supporting, you know, challenge that that's working its way through the court systems

around the kind of open source nature of this code and whether it's reasonable for treasury to, you know, put open source code on a sanctions list. And so I think our plan for base is to extend and build on that permission. There's obviously a complex path to that. We're in the test net right now. We've written a lot about our path to decentralization. If you want to read more about it, you can find it on our blog at base.mure. XyZ.

But we're working with optimism to basically figure out how do we decentralize the underlying technology here of the OP stack as quickly as possible, so that there's no multi-sig controlled by one individual or entity that can make decisions about the characteristics of the chain, the censorship of this chain. chain. There's forced inclusion rights that are upheld at the L1, that even if you have a sequencer that's misbehaving, transactions can still be processed. And then we're, you know, decentralizing the sequencing layer so that more people can be kind of building blocks and submitting those transactions to the broader L1 in batches. And so it's going to be a journey as we work our way towards MainNet. We'll be continuing to communicate about it. But we believe that we believe believe in the permissionlessness of Ethereum, we see base as an extension of Ethereum and as a

scaling solution on top of Ethereum. And we see that kind of holding across all layer twos. And that's what we're going to be working to uphold from a decentralization in open perspective over the next few months and years. So I think we're all familiar with kind of the decentralization shortcomings of L2s. I think this goes without saying. We all know this. And I think this is, and I think this is, it's kind of a dead horse to beat because, I mean, it's, I mean, everyone always says, look, we'll decentralize this. And I think technologically, this is possible and it, it will happen. But just to clarify, as is, does Bays have any other permissioning systems or settings that set it apart from the standard OP deployment?

No, we're running the standard. OP deployment. Our goal is to continue upstreaming all of our changes to the standard OP deployment and work with optimism to release consistently across OP mainnet and base and to have those operate on the same code base. Cool. I think this is what what Brian was kind of trying trying to get at. So basically anyone can kind of deploy a DAP on base if they choose to do so. In principle, you can censor them from your interfaces. just like an app store doesn't have to show an app, but you can't kind of exclude them from the L2. That's super reassuring to here. There's no mechanisms in the OP stack code base to do that. And we're continuing to contribute to the OP stack code base,

continuing to decentralize the OP stack code base. I think your observation around kind of interfaces is exactly right. And this is what you see pretty consistently across the board with these layer twos in L1s as well, which is that if folks are hosting things like Bridges or they're hosting things, yeah, I mean like Bridges, I think it's a canonical example.

They're oftentimes or almost always applying some level of judgment around what kind of users, whether it's based on IP or addresses, they want to let use those interfaces, but then they're fighting to protect the permissionlessness of the underlying network, the smart contracts, the nodes, That's what optimism has done consistently, and that's what our plan is to do as well.

We want to be building with optimism, building towards the centralization, and treating layer two as an extension of Ethereum that protects the right for developers and users to run open source code. Just like people have been running code on other systems for a long time, and just like the Internet remains an open protocol that anyone can build on, we see Ethereum kind of upholding the same standards. as a centralized exchange, you have certain requirements, you know, from the regulators as to kind of funds and users you can onboard. So where exactly do you draw the line between a user and a non-user of Coinbase if people kind of move around on base? Are those people automatically kind of users of Coinbase or can Coinbase users automatically, I mean, can they just move around

base freely and how do you deal with kind of funds that you may not be able to kind of onboard onto Coinbase proper, but that have kind of come in contact or have come to belong to Coinbase users on base. To me, it seems like really difficult terrain to step in. Definitely very difficult terrain to step in. I think Coinbase is at the vanguard of trying to figure out what is the, where are the lines? And, you know, there's not going to be clear lines on any of this stuff. Like the ways where the laws that we're working with are old. And, you know, I think our position has been pretty consistently. Like, it's time to create new laws that create regulatory certainty for developers, create protections for users, but also support innovation. I think to your

question in particular around like kind of what's the difference between the centralized part of the business and the exchange and the kind of more decentralized software parts to business. You know, this is something that we've actually been dealing with for a long time. You know, if you look at coinbase.com and the Coinbase mobile app, those things are different than Coinbase wallet, right? Coinbase.com and the Coinbase mobile app, you know, when you sign up, you create an account with your username and password, you give us your verified information, we confirm that information, we do the KIC checks, we report on all of that.

