Jesse, welcome to the podcast.
You and I have kind of had an ongoing philosophical discussion for many years on how libertarians can learn from progressives and progressives can learn from libertarians. And it's funny because I went so far libertarian that it became like a progressive, and I'm like, you know, I need to do community building, I need to do community organizing.
Yeah, it's exactly right. I mean, when I think back to our time at Coinbase, I feel like so much of the fun that we had was thinking about how all of these different political philosophies are going to be kind of rewritten in this new world where the internet defines all of us, and we're actually all looking for kind of new frameworks to think about how the world can come together and how the world can be better than it has been in the past.
So, let's go through Base. It's really funny how Coinbase was so well named that it managed to not just be easy to pronounce and pass the bar test, but it was also based later on. You know, like you managed to launch Base when Base was...
Yeah, no, I mean, I think one of the things I've always felt about Base is that we just got incredibly lucky in having a name that we could borrow from Coinbase that kind of brought over the trust, that had such a metaphorical meaning in terms of being this platform that everyone can build on, that was associated with a cultural phenomenon like "based", that was four letters, really easy to pronounce, totally globally accessible. You know, I think there's probably a lot of things we could have gotten wrong, and the name still would have been really, really great. But luckily, over the last two years of building, I think we've got a lot of things right. And today, you know, for those who are maybe listening to this for the first time, Base is one of the largest chains in the world. It's an Ethereum layer 2. There's thousands and thousands of builders all around the world who are choosing to build on Base to help us build this global onchain economy that we think is going to massively increase economic freedom, innovation, and creativity around the world.
You know, one thing I think about, and let's go into details, is Base is interesting because it's a coinless chain in the sense of there isn't a native asset on the chain, but it is still useful. And one way of thinking about it is that Coinbase stock is like sort of the quasi-native asset of Base. It's not, you know, directly there. Or another way of thinking about it is it actually takes aspects of blockchains that we didn't think you could take. You know, people didn't think you could run a blockchain without a coin, but you can. You can run it as like an open state database, right? Maybe you have some thoughts on that, and let's get into the details of how Base works.
Yeah, I mean, from the beginning of Base, one of the theses that we had was if we just focused on building a really great product that solved problems for developers and creators and consumers, that was going to be a way higher leverage way for us to bring this to market than what we'd kind of seen for the last few years in terms of people really focusing on the coin and token side of things. And I think that's proven out to be true. It's been a really good forcing function for us, right? You know, whereas I think a lot of folks who'd been building chains otherwise, they said, "Hey, we're going to have a coin, and then we're going to use that coin to pay people to come and build with us, and we're going to kind of use that as a shortcut to try and kind of jumpstart the network effects that are required to be here." We didn't have that luxury. Instead, we had to go and say, "Hey, we're going to go fight for every single customer, every single developer, every single creator, every single user. We're going to have to win them on the merits of using Base because it's faster, because it's cheaper, because it's easier to build on, because it's more connected to create on, because you can do things that you wouldn't be able to do anywhere else." And I think that's been a really good forcing function for us to just make sure that we're always building the right product.
All right. So, I want to go like kind of top to bottom. So let's start with the technical parts of Base, and then I want to get to why I think Base and tools like it are the base for building new societies, startup societies, network states, and so on. Okay, great. So what is the problem that Base was created to solve? I know this is super basic, but you know, go 100%.
