The Origin of Base: From Coinbase to Layer 2

Base, the Layer 2 (L2) scaling solution for Ethereum, emerged from a journey that began within Coinbase, one of the largest cryptocurrency exchanges in the world. Jesse Pollak, the creator of Base, shared the fascinating origin story of how this ambitious project came to be.

Pollak joined Coinbase in early 2017 after his startup was acquired. Over the next five years, he took on increasing responsibilities, eventually leading all consumer businesses at Coinbase on the engineering side. However, by early 2021, Pollak felt a need to return to the core of crypto innovation:

"I wanted to get back to the metal of crypto. I'd spent five years building these consumer interfaces, which were predominantly custodial and predominantly about trading. But it felt to me like if we wanted to enter the next era of crypto, that was less speculative, more utility driven, we really needed to solve some of these hard infrastructure challenges that could actually unlock that next wave of adoption."

This realization led Pollak to propose a new direction for Coinbase – bringing the business on-chain and transitioning from custodial, off-chain products to on-chain, smart contract-powered solutions. The journey towards Base had begun, although at the time, the team wasn't explicitly setting out to build a new blockchain.

Exploring Product-Market Fit

Initially, the team at Coinbase explored various product ideas to gradually move the company on-chain. They experimented with concepts such as:

1. A marketplace to help apps identify themselves and reach customers
2. Advertising infrastructure for targeted app promotion
3. Identity products, which eventually evolved into CB ID and attestation work

However, these early experiments revealed two critical insights:

1. Building on-chain products was still too challenging, with unclear infrastructure and processes.
2. None of the initial product ideas seemed to have the potential for significant impact.

These realizations led the team to shift their focus towards creating a "paved road" for building on-chain applications. As Pollak explained:

"We started basically thinking holistically about how could Coinbase build a paved road for building on chain. And pretty early on we went out and we looked and we said where are all the developers building today, we saw that the vast majority from a numbers perspective were building on EVM, from an assets perspective, Ethereum was still far and away as the largest economy."

The Decision to Build a Layer 2

The team's research clearly pointed towards the Ethereum ecosystem as the logical focus for their efforts. However, they quickly realized that building directly on Ethereum's Layer 1 wouldn't provide the scalability required for Coinbase's ambitious goals:

"When we looked at okay the scale that Coinbase wanted to build at, you know, millions, tens of millions, hundreds of millions, it was clear that we couldn't do that on L1. Just wouldn't sustain the scale that we were operating at, be way too expensive for our customers."

This realization led to the decision to build a Layer 2 solution. The team's perspective evolved from thinking about a single, monolithic L2 to envisioning multiple L2s working in parallel to scale Ethereum collectively:

"As that kind of perspective shifted for us from one L2 to others, me, many of these things, I think that really opened up the possibility for us of doing one ourselves."

Choosing the OP Stack

After extensive research and meetings with various teams, Coinbase decided to build Base on the OP Stack, developed by Optimism. Pollak outlined four key factors that influenced this decision:

1. Technology alignment: The OP Stack's modular design and focus on future decentralization aligned with Coinbase's goals.

2. Open-source approach: Optimism's MIT license allowed for permissionless building and forking, which resonated with Coinbase's vision for an open, on-chain economy.

3. Complementary strengths: Optimism's expertise in on-chain governance and decentralization complemented Coinbase's strengths as a scaled centralized corporation.

4. Team compatibility: Previous collaborations with Optimism on projects like EIP4844 had built trust and demonstrated aligned visions.

Pollak emphasized the importance of this last point:

"We had a year of being in the trenches writing code, shipping real fundamental infrastructure improvements. We knew that they were really strong engineers. We knew that we had similar visions for how all this technology should work."

The Rapid Development of Base

With the decision made, the team moved quickly to bring Base to life. Key milestones included:

• December 2022: First internal prototype of Base (then called "basenet") developed
• February 2023: Testnet launched
• August 2023: Mainnet launched

In just eight months since its mainnet launch, Base has already established itself as a leading L2 solution. Pollak shared some impressive statistics:

"In the last couple of weeks, there's been the most dex volume on base. There's been the most users on base. There's been the most transactions on base. I think you're seeing pretty much every app launch on base today."