you know, within kind of the guidelines that we work with from a regulatory perspective in different jurisdictions. That's obviously been hugely successful for many users. And it's different than Coinbase Wallet. If you download Coinbase Wallet today, you can download Coinbase Wallet anywhere in the world. You can use the software of Coinbase Wallet to generate a private key that is yours that you then use to interact with any application that's deployed on Ethereum, I mean, other networks too. And Coinbase in that context is really providing software to let users manage their own information, their own data, their own private keys, and transact with, again, this open source software

that's running on Ethereum as kind of a base layer. And our stance on that has been, again, people can and should run software and that they should have rights protected around that. And we're going to support them in doing that. And so I think that's going to be the same, you know, regulatory gray area or, you know, lack of clarity that we're navigating with face. And again, our goal is to build on and extend the kind of foundation that Ethereum has built and see and treat layer two as an extension of that and make sure that we're kind of upholding

those values because we think that that's essentialization, that openness, that's what enables us to build a global crypto economy. That's what's going to enable us to bring a billion people on chain and increase economic freedom everywhere. Cool. No, I really appreciate, you know, the clear answer and also the stance, right? I think that's really amazing that, like, you know, Coinbase is really building something, you know, fully open, permissionless. And, yeah, so I think that's very cool. One thing I'm curious about, of course, An exchange or primarily in exchange building some kind of chain is not a new thing, right? I guess most known as like Binance, right?

It has like the Binance chain that I think kind of failed, right? But then Binance smart chain, which has been pretty successful. Are there some things that you learned or some things where you're like, okay, these are things we really want to do differently compared to how Binance has approached it? Yeah. question and just as like context and historical data point we've actually looked at building a chain twice before and we decided not to in 2018 and 2020 and the reason why we decided not to build a chain in those times is we didn't think that we could launch a chain that would live up to our values and beliefs about the crypto economy and in particular we didn't want to launch something that would put our users on an island

or silo them or make them be disconnected from all of the other innovation that's happening and that they're using coin-made products to access. And I think the thing that shifted now is we feel like we can. We feel like we can have both. We can both create the home for us on-chain and be deeply interconnected to the broader crypto economy. And I think as we look at other chains like finance smart chain, that's probably the key difference in our philosophy and the approach that we're taking here.

When I look at Binance Smart Chain, the thing that gets me really excited and something that I think we've learned a lot from is the combination of having interfaces that people use, consumers, real consumers use, combined with a chain infrastructure that people can build applications on, is super powerful. If you look at the activity that's happening on Binance Smart Chain, it is mostly small-scale retail users doing small transactions, whether it sends and receives of tether or swaps of, you know, like $10,

it's everyday people actually using the chain. And that's because they have interfaces that enable them to use the chain. And that's why Binance Smart Chain has, I think, 10 million monthly transacting addresses, which is five times bigger than Ethereum and 10 times bigger than the next L2. And I think that's incredible. It's an incredible illustration of how if you stop just forcing users to do things like pick the infrastructure that they want to run their apps on, and instead, just give them products and applications that they actually care about, they're going to use it.

And that can drive real adoption of crypto. Now, I think our approach is like, let's take that learning and then let's figure out how to do it in a way where we're not off to the side. We're not creating our own siloed ecosystem, but instead we are using base almost as a bridge. And the value that we repeat over and over again is a bridge non-island, which basically means that we think about BASE as the way that users are going to come from off-chain to on-chain, and then the way that we're going to enable users to go everywhere else. And we're going to do that by continuing to support all these chains across our products.