I've been at Coinbase for five years. Balaji and I got to overlap when he was CTO. It was some of the most, you know, powerful learning experiences I ever had getting to watch him operate inside of the company. And in those five years, I built the consumer businesses at Coinbase. So Coinbase, Coinbase Pro, Coinbase Wallet. And then after doing that for five years, I had this idea of if we wanted to accelerate global crypto adoption, Coinbase was a crypto company, but it wasn't yet an onchain company. It had been started in 2012. It didn't know how to write smart contracts. There weren't engineers who were kind of building onchain every day. And it felt kind of like the early days of the internet where there were going to be companies that figured out, okay, how do we do this transformation to really become an internet company, to be a native internet company? And if a big company like Coinbase could do that first, then other people could follow. And so that was kind of the initial thesis behind the conception of Base was how do we make Coinbase a truly onchain company? And we went through a bunch of different product iterations. We tried a bunch of things. None of them worked. They all failed. And all of the learnings from that pointed us to this idea, which was in order for Coinbase to be an onchain company, we actually needed a platform where we could build the onchain products and services that would help Coinbase be more efficient, help Coinbase get more global scale, help Coinbase leverage this technology to build a better business. And so that was really the initial conception of Base. It was let's build the platform that enables Coinbase to make this transition. And then once we started doing that, we were like, okay, well, if we're going to build this for Coinbase, Coinbase is going to want the best platform in the world. And the best platform in the world is actually going to be an open platform where anyone else in the world can also benefit from that technology stack and can also benefit from plugging in, you know, as you like to say, to the open state database and all of the APIs that Coinbase can kind of bring onchain, whether that's on-ramps or off-ramps or payments or whatever it is that people need in order to build. That's what Base became. It kind of became this platform built for builders by the builders of Coinbase. Originally to solve some of Coinbase's problems in coming onchain, but now I think really to enable and accelerate the rate at which the entire world can come onchain.
Awesome. And I think actually in a sense you can almost think of Base as like the next version of Coinbase's APIs where you're not just querying Coinbase's server for data. You've got this open state database where you can write and read to it and so on and so forth. And in a sense, it's maintained by Coinbase, but it is also something that is more open than a traditional API. It's kind of the next iteration of it. Would you agree with that or do you disagree with that?
Yeah, exactly. And I think back to, you know, some of the presentations you gave when you were at Coinbase where you were talking about, you know, how do we get more verbs, crypto verbs for people to do? And this was like a thing that Balaji says, like we have a few verbs, buy and sell right now, but we need to expand to hundreds of verbs. And one of the ways I like to think about Base is it's almost the perfect platform for enabling rapid expansion of verbs because rather than one corporation, you know, maybe in a traditional API or serverless environment, one corporation having to add every single new API or every single new verb that you can do. The really powerful thing about a chain like Base is that it's an open platform where everyone can add new verbs. Every smart contract that a developer deploys is a new verb that some other developer can call. And so what that enables is it enables very rapid expansion in what's possible and what capabilities both builders and consumers have on the chain. And so I think when I was thinking early on in the journey of Base, I thought back a lot to those conversations that we had where you were really just hammering how do we get more verbs? Because verbs are how you expand the GDP of the global onchain economy by giving people the actual tools and capabilities to transact onchain, to buy, to sell, to borrow, to lend, to do all of these things that have historically been very complex, very expensive, and very kind of locked out for a lot of people in the traditional world.
Yes, exactly. And just, you know, the nouns and the verbs, right? So just for folks who know what we're referring to, like a noun was something like a miner, a holder, right, a wallet. And verbs: buy, sell, receive, but then also stake, burn, mint, right, all this kind of stuff. And you're exactly right that essentially the innovation, one way of thinking about blockchains is, you know, Coinbase or any company, Twitter for example, it can't put its Postgres database in public, it can't give everybody the root password to its Postgres, but it can put a chain in public and everybody has read and write access to that, and the consensus algorithm ensures it's not corrupted, which would happen with just a Postgres database that was naively opened up to the world. And so because everybody has read and write access, they can add the smart contracts, which as you say are the verbs, and you also can add the NFTs which help add new nouns, and different user types are also new nouns. And in a sense, like the smart contracts are onchain code and the NFTs are onchain data, right? So now help me understand, how does Base work technically? How does it work in terms of validation of blocks and so forth? Let me understand that.