The L2 Endgame: Many Chains, One Vision

As Base continues to grow, Pollak shared his vision for the future of Layer 2 scaling solutions. He believes that rather than a single dominant L2, we'll likely see multiple L2s working in parallel to collectively scale Ethereum:

"My rough mental model is that L2s are going to end up being these economic zones, almost like a nation state today where you have this really big macro economy that is basically like a society that has sovereignty, that has governance, that has a culture that develops off of it."

Pollak estimates that there might be room for tens of significant L2s, each with its own characteristics and focus. He draws an analogy to the current global economy:

"I don't think there's thousands of those that will exist but I do think that there's probably enough space for tens and some of them are definitely going to be bigger like the United States is the largest economy in the world but I think there are going to be on the order of tens of these that end up being really material."

Layer 3: The Next Frontier

Beyond L2s, Pollak sees tremendous potential in Layer 3 (L3) solutions. He envisions L3s as app-specific zones that can leverage the infrastructure and liquidity of L2s while providing more tailored scaling solutions:

"L3 is going to be this experimentation zone it's going to be super super heterogeneous it's going to be really diverse you're going to have people that really want to have different trust characteristics for instance I think people are going to build L3's that essentially have the same trust characteristics as web 2 products but they get to bootstrap off of the identity that's on chain on L2 they get to bootstrap off the assets that are on chain on L2 and build them using this new technology platform to help them move faster."

This diversity in L3 solutions will allow for greater experimentation and innovation, potentially leading to breakthroughs that can be incorporated back into L2s and even L1s over time.

Interoperability: The Key to a Unified Ecosystem

As the landscape of L2s and L3s becomes more complex, interoperability emerges as a crucial challenge. Pollak identifies two primary forms of interoperability that need to be addressed:

1. Asset Fungibility: Enabling assets to move seamlessly across different L2s without introducing new trust assumptions.

2. Execution Interoperability: Allowing for synchronous execution of transactions across multiple state zones within a single block.

Of these two, Pollak believes asset fungibility is currently the more pressing concern:

"I'd say that I'm actually at least today much more focused on the asset fungibility side of things than the execution interoperability side of things. And that's not because I don't think the execution fund interoperability stuff is important. It's absolutely important it's something that we're pushing on. But I think that the economic outcomes that asset fungibility unlock are actually much much bigger."

The challenge of achieving asset fungibility lies not just in the technical implementation, but in getting different chains with varying backgrounds and perspectives to agree on a shared root of trust. This is where initiatives like the "super chain" concept come into play, aiming to create a collaborative framework for interoperability.

Scaling Challenges: Execution and Data Availability

As Base and other L2 solutions continue to grow, they face two primary scaling challenges: execution scaling and data availability (DA). Pollak is confident in Base's ability to address execution scaling, with a medium-term goal of reaching 1 giga gas per second – a 400x increase from their starting point.

However, data availability presents a more complex challenge. Base is currently leveraging Ethereum's improvements in this area, particularly the recent EIP4844 upgrade (also known as proto-danksharding). Pollak outlined the roadmap for further DA scaling on Ethereum:

1. Current implementation: 384 kilobytes per block of blob space
2. Pure data availability sampling (pure DAS): The next major milestone, enabling more efficient data storage
3. Full danksharding: The long-term goal, enabling sub-linear scaling as more nodes are added

Pollak expressed confidence in Ethereum's ability to scale its data availability to meet Base's needs, even as they push towards 1 giga gas per second or more. This alignment with Ethereum's roadmap is crucial for Base's vision of building a trusted, global on-chain economy.

The Role of Alternative Data Availability Solutions

While Base is committed to using Ethereum for data availability, Pollak acknowledges that other teams, particularly at the L3 level, may make different trade-offs:

"There are going to be all sorts of people who are building all sorts of things on chain that don't that aren't trying to build the largest economy in the world and so they might be willing to sacrifice some of that trust sacrifice some of that security because they have less less high requirements."

This opens the door for alternative DA solutions like data availability committees, Celestia, or Eigen DA to find their place in the ecosystem, particularly for more experimental or specialized applications.

Base's Business Model and Coinbase's Vision

An interesting aspect of Base's rapid growth is the revenue generated from sequencer fees, which Pollak admits was somewhat unexpected. However, he emphasizes that Base's primary goal is not to be a revenue driver for Coinbase:

"Our north star is to drive fees down as low as humanly possible so we can drive as many people on chain as possible that's it like we do not think about base as revenue driver."