Other L-2s, Ethereum, other L-1 ecosystems, we're going to do that by building really deep interoperability between BASE and Ethereum, between BASE and other L2s, between BASE and other L-1 ecosystems, like KOSOSOS, like Solana. I think we're at day zero in this story. There's still a small millions of real human beings who are transacting on chain every day. And we need to get that to a few billion transacting every day. And in that, it's going to take all kinds of innovation. It's going to take a diversity of different solutions.

And we want to be bringing people in, accelerating the growths of the broader crypto economy. Having base obviously played an important role in it, but letting users and developers choose where they want to be building in a way that kind of lives up to the best values of crypto and the openness and the interoperability that we see making crypto such a special place. I totally subscribe to that ethos, but don't, you know, don't dismiss Binance Smart Chain too quickly because what they're actually able to do is they do a lot of, yeah, you never thought you'd hear that for me, right? I love it.

I don't think I'm dismissing Bion smart chain. I think Bion smart chain is incredible. I think that they've driven the most consumer adoption in the world of crypto right now. And I mean, the way that they're doing it is they're just able to do a massive amount of transactions per second by, you know, by virtue of being pretty, you know, centralized. But, I mean, same can be said for, you know, the OPE stack. But I know the roadmap and so on. But the numbers of transactions. transactions that you can do on an optimism roll-up.

It's nowhere near the number of transactions you can do on Binance Smart Chain, right? So basically, if you have like 110 million users on Coinbase, how are they all going to fit onto your roll-up? Yeah, I mean, I think across the board we have a lot of scaling challenges. I challenge that Binance Smart Chain has some, you know, like meaningful lead on other L-2s, or even other L-1s, like Nosis. I mean, Binance Smart Chain is running on Gett and Aragon. You know, those are the same clients that we're using to run Ethereum,

and the same clients we're using to run these layer twos. And they've tweaked the gas limits a little bit, so they have higher gas limits, which, you know, has the downside of, you know, bloating data much faster, but the upside of creating a little bit more or significantly more throughput. But I don't think that there's like meaningful technological, advantage that finance smart chain has over other L2s.

And in fact, I think what is more likely to happen is, you know, almost like the tortoise versus the hair, right? If you look at layer two on Ethereum, there's actually a pretty clear path to driving down costs consistently because the biggest source of costs is L1 Ethereum data availability. And we're running this roadmap around 48444 Protodank charting that's going to create a new kind of data availability on Ethereum, that's going to be much cheaper to use. And then we can grow that capacity over time to continue driving down costs. That's not the same situation for Binance Smart Chain.

Like, if they want to solve the like, how do we continue putting so many transactions through Binance Smart Chain, but then manage with state growth, they're going to have to figure out how to do that at the L1 context, which is a hard engineering problem. And that's kind of why Ethereum has decided. to pursue this roll-up centric scaling roadmap where you separate the concerns, you do data availability at L1, and then you push the execution down to L2. And so, I mean, I think time will tell, but today, Binance Smart Chain is more expensive than other L2s.

Maybe it has more throughput, but the costs are higher. And I think from a long-term perspective, I at least feel a lot more confident in the scaling roadmap that folks like Ethereum and Nosis are running, 4844 around providing data availability utilities. I hear that. To me, the question is so basically invariably with an L2, your transaction costs are going to be correlated with, I mean, proportional to the L1 fees, right? So basically, there's only so much you can ultimately settle to Ethereum, right? So basically, I mean, even if you, I mean, and we are now even talking about layer three is because basically layer

twos are getting too expensive for many things. I recently spoke with Jodi from Polygon. This is actually, this interview is coming out after yours. So I can't, basically no one will know this. But basically their plan is to kind of have like this system of chains and depending on what you're actually requirements in terms of transactions. cost and security guarantees are, they will recommend you a different chain. So basically they will send you to a polygon ZK EVM or Polygon POS or any of the other ZK chains

they're currently incubating. Do you think Bayes can kind of somehow tow the line between, you know, between kind of excluding people on economic grounds in terms of transaction costs or excluding debts? Or how are you thinking about that? Yeah, good question. And first, the first thing I'll clarify is I think actually that with 4844, which is Proto-Dang charting, one of the really powerful things that's going to happen is we're going to now start to have two separate fee markets for L1.