Yeah, absolutely. And before I jump to that, one thing I do want to say is, you know, you mentioned kind of you can think about Base as, you know, an extension of Coinbase or an onchain open version of Coinbase where you have access to these APIs. And I think that was like almost the initial conception of Base. But one of the things that we realized very early on is that the opportunity is actually much bigger. It's much bigger than being a single company where you can kind of give everyone access. It's really the opportunity to build a global economy. And if we want to build a global economy that everyone can participate in, one of the things that we realized very early on is it can't be controlled by one company. The only way to do that is to build a decentralized platform. Because if you're not decentralized, inevitably either a single corporation or a single state will get into a place where it tries to co-opt that platform for itself. And so from the beginning of Base, and this gets into our technical architecture, we've been very, very committed to decentralizing Base to make it so that everyone can feel confident that they can build on this global platform and trust that it's a neutral place for them to contribute to the global economy. So how do we do that? Base is built as an Ethereum layer 2. If you don't know what Ethereum is, Ethereum is the most secure, decentralized, scalable L1 platform for writing smart contracts. But one of the challenges with Ethereum is that it's built to be maximally decentralized, which meant that costs for doing things kind of got higher and higher. And so Ethereum kind of took this scaling strategy, which was let's expand the surface area of Ethereum by letting people build and enabling people to build layer 2 on top, which let you kind of bootstrap off of that decentralization of Ethereum while bringing much more scalability and driving down the costs of how much it actually costs to use the chain. And so what we do is we basically take transactions, we batch them, we publish them to Ethereum, and that lets us get the best of both worlds. And so today, Base is kind of processing, you know, every second hundreds of transactions and bringing all of those to Ethereum, letting us kind of bootstrap off of that decentralization, provide those same decentralization guarantees to customers, but get really, really great cost savings and make it more accessible for more people to come onchain.
Interesting. So you want to describe kind of how, you know, optimistic rollups work and sequencing? And, you know, one thing I was actually researching and I was just thinking is like how many disputes have actually happened? Well, first, why don't you describe how do optimistic rollups work for somebody who doesn't know.
Yeah. So Base is an optimistic rollup, which basically means that when we're doing this kind of batching of transactions and submitting them to L1, we're doing that optimistically. And so that basically means that people are trusting, but the way the mechanic works is you assume that the batches are faithfully posted to Ethereum. And that's done in a way that kind of preserves the mechanic. But there's a mechanism called a fault proof or a challenge where someone could say, "Hey, the sequencer, which is this kind of entity that's taking those transactions and batching them and publishing them to Ethereum, did something malicious. Now we're going to challenge that, and there's going to be a game where there's kind of economic incentives involved to kind of identify where that malicious activity was and unwind it." And so what that means is it means that rather than doing computation on every single transaction, you actually get to drive down the cost. So in 99.99% of the time, you're actually not having to do anything because it's optimistically accepted. And then in that 0.001% of the time, there's a mechanism for making sure that there's still safety for users. Another really important part of this design is that the way it's built is that there's not just one way to transact on the chain. If you were kind of just able to go through the sequencer, one of the concerns would be, okay, you can only go through the sequencer. What if the sequencer does something malicious in terms of censoring your transaction? And so the way these optimistic rollups like Base are built is they're built to also enable people to submit transactions through Ethereum. And what that means is it's kind of like an escape hatch where you have this guarantee that transactions can be forced in through Ethereum, which gives you much greater certainty that your transaction can't and won't be censored. And so that's the construction that Base uses today. Now, one thing I will say about Base is that we've built it on something called the OP Stack, which is this open source standard for building layer 2s. And one of the really powerful things about the OP Stack is that it's designed such that the proving mechanism, which is this optimistic rollup construction that we talked about, is modular. And so we've started with an optimistic rollup, but we actually have in production right now there's a team that is proving every block on Base with a ZK prover as well, which is kind of using zero-knowledge proofs to validate that every block is there. We've also seen teams experiment with what are called trusted execution environments, where you kind of have hardware devices that are provable that they're signing the transactions and kind of validating, and they're using that to prove blocks. And I think where we'll end up with Base in the next year or so is rather than having one mechanism that's securing Base, we'll actually have more knowledge, you have TEE, you have some degree of TEE, you have optimistic, you have zero-knowledge, they all sit on top of each other, and then you can kind of have a game where if any one of them is signaling, hey, there's something going wrong, there's something malicious here, then you kind of layer them on top of each other. And that's one of the ways we're going to be able to remove more and more trust out of the system and make it kind of inherit even more of the decentralization and security of Ethereum.
