Coinbase exec says there’s no playbook for public companies launching blockchain.
Coinbase exec says there's no playbook for public companies launching blockchain.
The Launch of Coinbase’s Base Blockchain: A New Era in Decentralized Applications
Coinbase, one of the leading publicly traded cryptocurrency exchanges in the United States, is set to unveil its new Base blockchain on Wednesday. This blockchain, built atop Ethereum as a layer 2 solution, is expected to make a significant impact in the industry right from the start. Even before its official launch, the Base network has garnered $133 million in deposits locked into various applications and protocols, making it the fifth-largest layer-2 blockchain in terms of total value locked (TVL) according to Dune, a crypto analysis firm.
In a recent interview with Jesse Pollak, the creator of Base and head of protocols at Coinbase, he shared valuable insights into the strategy, revenue potential, and regulatory considerations of the new blockchain. One key point emphasized by Pollak is that no publicly traded company has ever launched its own blockchain, so Coinbase is navigating uncharted territory with Base.
Coinbase’s Mission: Enabling Safe and Easy Crypto Transactions
Coinbase’s mission, which has evolved over the last decade, has always been to enable people to safely and easily transact with cryptocurrencies. Initially focused solely on buying and selling Bitcoin, Coinbase has expanded its offerings to include a wide range of cryptocurrencies, as well as services like saving, staking, borrowing, and lending. However, Coinbase acknowledges that the current adoption of cryptocurrencies has been limited to speculation and trading.
With the launch of Base, Coinbase aims to move beyond speculation and trading and enter a new phase of utility and innovation in the crypto economy. Base is designed as a low-cost, easy-to-use, and developer-friendly platform built on top of Ethereum, the largest decentralized ecosystem in the crypto industry. By providing a trusted interface and curated experiences, Coinbase intends to bridge the gap and make crypto accessible to a broader audience, ultimately integrating it into various aspects of people’s lives worldwide.
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Revenue Opportunities in the Base Ecosystem
When it comes to revenue opportunities, Coinbase believes that the primary source will come from decentralized applications or “dapps” built on top of Base, rather than directly from running the sequencer of the blockchain. Coinbase’s historical monetization strategy revolves around simplifying complex crypto activities and charging a fee for that service. As the utility and use cases of cryptocurrencies increase, Coinbase expects more customers to access these functionalities through their platform, thereby creating monetization opportunities.
Sequencer fees, which Coinbase plans to implement as a revenue mechanism for Base, are not expected to be the primary focus. Instead, Coinbase aims to increase utility, expand the range of use cases, and provide easy-to-use and trusted experiences. The company’s monetization efforts will center around its user interface, where it has traditionally generated revenue. By focusing on the user experience, Coinbase intends to support Base’s innovation and reinvest any profits back into the ecosystem.
Ensuring a Safe and Trusted Experience for Retail Investors
As a centralized, retail-focused company, Coinbase understands the importance of communicating risks to retail investors and providing curated and trusted experiences. Despite the open and permissionless nature of Base, Coinbase aims to ensure that the platform remains safe and accessible to everyday users. To achieve this, Coinbase will continue to provide trusted interfaces, curated experiences, and ratings and reviews for dapps and tokens within the Base ecosystem.
While Base allows for decentralized and global on-chain interactions, Coinbase’s role as a gateway provides an added layer of safety. By vetting and highlighting trusted protocols and offering dedicated user interfaces, Coinbase aims to eliminate confusion and provide a secure experience for its users. In doing so, Coinbase is committed to enabling banks and users alike to leverage the open, permissionless nature of Base while maintaining a reliable and trusted environment.
Base’s Token Strategy: Focusing on Innovation and Product Market Fit
Contrary to the widespread trend of tokenization in the crypto industry, Coinbase has no plans to introduce its own token on Base. The company believes that tokens can often hinder product market fit rather than aid it. Instead, Coinbase’s focus for Base revolves around building a developer-friendly platform and ensuring a seamless user experience. Base already supports various tokens like Ethereum (ETH) and USD Coin (USDC), enabling a rich ecosystem of token-based products and economy.
Coinbase’s decision is based on a belief that tokens can create inefficiencies and distort incentives for developers and users. The company aims to simplify the user experience and drive adoption based on the merit and utility of the products, rather than promoting tokens for their own sake.
Regulatory Considerations and Coinbase’s Approach
Launching a decentralized, open, and permissionless blockchain from a publicly traded centralized company presents regulatory challenges and uncertainties. Coinbase acknowledges that the regulatory environment around the world is currently unclear, causing entrepreneurs and innovators to spend significant resources on legal considerations rather than product development.
To address this, Coinbase has taken a deliberate, measured approach with Base, involving every relevant department within the company, including legal, compliance, finance, privacy, and regulatory teams. The aim has been to ensure that Coinbase adheres to its stringent values of security, trust, and compliance while bringing clarity to the regulatory landscape. Coinbase believes that clear regulations can foster innovation, protect consumers, and allow the technology to achieve its full potential.
In conclusion, Coinbase’s launch of the Base blockchain heralds a new era of innovation and utility in the crypto industry. By providing a trusted interface, curated experiences, and a reliable platform, Coinbase aims to expand the adoption of cryptocurrencies and enable a seamless transition from speculation to everyday use. With Base, Coinbase believes it can contribute to the growth of a decentralized global economy while ensuring safety and regulatory compliance. As the industry evolves, Coinbase remains committed to facilitating the best and most trusted access to a multitude of innovative blockchain products for millions of users worldwide.