So we'll have the fee market for like transactions on L1 that are doing execution like a swap or or NFT min or whatever. And that will continue to have the kind of like market driven demand based on events. Like there's a big min, you're going to see more spike, you're going to see higher gas costs.

But then we're going to have this other market for blob space, which is just the data availability market. And that market isn't going to have the same kind of demand-based curve or as intense demand curves because the primary use case

is going to be L2s that are consistently publishing data. And so I think one of the things that we're actually going to see is we're going to see a divergence of the L2 costs from having that direct correlation to the L1 execution costs. And instead, what we'll see is over time, we're actually able to drive down the L2 costs

because we're going to be able to create more data availability through proto-dank sharding and then full-dank sharding that I think eventually should be basically infinite if we can solve the technology problems. And that's going to mean we'll be able to continue driving down costs. So I'd say that's the first thing. I do think that there's a path to lowering costs on L2s consistently for the next decade in a way that we'll get really cheap fees.

The other thing that I'll say is I actually totally agree with Jordy's perspective. And we've talked about this a lot with optimism. We don't think any one chain is going to be the answer. Crypto is too big. We have to bring a billion people on chain. And not only is that a huge amount of time. demand, but you also have applications that are, you know, just have really different requirements in terms of how they run. And the mental model that I have for this is the mental model of Web2.

If you look at the average kind of developer life cycle of a Web2 business, maybe they start on like a shared hosting solution, like a Heroku, and then that gets too expensive for them or it's too slow. And they're like, okay, now we're going to go to AWS and we're going to run our own computers on AWS that are virtualized. And that works really well for them. And then they get big enough at some point and they're like, wow, like it's too expensive for us to be on AWS. Now we're going to get our own data center. And we're going to have our own data center. We're going to invest in the hardware.

We're going to find you and we're going to make it work specifically for our use case. I actually think applications in crypto will go through a similar trajectory where they'll start on a shared chain and it will be like, oh, now we can like get easy access to all liquidity and it all just work and it's really easy to deploy. And then after a certain point, they'll be like, wow, now we're on this. chain and we're like paying all these gas fees and it's not really working perfectly for us and we've scaled and we have millions of users. What if we would be better served by running our own instance of this stack and having it interoperate with that other chain and still have the same API or interface

available to users through the other chain but have our own kind of custom stack that's powering the underlying business logic. And I expect that to happen. That's why we're building on the OP stack. That's why we have this vision of a super chain where what will happen to over the next five years is we're basically have thousands, millions of chains that have different use cases, that serve different kind of application developer needs, and that all kind of fit together

through interoperability so that the user, they aren't having to make choices of like, am I running on this one or that one? Just like you don't make choices around, like what's my tier one versus tier two ISP as I'm connected to internet. Instead, they just run the applications that they care about and the kind of abstraction

the super chain, however that shaped up to be, make sure that that's executed in the right place. And so I think Polygon, you know, spent a lot of time with Polygon, I think their vision, our vision, and the Cosmos vision, like everything's kind of converging to this idea that there's going to be many of these things. They're going to interoperate. They're going to have different configurations of data availability. And that mesh is going to be the thing that enables crypto to grow to billions of users. I think the places where there's differences in perspective are, you know, what exactly is the technology that we're going to use to coordinate those things?

Where exactly is the data availability going to live? What are the kind of foundational validator sets or, you know, trust networks that secure different parts of the system? People have different perspectives there, but I actually think from a like architecture perspective, we're generally converging. Yeah, absolutely. Well, we have talked, we've mentioned quite a bit, you know, OP stack, you guys building on that and on optimism. Now, of course, that's not the only layer two technology there is. I mean, arbitrium is, of course, the other roll up that today, you know, is live and has significant traction. And then there's a lot of other things coming, right, with more like based on ZK technology.