Awesome. So, well, now you also have a goal for progressive decentralization of like sequencing and validation and so on, right?
Yeah. And so, you know, there's this framework that Vitalik, who created Ethereum, uses to kind of define the decentralization of these rollups: stage zero, stage one, stage two, kind of three levels of decentralization. Base started as a stage zero rollup, which has training wheels. We are about to become a stage one rollup after a lot of hard work from the team. I don't know exactly when this podcast is going to come out, but it is either going to happen, you know, immediately before this podcast comes out or immediately after. And so that's a huge milestone that I'm super, super excited about. And it's just one more step in our commitment to making Base this decentralized platform that anyone can build on. And then from here, we're going to be doing more work to get to stage two. That involves kind of getting to this multi-prover environment where, you know, we have multiple ways of validating the chain. It also involves increasing the decentralization of the way people submit transactions to Base through the sequencer. We actually have some really cool work that we're doing right now with a team called Flashblocks, which is helping us start with what's called builder decentralization, where basically there's going to be the opportunity for multiple people to build blocks, which will make the market more efficient for Base because you'll have some kind of competition in how people are able to submit transactions and look for me. And so that's a really good first step, and then from there we're going to bring further decentralization to the sequencer.
Awesome. Now, what kinds of things can people do on Base? Can they do anything they can do on any L2? Are there unique things? Like what kinds of things do you think are... Yeah, go ahead.
Yeah, I mean, I think at this point in terms of day-to-day usage of crypto, there's probably not another chain in the world where you have more people doing kind of everyday things. And so you have people using payments. In terms of social products though, this is really what's shining on Base right now. If you look at Farcaster, this is the kind of fastest growing onchain social network. The vast majority of mini apps built on Farcaster, transactions happening on Farcaster are built on Base. And I think that's like a daily habit that tens of thousands of people are doing right now. It's still early in the grand scheme of things, but I'm super, super excited about that. And, you know, you're on Farcaster, I'm on Farcaster. We also have creator social products like Zora, where you have creators all around the world who are starting to bring their creativity onchain, have it more directly valued by the free market, and then actually able to capture that value to help fund future work and to live a better life. And so I think that social domain is a really, really rich one on Base, and probably a place where, you know, in terms of any other chain in the world, I don't think there's anyone who has more social activity than what's happening on Base. And then I'd say there's a long tail of other use cases. You know, we have Blackbird, which is building restaurants onchain and onboarded hundreds of restaurants in the United States. We have, you know, people who are building pretty much every part of the application spectrum. And we're just excited to see all of it happen faster and faster.
You know, a few years ago, Moxie Marlinspike wrote this piece which said something like, "Oh, you know, what's weird about these crypto apps is they have..." He's a very good engineer, obviously, he built Signal and so forth, but it was interesting. His framework was these crypto apps have like the minimum level of decentralization they need to kind of get out there, and he's phrasing this as a negative thing. And I was surprised when he wrote this because my response was that's because blockspace is a fundamental constraint of crypto in the same way that bandwidth was a fundamental constraint of the early web. And everything on the web in the '90s, like, you know, Amazon, Yahoo, Google was constrained where, you know, I think Amazon's book descriptions didn't even have images at first, and Google was just put in text, get out text, right? Images, you know, digital cameras were only really widespread by the mid-2000s, and Facebook only worked because Harvard had T1 connections, and so people could put digital camera images, and people had like one or two digital images of themselves. They didn't have, you know, camera phones and so on and so forth. So bandwidth is a constraint on the internet for a long time, and blockspace was a constraint for crypto apps for a long time. So that's one way of thinking about like what Base does, right? It radically increases the amount of blockspace that's available. That's what L2s do in general. And how much more blockspace is there, and what kinds of things can go onchain? And what do you think is still infeasible? For example, Farcaster still has its own, you know, Postgres, right, that you can run separately. So what do you think is the right thing to put on Ethereum versus on Base versus on, you know, an app-specific database like Farcaster? How do you think about the division of data there?
