Coinbase’s Plan To Disrupt Finance, Social & Payments w/ Base Founder Jesse Pollak

Doing great. Happy Thursday.

Absolutely. Well, at the highest level, Coinbase's mission has always been to increase economic freedom in the world. And when we talk about economic freedom, we're really talking about the experience of people with money, and it's about property rights. It's about having access to privacy. It's about knowing that if you put your money someplace, it's going to be there the next morning. The ability to start a business without people trying to scam you or fraud you or bribe you. And the reality is that when you look at economic freedom around the world, A, it's not evenly distributed at all. Depending on where you're born, depending on where you live, you're going to have massively different levels of economic freedom. And then B, it's correlated. Positive economic freedom is correlated with so many things: longer lives, happier families, better businesses. And so our vision from the beginning has always been, how do we increase economic freedom around the world? How do we make it so that everyone everywhere has the same access to opportunity so that they can all then build a better world together? And you know, if you go back to the kind of early days of Coinbase, the kind of crazy thing about it is that Brian, our CEO, articulated this Coinbase secret master plan which talked about kind of these four phases of how crypto adoption was going to increase economic freedom, how it was going to kind of take over the whole world. And it started with the actual cryptos. This is, you know, things like Bitcoin and Ethereum. Then you needed these kind of second phase of the ways to access that crypto. That's exchanges like Coinbase. Then finally you have these consumer interfaces. These are things like the Base app. And then, you know, the fourth phase is that you have everyone living their lives on crypto, all powered by this global economy of apps that are built in this new decentralized way that billions and billions of people can use.

And I think the first maybe 10 or so years of crypto, maybe even more. You know, Bitcoin was invented in 2009. Here we are 16 years later. We're really stuck in phases one, two, and three. And I think just in the last kind of couple years, we've started to push into phase four, where we actually have these apps, whether that's a stablecoin, which I think of as an app that's letting you send money to anyone anywhere in the world instantly for free, or it's a new social network, things like, you know, the Base app or Zora or Farcaster, where you can get paid to post and you can earn more. Or it's any of the other things around gaming or commerce that are starting to crop up. I think that that's just the taste of what we're going to see over the next five years, which is basically now that the infrastructure is finally ready, we're going to see the whole world be replatformed on top of this infrastructure. And some of it's going to look familiar. You know, you're still just going to be paying for your coffee or, you know, buying that new thing online, but it's going to be running on new rails. And those new rails are going to make it so that it's accessible to everyone. So it doesn't matter where you live, you can have the same level of access, so it's faster, so it's cheaper, and so that you can actually build 10 times better product experiences that actually just make it easier for people to do the things that they want to do.

And so I think that that will cut across every part of the industry. I think for Coinbase in particular, there's two big ways that I see it manifesting. On the kind of core Coinbase side, you know, I think a lot of what we're focused on is building that next generation primary financial account. So, it's, you know, you're used to banking in the traditional financial system. Everything takes days. You're charged a fee at every point. You don't have access to the best investment opportunities. Over the next few years, you'll be able to do all of those same things, but now it's going to be globally accessible. It's going to be instant. It's going to be, you know, low cost. You're going to have access to every asset that you could ever imagine, all running in one place that's all seamlessly manageable. And I think that's going to be kind of this Coinbase path where it's just going to let you do things with your money better. And then on the other side, and this is really what Base is pushing, I think we're going to see the same transformation happen to the social networks and to the app stores where for the last decade, so much of the internet has been powered by social networks, but the people who actually bring the creativity to those networks haven't earned. They've been cut out of the equation. They earn less than 5% of the total kind of inflows into social networks with 95% of that value going to the underlying platforms. And what we're seeing happen right now on Base is that that is being totally inversed where for the first time creators are actually getting paid to post. They're earning, they're getting 95% of the value. And I think that's going to lead to the same replatforming that's happening right now with traditional finance and money happening with traditional social media and this next generation social media that actually rewards creators, rewards the people who make the internet what it is. And so I think five years from now when we look back, the primary thing we're going to feel is like, oh my gosh, can you believe how quickly that transformation happened? And then if you actually take a step back, you'll see, oh no, that was 20 years. Like five years from now it's going to be 2029, which is 20 years after Bitcoin was invented, but I think it's going to really start to compress because we've done so much investment in infrastructure that now we're finally going to actually have the user experiences that benefit from it.