So why did you guys decide to go with the OP stack? So one note on the OP stack and just kind of optimism, optimistic versus ZK rollups generally is I think we don't think about this as like an optimistic or ZK rollup question. I think our thesis is that as these technology is mature, basically what's going to happen is because they're all open source, because this is all being done in the open, we're going to be able to bring together the back. of all of these things to upgrade the chains. And so as we've been building base and as we've been kind of doubling down the OP stack, I think the key thing that we've really optimized for is how do we create a modular foundation for this chain so that as the technology matures, we can plug in the things that make it better.

And so an example of this is we're starting with optimistic fault Prover. That's going to be the thing that kind of secures the network. but that prover component of the OP stack is a module. And the second we have a ZKEBM that's mature enough, we can add that in, either in a multi-prover setup or as a replacement for the optimistic prover. And I think we believe that over the next few years, we're basically going to increment to the upgrade this thing

so that sometime in 2024, 2025, we're going to have many provers running in parallel that are going to provide more resiliency, see more redundancy on the system, lower finality time between L1 and L2, and make it so no failure in one place, you know, risks user funds. So that kind of mental model of like this isn't optimistic or ZK roll up, but instead it's like optimistic and ZK roll up. And it's like, how do we build the system to be upgradable so it can be flexible to those technology improvements? I think has been the guiding kind of North Star process we've been building base. In terms of why optimism

in the OP stack specifically, I'd say there's really four reasons. The first reason is this kind of technology question. It's like, you know, how did we get to, how do we make sure we're building on a sufficiently modular, sufficiently strong foundation for what we think will be many, many years of iteration in terms of making this chain high quality? And we feel great about the collaboration with optimism there. Although the thing I'll also say is we also feel great about all the other incredible work that's happening in the industry.

You know, the work that Arbor Trump is doing is totally cutting edge. they've been leading away on the fault-prover. Scroll in terms of having a ZK EVM that's EVM equivalent, I think they're really pushing boundaries. Polygon, in terms of just moving quickly, getting things out the door, huge inspiration there. And I think our goal is to not just work with optimism,

but to work with all of these teams to figure out how do we bring the best of these technologies together to scale the crypto economy and make it possible for a million, builders to create the applications that bring a billion users on chain. But anyways, the first one is technology. I'd say the second big reason why we're working with optimism is the kind of licensing and open source approach of the OP stack. Ethereum is open source freely available.

That's been the thing that has both driven so much of the innovation that's happened around Ethereum because people could fork and experiment with it and I think been so essential to protecting that permissionlessness and openness that we talked about earlier. there. And I think optimism's approach with the OP stack is the same, and that felt really important to us. We want to be taking our resources and not putting them into a silo or a thing that was just benefiting Coinbase, but instead putting them into something that was open source, something that was freely available, something that anyone could benefit from, whether they wanted to join in with us and build or fork. So that kind of open source ethos was the second reason. The third reason was optimism's work and thinking around funding public goods.

I don't know how much you guys know, but they've been running these retroactive public goods funding rounds. And in general, kind of pushing the boundaries of like, how can we make sure that we're getting the money that's created in these systems back to the underlying infrastructure, whether it's core internet infrastructure or Ethereum infrastructure like Gap and Nethermind and Aragon or the OPE stack infrastructure. And so contributing to that and being a part of it and supporting those public goods felt really important to us. That's also why we're contributing a portion of the revenue that base generating. from transaction fees back to that retroactive public goods funding mechanism through the Optimism Collactantium. So that was the third reason. And then the fourth reason was we started working with optimism a little bit more than a year ago on EIP 4844, which again is this upgrade to Ethereum. That was before we started working on base. We didn't know we were going to build an