Yeah, it's a really good question. And I think your point is exactly right, which is that we need to increase the bandwidth of blockchains in order to enable more use cases. And I think kind of L2s and this recent adoption of more scalable chains is kind of that broadband moment where we went from dial-up to having enough bandwidth to start to build real applications in the early days of the internet. And really the way we think about that is driving down the cost of most transactions to sub-cent is really this kind of Schelling point where once you get sub-cent, people stop thinking about the costs and they start being able to build really, really powerful things. And so, you know, right now on Base you can send a payment to anyone for a fraction of a cent. You can mint an NFT, you can buy a coin, you can trade, you can, you know, post something on social media. And so I think that's this kind of milestone that we just crossed in the last year or so that's leading to a ton of economic activity and a ton of growth. Now, in terms of how I think this is all going to shake out, I broadly started thinking about this as kind of like tiers of applications or tiers of use cases. Kind of like the internet. You know, the internet's actually architected in like three tiers. There's like tier one ISPs, tier two ISPs, tier three ISPs. And I think that what we'll see as more and more of the world's compute comes onchain is the same rough architecture will happen in the onchain world. And so that will look like L1s that sit at the bottom that provide kind of maximal decentralization and this kind of scalable platform that people can build on that they know is going to be neutral, kind of as a technology platform, almost like a pure piece of infrastructure. So that's going to be layer one. That's going to be things like Ethereum and Solana. I think on top of that, we'll see what I kind of think about as economies start to shape up. And this is going to be Base, right? Base isn't just pure technology like Ethereum. It's a technology plus culture plus economic activity plus all of this infrastructure that lets kind of global economy start to crop up. So one example of this is one of the big priorities that we have for Base right now is onboarding local currency stablecoins all around the world. So right now we have about 15 local currency stablecoins: the Kenyan shilling, the Mexican peso, the Canadian dollar, obviously the US dollar, the euro, the pound, the Singapore dollar, you know, the list goes on and on and on. And that is economic infrastructure that can enable people to come onchain to start to build, start to create. And that's not going to be something that every application is able to build entirely themselves, but it is going to be really, really important infrastructure to enable an economy to start to flourish. And so that's kind of the tier that Base is working on. It's like our mission is to build a global onchain economy that increases innovation, creativity, and freedom. I think there will be a lot of other economies. And I think they'll kind of live side by side. They'll have like trade that happens between them. And they'll all be working together on top of these kind of foundational L1 technology platforms to grow this economy.
Obviously, Coinbase itself uses Base a lot. Probably exchanges use Base a lot. So those are the unsurprising major use cases. You know, Farcaster uses Base. What are the things that you consider, you know, big apps, and what are things you consider like surprising apps, surprising use cases?
Yeah, I think obviously you talked about Coinbase, Coinbase Wallet, other exchanges that are using Base for payments and transactions. I think Farcaster is the second one. We've invested a lot in Farcaster from a community perspective, and we're actually in the process right now of integrating a Farcaster feed and mini apps into Coinbase Wallet. And so Coinbase Wallet is going to be evolving to have a full social feed, to have mini apps built into it, and really to be a place where people can come onchain, get started, find things to do, buy a coin, but then stick around to do a lot more. Zora, I think, is another pretty fast-growing social network that's built on Base. Where, you know, if you think about Farcaster kind of analogized to Twitter, Zora is much more analogized to Instagram, where it's primarily visual content. And Zora just went through a change right now where every single piece of content is actually a coin. And that's through a lot of iteration. Originally, Zora was built as a one-of-one NFT, and then it kind of went to open edition NFTs. But after kind of experimenting with those different economic models, I think they kind of went full circle and said, "Hey, the easiest way to let content be valued is just make each piece of content a coin. Let the market value it." And then create kind of market structures that let you redirect that value back to creators. I think the place that Base is really winning right now is in this kind of interconnected social economy that's being built on top of things like Farcaster and Zora.
Base is interesting because it's a coinless coin, right? Or it's a coinless chain, right? Where do you think we're going to go with equity-backed assets, real-world assets, other kinds of things on Base or in general, right? Like I think the legal system is moving quickly in a positive direction. Maybe you have some thoughts on that and whether Base supports that, whether Base will support that. Go ahead.
