Interview with the person in charge of the Base protocol: Will Base become independent from Coinbase?

Original title: Coinbase's BOLDEST Bet Is Paying Off Big Time

Compiled by: Kaori, BlockBeats

Editor's note: Base, one of the Ethereum Layer2s with the strongest growth this year, has gained wider recognition after Coinbase released its first quarter financial report. In this episode of Bankless, the host and Jesse, head of the Base protocol, discussed how Base expanded Ethereum in the blob era, how Coinbase gradually migrated to the chain, the relationship between Coinbase and Base, and the upcoming Onchain Summer and some new things in the Base ecosystem.

Host: Jesse, it's great to have you on the Bankless show again. We just checked some recent data from Base, and there are a few data that are still fresh in our memory. Base is now ranked third in Layer2 solutions by total asset value, with a TVL of approximately US$5.2 billion. In terms of DAU or WAU, it's about 1.3 million. Base's fees are under 5 cents. Base was launched in August 2023, if I remember correctly. Give us a summary. How is it going so far and where are we on our journey?

Yes, we are still on day one, and that's what I tell my team every day. We still have a lot of work to do to bring the entire world on-chain. Having said that, it's been about eight and a half months now, and the team and I are really astounded by the progress we've made.

I think the last nine months can be divided into three phases. The first phase was Onchain Summer, where millions of people joined the Base chain and there was a lot of energy. I think that was a great way to drive the network and the economy and achieve the culture that we want to achieve. During that time, we saw a clear increase in many of the metrics and expected results.

After Onchain Summer and in the fall, the enthusiasm waned a bit, and it was a bit stagnant, like a bit of a melancholy trough. We had a big launch, which was very exciting, but now we're facing the reality that our team, frankly, is also very tired. We worked hard for a year to get this project launched, worked hard in Onchain Summer, and then spent September, October, and November to adjust and get our balance back. At the same time, we also have to think more broadly about where we are going in the next one to two years and how to establish our mission and strategy. I think we've done a lot of good work in this regard.

The first quarter of this year really kicked off phase 3. We were in the top 10 Layer 2 solutions by transaction activity and TVL at the start of the year. If you look at the data now, we're number 3 by TVL, which is a very lagging metric. Some projects have been building for three years, so it's going to take a long time for us to catch up, but if you look at daily active users, transaction volume, and developer count, it looks like Base is the largest Layer 2 solution in the world right now. Most of the time, we're competing with the largest chain after Ethereum, which I think is pretty remarkable.

In mid-March, we did a 4844 upgrade to Ethereum, which reduced Layer 1 fees as well as other Layer 2 fees. Now we have a place to store data that's designed specifically for Rollup processing, which means that instead of having to pay a lot of fees for all the data stored on Layer 1, we're paying less. It's a pretty amazing solution that I think will enable Layer 2 to scale as part of Ethereum's Rollup scaling strategy.

After this upgrade, we saw a huge drop in Base fees, and at the same time we saw a huge increase in demand. In the space of a week and a half, we saw about a five-fold increase in demand. The result of this is that while fees on layer 1 are very low, we're seeing pretty high fees on layer 2 due to the increase in demand.

This is because just like Ethereum, the Base chain has a fee market that is defined based on two factors. The first is what's called the gas target, which is the target amount of gas that the Base network will be able to process per block or per second. If the number of transactions processed exceeds the target, fees go up. Same mechanism as Ethereum's 1559. Fees increase exponentially. If the amount of gas processed per block is less than the target, fees go down. It's a system that automatically recalibrates, so if demand on the network exceeds the capacity of the network, fees go up. If demand decreases, fees go down. So we're seeing demand that exceeds our target capacity, which causes our fees to go up significantly.

And now the gas target is a variable parameter, but if you change the target it has a lot of other effects. And you can't just change the target at will because these effects can be very problematic and you need to take a very principled approach to enable the network to scale healthily.

We think there are three main issues with addressing this. The first is that there needs to be more data availability when increasing the target so that all transactions can be processed. More gas means more transactions, which means more storage needs to be put on a layer. So we need to continue to expand the data availability of a layer through PureDAS and the entire Protodank or Dank sharding roadmap. This is an Ethereum layer 1 roadmap issue, but we will continue to invest in this area.