L2 at that time. We were just wanting to scale Ethereum because we felt like scaling Ethereum was going to help the industry, which is going to help Coinbase. I think through that context of like working on Ethereum together and writing code and writing docs and like collaborating, we built trust, we got to know each other, we got to feel out each other and be like, do we work well together? What I think we saw was like, yeah, we work well together. And this has actually been a consistent pattern that we've seen, which is that the shelling point of Ethereum from a collaboration perspective of finding people and starting there and being like, let's work on Ethereum because we know it's going to be good for all of us. And then as we do

that and as we build that context, how do we kind of add on additional collaborations? I think that's been a really powerful approach that has consistently brought us great people who we love working with. Yeah, that's super interesting. It's funny. I've actually never had this, I mean, basically building upgradable infrastructure or protocols. This is super difficult because you kind of you have to know where you want to be able to upgrade, right? You don't want to be able to upgrade everything. So how far have you planned this out to kind of upgrade base into a ZK rollup? Because basically from an engineering perspective, that seems incredibly complex and really

difficult to kind of lay out. So basically to me, it would seem it might, I mean from an engine, you know, from practical perspective and might even be easier to just redeploy a new roll-up that's kind of innately ZK, you know, rather than kind of ensuring that you can upgrade in all the right places. I mean, I think there's a lot of hard technology problems to solve here, but I think one of our goals and theses here is this is a long-term investment, it's a long-term project. We're going to measure our success on the order of years, just like Ethereum, has measured its success on the order of years.

And I think we've been inspired by Ethereum's ability to consistently make progress and upgrade itself, even as that has been a real challenge. Sometimes it's taken longer than we might want, but that malleability and the ability to evolve, I think has been very inspiring for us. In terms of the specific technology side, I think the way we've been building the OP stack,

is to have as much modular as possible around the proving layer and around the data availability layer, because those are the things that feel like, from our perspective, they're the most well-defined in terms of places that we will want to upgrade and evolve. Data availability right now is obviously going to be Ethereum, but we want to make it so people can also use the OP stack to not run on Ethereum, whether that's putting their data on other L-1 or putting their data in a data availability committee that's going to allow them to run it much faster and have much lower fees. So I'd say, and then on the proving side, we already talked about this, you know, thinking about optimistic roles versus ZK roles.

So I'd say those are the two areas that we focus most on from an upgradeability perspective. In terms of the exact ZK, you know, path there, I think it's, I think it's very possible. I think one of the things that we definitely feel is like it's the, it's not the expertise that we have at Coinbase. And I also don't think it's the expertise that, um, optimism has at OP Labs or the Optimism Foundation. I think this one, like at some, in some ways that feels like a risk, in some ways it also feels like exciting to us.

Like what that means is there's space for more people to be building with us. You know, there's space for other teams to say, hey, wow, this is a valuable selling point. Like let's figure out how to make this work. And we're, you know, we're having some of those conversations today. And I think that there's a very real path to both bringing the technology but also bringing the talent together.

to contribute to this open source interoperable, freely available toolkit that's starting to kind of shape up to scale Ethereum and the broader crypto economy. One of the other drawbacks of optimism is kind of the withdrawal period, right? So basically, I think it's pretty well known that when you kind of want to withdraw something from an optimistic roll-up, you have like this weight period of one week. And for many assets, this isn't really that much of, that, big of a deal because you can have like a liquidity protocol that kind of operates on top of it. But it's a major usability problem for everything that's non-fungible or illiquid, right? So basically, so if you have an NFT or any sort of attestation or social graph or whatever, and you want to bring it down from this optimistic roll-up onto another optimistic roll-up or

layer one or another layer one, that's, you're locked in for a week. And anyway, how are you guys thinking about that? Yeah, I think definitely a challenge. And to your point, like for fungible assets, this is much less than a challenge because, you know, we, you can do kind of liquidity bridging across them. And Coinbase has a product that makes it so anyone can bring assets from optimism to Ethereum or Polygon to Ethereum or Arbitrown to Ethereum. instantly. And I think we've seen that that's pretty consistently been like the solution for users.