Well, I think that that's directionally spot on, but the really important note is it's not us, it's all of us, right? Like this isn't something that Coinbase can do alone, right? If you look at what the primary financial account is being built on. It's being built on Ethereum. It's being built on the open network and Base. It's being built on all of these different stablecoins. It's being built on open protocols like Aerodrome and Uniswap and Morpho that have built out the infrastructure of this new economy. And then a lot of what we're doing is we're stitching it together. Same thing on the Base side. You know, the Base app, we couldn't have built it alone, right? It runs on the Base, then it runs on Farcaster, it runs on Zora, it runs on XMTP, it runs on Aera, it runs on Uniswap. And so when I think about this new internet, the thing that's going to be really different is that it's not going to be controlled by one corporation. It's going to be built on open protocols that everyone can contribute to where we actually earn from the contributions that we make. And so yes, I think that everyone who's watching this podcast and all the people on Twitter and all the people who believe in this future, we are the ones who are going to take on the legacy systems because the systems are broken. They don't serve us. They don't help us accomplish what we want to. They cut us out if we don't live in the right place or we don't have the right phone or we don't have, you know, the right citizenship. And we can build new systems now that we finally have this technological foundation that actually put us back in control. And so I think that that's a collective task. I was tweeting about that earlier today where I think it really is a thing where we win together. But I also think that that's going to be something that's going to take a lot of hard work. It's going to require unlearning some of these kind of learned habits of like everything is a zero-sum competition and it's going to require embracing this new way of building that's fundamentally open and built on open protocols.

Yeah, well, reading that speech from Paul Atkins, it honestly felt crazy to me because, you know, two years ago no one was saying onchain. Like it wasn't a word, right? And, you know, Jacob Horne and Dee from Zora, they really invented the word and then I think I've popularized it and helped kind of, you know, say it out loud a million times. And to see that repeated back to us, this idea of we're going to bring America onchain and the American financial markets onchain from the regulator who for five years like wouldn't meet with us, that was just like, holy crap, right? Like I could have written that, but they're writing it now. And that's how much kind of impact we've been able to have as an industry over the last many years in terms of kind of bringing this new global financial system, making it a reality such that it's being recognized at that level. And I think, you know, to your point, it has been a sea change. And one thing that made that speech particularly special was at the exact same time that Paul was giving that speech, Chair Atkins was giving that speech, I was actually in the SEC offices. I met with Hester Peirce. I posted a picture of that. We had another bunch of meetings with SEC staff. And the level of collaboration and engagement where folks are genuinely trying to understand what's happening and then figure out what's the policies that we can put in place to make it so that this global economy can thrive is night and day. They literally wouldn't meet with us for like six years. They sued us, but they wouldn't meet with us. And now it's like not only are we having meetings, because I meet with a lot of people, but we're having conversations where they're not just making the time to kind of like hear from us, they're bringing their own ideas and those ideas are good. You know, he wrote that speech and that speech was like visionary in so many ways. And so I think that that shift from like not only being willing to meet with us, but also coming to the table with a level of depth and expertise and knowledge that is reflective of caring and wanting to build the best policy outcomes or wanting to build the best policy to get to the best outcomes for this new kind of financial system that we're building and wanting to make America at the center of it. I think that that's just been remarkable because, you know, it hasn't been that long. Seven months ago, we were whatever. Eight months ago, nine months ago, it was a totally different game. And it was about how do we defend ourselves from these kind of like aggressive prosecution that we think is totally lawless. To now being like having the conversations, getting into the weeds, really collaborating in many ways to figure out what this future is going to look like. It's remarkable and I feel super grateful and it gives me a lot of confidence that, you know, America as a country and the government that we've built is resilient. You know, like things can go wrong. We, you know, parts can be wrong. You know, people can have bad opinions, but with the kind of test of time, you do have this kind of like naturally self-healing process where when the citizenry, you know, 52 million Americans who own crypto speak up as they did in the last election, the government listens and the government changes and the government evolves the way they approach these problems and it's able to actually come back and, you know, make a positive impact. And so that as an American and someone who obviously is working hard to build a global economy but wants America to be a big part of that, that's been really inspiring to see.

100%. Yeah. I mean, I think the past environment was one where there was so much uncertainty and not only was there uncertainty, there was like active antagonism, whereas like if we did something wrong, we were going to go have to deal with being sued by, you know, the United States regulator. That is a, it creates a culture of fear. And I saw it inside of Coinbase, you know, and Coinbase is a public company that's, you know, the industry market leader. But even at Coinbase, I saw how that impacted product roadmaps and vision and our ability to actually bring things to market. But then I also, you know, building Base, have seen it firsthand with smaller business. And there it's like if you think Coinbase is shaken by, you know, having regulatory uncertainty and not knowing if you're getting sued, you know, Coinbase is also a $50 billion company that, you know, makes billions of dollars revenue and can fund these, you know, defenses and can fund the political campaigns. If you're an average builder, you don't have any of that. And if you get sued, you're dead. And so the culture of fear that it created among builders and the way that that culture of fear then restricted innovation among builders, that for me was the hardest thing to see because I saw builders spending more on legal fees than they were spending on engineers. And so it's, again, like this is another thing that I've seen a massive sea change around where really for the first time I feel like builders are unleashed right now and they're able to say, oh my god, like what if we were able to just focus on building great products, focus on designing things in the right way and trust that we have the safety to actually build in this future that we're trying to build. And now I will say I don't think our job is done. Like we still need to pass kind of legislation to clarify the market structure. Obviously, there's cases in court right now. You know, it was exciting to see parts of the verdict on Roman Storm yesterday. Also disheartening to see other parts, but I'm sure that's going to get appealed and, you know, continue to push through. We're seeing courts, you know, still look at cases. So we have a lot more work to do to make sure that crypto is kind of clarified as this piece of technology that's foundationally good for our society. But it has had a huge impact on the Coinbase internal environment and our ability to push and ship products as well as the external builder community.