The second challenge is how much gas the actual layer 2 nodes can handle. That is, if we run a block every two seconds, and we want to process 10 million gas per second, can we process all the gas in these two seconds or less so that all nodes can continue to run. This involves a lot of EVM optimizations, such as can we do optimistic processing? Can we change the database format to improve performance?

The second aspect also involves hardware issues, can we increase the hardware requirements? And one of the great things about L2 is that they don't necessarily require the same hardware requirements as L1.

The third important aspect is state growth, which means that if the chain runs very fast, you will get a very, very large chain. This is a lot of data that everyone needs to store, which will cause many downstream problems. Ethereum has started to think about these problems and solve them by using virkle trees, state expiration, or transferring state to other participants. This is the third open research problem we need to solve.

So to have the confidence to raise this target, which was really a variable behind the scenes, there were very, very, very difficult engineering challenges that needed to be solved. When Base started seeing these increased fees, I felt like we needed to change our focus and our narrative a little bit.

We've been focused on increasing data availability and lowering the cost of L1 transactions for the past two years. Now we needed to have some changes in the team and the industry to say, "Okay, the rules have changed." Now we need to focus on both EVM scalability and state growth. So I came out and said, "Hey, we're going to start solving this problem. We're going to set a very aggressive goal of processing 1 billion gas per second."

This goal came from our conversations with the Paradigm team, who we've been working closely with and have great respect for.

If we look back to our initial starting point of 2.5 million GAS per second, 1 billion GAS is equivalent to 1,000 GAS per second, so our goal is 400 times more than what we initially wanted.

Over the next two weeks, we achieved about 2x growth, from 2.5 million GAS per second to 5 million GAS per second. This quarter, we are working towards 10 million GAS per second. We feel that this goal is clear, and we will continue to work hard, doubling each time, until we reach our goal of 1 billion GAS per second.

In the process, we will solve or drive a lot of very difficult challenges that are somewhat invisible but limit our ability to continue to scale the network. That's what it's like to work as a Base engineer. You have to face this environment and this goal.

I remember after the release of 4844, Vitalik published a blog post where he said that the moment of Ethereum from zero to one has passed, and now it's more from one to ten. What he meant was that it was going to be achieved through a series of incremental steps, not a binary improvement like the introduction of 4844, which was like a binary improvement in Ethereum. Now everything is achieved by incremental improvements in seven different directions that are multiplied step by step. There is no one-size-fits-all solution here, but by making incremental improvements in five or six different directions, and Base is involved because it is a network. But the beauty of this is that if Base solves any cutting-edge problems, this can actually be extended to the Layer2 space of Ethereum.

Moderator: You build not only for yourself, but for the entire industry.

Yes, I think that's the most important point about our decision to build Base, and we also decided to build an open platform on the OP Stack. If you look at the current OP Stack core development process and achievements, the Base team just led the latest upgrade, and we will also lead the next upgrade, Fjord, which contains more expansion content. We will reduce the cost of L1 by 10% to 20%, and there are some other very positive changes. All of these benefits will accumulate to any network running on the OP Stack.

Moderator: You just said that after the introduction of 4844, there has been a significant increase in Base consumption.

This is to some extent expected. We have been predicting the demand before 4844, but it seems that the actual demand has exceeded our expectations.

Moderator: Do you know where this demand comes from? For example, why are people doing more things on Base? What is driving this increase in demand?

Yeah, it's definitely more than we expected. If you look at the industry as a whole though, it's probably not true for everyone, just more for Base. There are certainly exceptions, but there's a reason why Base is processing more transactions right now than Arbitrum or other networks. I don't have a specific answer for that, I think it's more due to the developer marketing that we've been doing, the timing of the launch, and all of these factors came together perfectly at a certain point in time for people to attribute this 4844 thing to Base and think that this is where we can unlock more and better applications.

If you look at the developer metrics, you can see this. One of the metrics we focus on the most is "revenue generating deployers", which is how many people are deploying smart contracts on Base and other networks that are able to generate meaningful revenue, because that's a measure of substantive, high-quality developers.

If you look at this chart, we had been flat, and then the predictor framework changed, and we went up a little bit and started growing. And then 4844 happened and we started to explode.

Today, Base has more revenue generating deployers than other L2 networks like Polygon, POS, and I think we have the same in the entire Ethereum ecosystem.

I think a lot of this is due to a moment and a confluence of different factors that led to a lot of developers coming to the Base chain for the first time, and a lot of developers refocusing their energy on deploying applications to Base.