And they've appreciated that. On the non-fundable side, I think I think you're exactly right. We have work to do here. It's, you know, one thing that gives me a little bit of solace is people are used to waiting absurd amounts of times for some of these things in the existing financial system. If you think about like getting a loan or, you know, getting your identity verified by the DMV, people's expectation bar for getting that like final check if they want to move somewhere else is pretty low today. So I think that that gives us time to solve this as we get there. I think that there's some paths that we can follow. Like obviously, you know, upgrading or incorporating a ZK roll-up can lower the finality there. I think that there are things around L2 to L2 interoperability that can

get us faster than kind of the L1 finality through shared sequencing. And I'm really excited about that. And I think the thesis that I generally have is most users sometime in the next little while will start to onboard directly onto L2 and live directly on L2. And they won't actually have that many reasons to go to L1 unless they're, you know, large-scale business users who will probably be already on L1. And in that world, if you're on one L2, great. Like, you know, you don't run into that issue.

If you're on other L2s, I think that there's a path for us to get more interoperability there that has lower finality. So definitely a hard problem, definitely one that we think needs to get solved in order to, you know, provide the ideal user experience here, but also one that we think we will be able to solve with time. Cool. So let's talk about the DAP developers who will deploy to base. So I assume in the beginning this will mostly be cross deployments of things that already run on other chains. So how do you go about not starting on an empty chain, right? Because if on day one you kind of open a mall and say this is our decentralized mall, everyone go look at it and everything there's nothing there kind of sucks right yeah so yeah exactly

so how do you go about kind of creating this day one experience for your currently um centralized users yeah um so one thing i'll note is you know like the natural course of chain is you do have some inevitable phasing that has to happen like you have to do genesis and you have to get some infrastructure on there and that supports other infrastructure and that supports other infrastructure and that supports the product. So I expect like we're not going to on day one

have literally everything ready to go because it depends on Uniswop and, you know, Coinbaseball interface for borrowing depends on Ah man, we need to get all those things sequenced. So I expect like there will be a one to three month period where we're going to be doing that bootstrapping. In terms of like, you know, if we think about that as just kind of a given for any chain,

And how do we make sure that at the end of that bootstrapping, that base is a lively, exciting place that people want to be? You know, one of our values is that base is for everyone. And we've tried to embody that as best we could pre-announcement. We're going to try and embody that as best we can post-announcement as well. And so I think we went out on last Thursday with something like 70 builders who committed to be building on base. that includes basically every kind of blue chip protocol in the space, a ton of different infrastructure providers, multiple block explorers, multiple node providers,

multiple data providers, multiple NFT data providers. And that multiple thing has been really important to us. One thing that we really wanted to make sure was that we weren't making everything just coin base. So it wasn't just like first party, first party, first party, because that felt like it would set everything off on a wrong tone and bases for everyone. and that we weren't making it a winner take all

or like a king making situation where we were like handpicking someone and that person was going to go and kind of take all the value. And so for every category, our goal was to get at least three people that we felt like could be kind of a viable option for builders and users who are coming on chain.

And we achieved that in the opening kind of announcement and the folks who have already committed to building. I think post-launch, We've been, I mean, it exceeded my wildest expectations in terms of the amount of demand and inbound that we've had over the last five days. It's been a fire hose. We're at East Denver this week. I'm doing this from my hotel room. And similarly it feels like a little bit of a fire hose.

I think people see the potential for what we can do if we, you know, connect up the coin base distribution, connect up to coin base experiences to the on-chain economy. And they want to be a part of that. And so obviously there's a lot of work for us to do in terms of making sure that those folks, you know, get situated, that they have the right tooling, that they have the right infrastructure, they have the right documentation. But I think we're off to a really good start. I'm about to go do a workshop with, you know, a bunch of builders in East Denver to help them build on base. This week I'm just going to be literally on the ground, meeting people, connecting with people, being as helpful as I possibly can be. And hammering home this value that we have, which is that base is for everyone. It's an open ecosystem.