Yeah. Well, I almost tweeted this yesterday, but I didn't. I feel like there's sentiment on crypto Twitter at times where it's like, oh, we're in a bear market because like prices are down. And the thing I almost tweeted was like anyone who thinks that we're in a bear market clearly isn't actually in the field talking to builders and creators because from my experience, you know, I get to work on Base and talk to, you know, thousands and thousands of builders and creators all around the world and then obviously have visibility into what's happening elsewhere at Coinbase. There has never been more excitement. There has never been more energy. There's never been more smart people coming in and building real products on top of this infrastructure. And so the demand for, you know, I'd say really the last three years kind of since it bottomed in 2022, like you said, it's just been grinding up and to the right with the curve bending steeper and steeper and steeper where, you know, we have institutional demand, we have developer demand, we have consumer demand starting. And that to me, being on the front lines and actually seeing it and feeling it makes me feel like we're in a complete bull market because that wasn't the case in like the depth of 2021 or 2022. People were leaving. Same thing in 2018, 2019, people were leaving, but now it's just like people are coming. Now I think one thing that I don't think we've experienced yet, but I think we're close to, is we are used to I think this kind of like speculation-driven growth cycle where it's like, okay, you have this, you know, prices going up and you have a big pop of people and then it kind of wanes down. I think we've started on the kind of like infrastructure and builder and creator side to shift into more of this consistent growth, but I also don't think as an industry we've experienced real consumer viral growth that's not speculation-driven but product-driven where you have a product kind of viral growth cycle that's just sucking in people. You know, think about like Twitter or Instagram or TikTok and like how quickly those products grew. And I think a big thing that has kind of held back that moment is that we haven't had the consumer products. And the reason why we haven't had the consumer products is because we actually didn't have the infrastructure to build the best-in-class consumer products. But now we finally have the infrastructure. You have those fast and cheap chains like Base. You have the stablecoins that are trustworthy. You have smart wallets that make it really easy to abstract gas and cover those gas fees from developers. And I think we're just starting to see folks pull those together into consumer experiences that are starting to get traction. Now, they haven't gotten all the way to like full-on viral growth, but they're starting to show signs of this. And we're seeing this with the Base app that's been rolling out. There's so much demand for it, and the early cohorts of people who are in it are super sticky, really high retention. I think we're seeing it with things like Zora as well where, you know, it's just people discovering, oh my god, my content has value as a creator, I'm valuable, and that's like causing them to bring in their friends and grow more. And what I expect will happen sometime soon, and I won't put a specific date on it, but I think it's coming, is that we're going to see that next inflection where it's no longer just a steady grind up in the developer kind of institutional supply side kind of demand for crypto, but it's going to be this like viral grind up from the consumer side that's more demand-driven where it's like, oh my god, we finally have these products, how do I get it, how do I use that thing that can deliver so much value to me as a creator or as a consumer. I think we're really close.

Yeah. Yeah. I think that in certain ways the stablecoin stuff are in certain parts of the world. The thing about stablecoins though, and I generally feel this about payments generally, is because you actually have pretty high saturation of like in-region payment systems that are pretty good, like whether that's in the US with things like Venmo or credit cards or in India with UPI, you know, every country at this point for the most part has an in-region digital payment system that works pretty well. I think that limits the ability for a pure payments use case to be hyperviral, right? Because basically you like run into this adoption problem where, you know, it's good for certain things like now you can do cross-border payments way better or you can maybe save and get, but you don't have that same thing where like earlier in the payments life cycle with PayPal when it was like all bad, you had that viral like send money to a friend, it's magic experience, they get $5 and that could spread like wildfire. Now, when it starts to spread, you keep running into these nodes where it's like, oh, but like my payment system works pretty well. Like, why should I switch to this? And so my thesis on this is like we're not going to actually see that like really raw viral growth from pure payments. You have to start to bring in other consumer behaviors. And the big one that I have a thesis around is around social. Because when you look at kind of besides AI, which I would actually classify ChatGPT in many ways as a social product, because you're socializing with an AI, even if it's still kind of like a, you know, one-to-one in certain ways. I think that like the TikToks, the Instagrams, those are social products. They grow virally because you have this kind of bring your friends along for the ride. I think that that's what's going to grow virally in crypto as well.