Instead, Coinbase sees Base as a strategic initiative to create a robust developer platform and on-chain ecosystem. The company believes that by fostering this ecosystem, they will strengthen their position as a key gateway for users entering the crypto space.

Pollak outlined several ways in which Base is reinvesting the resources generated by sequencer fees back into the ecosystem:

1. Gas grants for developers building on Base
2. Scaling the grants program to reward impactful projects
3. Planning for "on-chain summer," a summer-long buildathon with resources for building and growing products

The ultimate goal is to dramatically increase the number of users transacting on Base:

"We're still in the hundreds of thousands of people who are transacting daily we need to get that to billions and so that's like a thousand x from where we are today."

The Importance of Trust and Security

Throughout the discussion, Pollak repeatedly emphasized the critical role of trust and security in Base's vision. This focus on trust is deeply rooted in Coinbase's ethos and extends to their approach with Base:

"When we are thinking about building a global on-chain economy that increases innovation creativity and freedom and we're thinking about building the the largest on-chain economy in the world that you know I think has the potential to be be larger than many economies that exist today in the world security and trust is going to be absolutely critical."

This commitment to trust and security influences many of Base's strategic decisions, from their choice of technology stack to their approach to scaling and interoperability.

Decentralization and the Security Council

As Base continues to grow, the question of decentralization becomes increasingly important. Pollak discussed the current state of Base's security model and the roadmap for further decentralization:

"Today like if you look at the the security council that we're building they're gonna have the ability to upgrade kind of the chain you have a like diverse security council set I think it's like 12 signers they're geographically distributed you know they have you know legal obligations they have contractual obligations but their permissions are still relatively wide."

The plan is to progressively descope the responsibilities and agency of the security council as the system hardens. This includes:

1. Widening the security council from 12 actors to more
2. Increasing time delays for actions
3. Descoping responsibilities to specific components rather than full system upgrades

The ultimate goal is to reach a point where the security guarantees for users are essentially the same as Ethereum's. However, Pollak stressed the importance of moving deliberately to avoid risks to user funds.

The Path Forward for Base and the Crypto Ecosystem

As the conversation concluded, Pollak reiterated Base's ambitious vision and the excitement surrounding its early success:

"We think we can bring everyone on chain we're gonna be able to increase economic freedom massively we're gonna be able to create a global on chain economy that increases innovation creativity and freedom and we're gonna be able to change the world."

The journey of Base represents a significant milestone in the evolution of the cryptocurrency ecosystem. By leveraging Coinbase's resources and expertise while embracing open-source collaboration and decentralization, Base aims to create a platform that can truly bring blockchain technology to the masses.

As Layer 2 solutions like Base continue to evolve and mature, they have the potential to address many of the scalability and usability challenges that have hindered widespread crypto adoption. The vision of a global, on-chain economy that increases innovation, creativity, and freedom is ambitious, but with the progress being made by projects like Base, it's becoming increasingly achievable.

The crypto landscape is rapidly evolving, and while Ethereum remains a dominant force, it's clear that the future will be shaped by a diverse ecosystem of interconnected chains and layers. Base's approach of building on Ethereum's strengths while pushing the boundaries of scalability and usability offers an inspiring model for how traditional tech companies can contribute to the decentralized future of finance and the internet.

As we look to the future, the success of projects like Base will likely play a crucial role in determining how quickly and effectively blockchain technology can be integrated into mainstream applications and services. The vision of bringing billions of users on-chain is bold, but with the progress being made in scaling, interoperability, and user experience, it's a goal that seems increasingly within reach.