It's not just Coinbase. It's not Coinbase chain. It is base and base is for everyone. How many of these, all your base belong to us? Jokes are you getting? Lots. Yeah, I mean, our first tweet, I can imagine.

The first tweet that we did was all your base are belong to you, which felt much more like, you know, we don't own your base. You own your base. Bases for everyone. We actually, we tried to put that in the Genesis block for the test net, but we messed up. And so it's not the Genesis block for the test net. That was the plan. We'll see if we put it in the Genesis block for the main net.

We might put something else. We're still deciding. Yeah, I mean, one of the things we love about the name base, I mean, there's two things we love about the name base. I mean, so many things we love about the name base. One is that it's just like spiritually connected to Coinbase. You know, it's like of Coinbase, but not Coinbase. which feels really meaningful to us. Two is that obviously it's connected to this meaning of like foundation

of kind of being this essential part of the broader crypto economy and platform. And then three, it is like the most memeable meme word ever. Like the number of based memes and all your, all your base are belonging to you memes. We have a whole meme channel at Coinbase that haven't yet gotten permission to just share publicly when people have just been baking bass memes. We've tried to build on that memeability with the blue dot, which we think has worked pretty well. But in general, there's so much great content to be created here.

And we think that that kind of content is the stuff that's going to bring in to everyday people to come use base. And that's who we need. If we want to get to a billion people on chain, it's going to take a lot of memes. Absolutely. You mentioned Maynett launch, maybe final question. here. I mean, what is the timeline for Maynett launch and maybe if there are any other major milestones that are coming up for base?

Yeah. So we're working to get to Mainnet as quickly and safely as possible. Hopefully the next few months. One of the things that we, you know, I think benefit from here is like we're not running this chain. Like this is not the first test net for this chain. This is not for the technology that's powering the chain. We're not like off on our own doing this. And And so that's going to let us have a shorter test net period than potentially other things that are coming to market because we have that resiliency, redundancy, and the battle testing that's already happened in other ecosystems. I think optimism is currently planning to bring bedrock, which is kind of the release that we're running on to main net in mid, late April. And we'll fast follow them. So no specific timeline, but next few months is what we're aiming for.

There's a lot of excitement, a lot of anticipation. We're going to do it as quickly and safely as we can and get base in the hands of builders so they can start building. And my goal, I haven't set the goal yet, but the framing that I've been working with is a million builders on base in 2023, a billion people on base in 2024. Wow. Okay, I like that.

That's an audacious goal. and one of these days it's going to happen it really does feel like we've been you know like crypto has been kind of like working its way but at a certain point the platform is going to work we're going to have the right wallets we're going to have the right identity tools

we're going to have the right wallet infrastructure we have the right chain infrastructure it's going to be low cost enough and to me it really feels like this is the year where those pieces are finally like almost ready like they're in sight and we just need to push a little bit harder to get them all to work really well together.

And that's going to be this catalyst that'll drive the next billion people on chain. Cool. Well, Jesse, thanks so much for coming on. It's been really a pleasure to speak with you. I think you did an excellent job at sort of explaining to us what base is. And I think one thing also really appreciated, you know, like emphasizing in sort of, you know, the values behind that and Coinbase's values. And I think for sure I agree that, you know, Coinbase has been doing, you know,

know a very important job right in like trying to like push back a bit against like all the horrible regulatory ideas and gerry gensler and whatnot is coming uh so i think that's you know really important right and hopefully you guys will continue to do that work and advocate for you know free and open decentralized systems and open financial systems so thanks so much and really excited to see how base is going to develop and how are we going to how are you going to fare on these these targets that you guys have set. Well, I appreciate you all having me on to help people build on base.

Cool. Thanks so much, Jesse, and thanks so much for listeners for tuning in. If you want to support the show, leave us a review on iTunes or tweet about it, share it on Twitter, and we are very excited to be back next week. Thank you for joining us on this week's episode. We release new episodes every week.

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