Facts + Figures

• Base was created by Jesse Pollak, who has been with Coinbase for over 7 years.
• The project began in late 2021 with the goal of moving Coinbase's business on-chain.
• Base launched its testnet in February 2023 and mainnet in August 2023.
• In recent weeks, Base has seen the most DEX volume, users, and transactions among Layer 2 solutions.
• Base's medium-term goal is to reach 1 giga gas per second, a 400x increase from its starting point of 2.5 million gas per second.
• The team anticipates needing 10-100 Layer 2 solutions to effectively scale Ethereum for global adoption.
• Base is built on the OP Stack, developed by Optimism, chosen for its technology alignment, open-source approach, and team compatibility.
• The current implementation of EIP4844 provides 384 kilobytes per block of blob space for data availability.
• Base is generating revenue from sequencer fees, which was unexpected by the team.
• Coinbase is reinvesting resources from Base back into the ecosystem through gas grants, a grants program, and planned initiatives like "on-chain summer."
• Base's security council currently consists of 12 geographically distributed signers.
• The project aims to scale from hundreds of thousands of daily users to billions, representing a 1000x growth.
• Base is committed to using Ethereum for data availability, citing trust and security as primary reasons.
• The team sees potential for thousands or tens of thousands of Layer 3 solutions built on top of Layer 2s.
• Interoperability between L2s and L3s is a key focus, with asset fungibility being the current priority.

Questions Answered

What is Base?

Base is a Layer 2 scaling solution for Ethereum, created by Jesse Pollak and the team at Coinbase. It aims to provide a more scalable and cost-effective platform for building decentralized applications while leveraging Ethereum's security and network effects. Base uses the OP Stack developed by Optimism and has quickly become one of the leading L2 solutions in terms of transaction volume and user adoption.

Why did Coinbase decide to build Base?

Coinbase decided to build Base as part of a larger initiative to move their business on-chain and solve infrastructure challenges hindering crypto adoption. After exploring various product ideas, the team realized that creating a "paved road" for building on-chain applications was necessary. They chose to build an L2 solution on Ethereum because it offered the right balance of developer ecosystem, asset base, and scalability potential to achieve their goals of serving millions of users.

How does Base plan to scale?

Base has a multi-pronged approach to scaling. For execution scaling, they aim to reach 1 giga gas per second in the medium term, representing a 400x increase from their starting point. For data availability, Base is leveraging Ethereum's improvements, including EIP4844 (proto-danksharding) and future upgrades like pure data availability sampling and full danksharding. The team is also exploring potential Layer 3 solutions for further scalability and specialization.

What is Base's vision for interoperability between L2s and L3s?

Base sees interoperability as crucial for the future of the ecosystem. They focus on two main aspects: asset fungibility and execution interoperability. Asset fungibility is currently the priority, aiming to allow seamless movement of assets across different L2s without introducing new trust assumptions. Execution interoperability, allowing synchronous execution across multiple chains, is also important but seen as a longer-term goal. Base is working on these challenges as part of the broader "super chain" concept.

How does Base generate revenue, and how is it being used?

Base generates revenue through sequencer fees, which was initially unexpected by the team. However, Coinbase does not view Base as a primary revenue driver. Instead, they are reinvesting these resources back into the ecosystem through initiatives such as gas grants for developers, a grants program to reward impactful projects, and planned events like "on-chain summer" to foster innovation and growth on the platform. The ultimate goal is to drive fees down and increase adoption rather than maximize revenue.

What is Base's approach to decentralization and security?

Base is taking a gradual approach to decentralization, starting with a security council of 12 geographically distributed signers. The plan is to progressively widen this council, increase time delays for actions, and descope responsibilities as the system matures. The ultimate goal is to provide security guarantees similar to Ethereum's. Base prioritizes trust and security in its design choices, including its commitment to using Ethereum for data availability, to support its vision of building a global, trusted on-chain economy.

How does Base fit into the broader Layer 2 ecosystem?

Base sees itself as one of potentially tens of significant L2 solutions that will work in parallel to scale Ethereum. They envision L2s as economic zones, similar to nation-states, each with its own governance, culture, and specializations. Base aims to be the largest of these L2 economies, leveraging Coinbase's resources and user base. They also anticipate a proliferation of more specialized Layer 3 solutions built on top of L2s, creating a diverse and interconnected ecosystem.

What role does Coinbase play in Base's development and future?

Coinbase initiated and supports Base's development, seeing it as a strategic initiative to create a robust on-chain ecosystem. While Coinbase provides resources and expertise, Base is designed to be an open, permissionless platform. Coinbase's long-term vision is for Base to become a key infrastructure layer that strengthens their position as a gateway to the crypto economy, rather than a direct revenue source. The company is committed to fostering Base's growth and adoption while gradually increasing its decentralization.