I really like this "revenue generating deployers" metric. Think of it this way, it's small businesses that entrepreneurs decide to open businesses in this new space. We often talk about Ethereum in the context of Manhattan, busy, big, very expensive, and now with these layer 2 solutions, we have new suburbs. When you talk about "revenue generating deployers," you're actually talking about emerging businesses. There are businesses, there are restaurants, there are movie theaters, there are a lot of small businesses popping up, which is very cool.

Moderator: I want to ask some stupid questions from a user perspective, maybe these questions are obvious to you, but you're talking about it from a system perspective. I want to look at this from a user perspective. The fee to transfer ETH on Base right now is about 1 cent. For users, the fee for a transaction is this much. What was this before EIP-4844?

I think our median fee has dropped by about 80% to 90%, and high gas consumption operations are more affected by this, while other small operations have little impact on fees. I think before EIP-4844, the rough cost of performing small operations was somewhere between 10 and 30 cents.

Moderator: So what would you like the fees to be, or is that an impossible question to answer?

We want the fees to be as low as possible, and we have a common goal within Coinbase of one cent per second. We want the average and median transaction fee to be under one second, under one cent, and to complete transactions in under one second. This is like the on-chain bandwidth moment for us, which means that if transactions are cheap enough and fast enough, everything on the chain is possible. We want to expand about 10,000 times in terms of the number of users, while keeping costs and speeds at the sub-second, sub-cent level.

Moderator: Of that cent, what percentage is the first cost aspect, which is the Ethereum Layer 1 cost?

Today, most of the cost is not due to Ethereum Layer 1, but due to the usage of the L1 gas market. Because we are not using all the block space, which means that the block fee is very cheap, almost free. But I think this will change in the next few months because we will start to use block space and there will be a market-based fee, which will bring it back to 5% to 30% of the L1 fee.

And then there are L2 market-based fees, which can be high or low depending on how much goal and demand there is. This will make up the remaining fees. We describe EIP-4844 as another lane that was opened up, like a high occupancy lane. It's cheap now because it's not full, right? But this may change in the future. Let's say if the situation changes, the high occupancy lane becomes expensive. So Ethereum's block space is full and all the Layer 2 solutions are competing for it. Would you consider using non-Ethereum dapp solutions? Because there are a few of those coming out now, and that could also be a way to lower fees on Base.

Yeah, I mean, we always consider different scaling options from a scaling perspective. I think our view right now is that the roadmap for scaling data availability on Ethereum is pretty clear, it just needs to be executed. Milestones like PureDAS will increase our data availability potential by 10x. So our first priority is to execute on that milestone, just like we executed EIP-4844 before. We think that will be enough to meet the data availability needs for at least the next phase of Base's growth.

When we think about the mission, vision, and strategy of Base, we really want to build a global on-chain economy that increases innovation, creativity, and freedom. I think one of the things that's required to build a global economy is trust, security, and certainty. When I think about the trust, security, and certainty of relying on Ethereum for data availability, settlement, and all of the L1 logic, that's a much higher level of trust than starting to carve those things up and introducing new trust systems into the tech stack.

Base's Layer3

Moderator: Jesse, if Layer1 is expensive and Layer2 is cheaper, why don't we use a large third layer on Base to scale?

I think there will be a lot of layer 3s on Base. My thinking on this has shifted a bit over the past year as I’ve started to build a better mental model of how these components work.

Layer 3s can be likened to servers, they’re just more tightly coupled to the servers running on-chain, making it easier to bring on-chain assets into a dedicated computing environment. There are a lot of people who want to run servers, and they run a variety of servers with different trust characteristics, different stacks, different languages, and tools, and I think we’ll see the same diversity in layer 3 on Base.

Right now, we’re tracking six or seven layer 3s actively running on Base, and we expect that number to grow to hundreds or more this year. I think this is going to be a very creative area because the costs are lower and there’s an easier on-ramp for users.

Layer 3 on Base is just another chain, deployed on top of Base’s Layer 2. So settlement happens on Base’s Layer 2, data availability happens on Base’s Layer 2 or somewhere else.

Moderator: What do you think about the second and third issues you mentioned - high transaction fees and another solution to Gigagas, which is parallelization?

I would classify this as EVM optimization, which is the work required for the second increase target. There are a lot of parallel optimizations that can be done in the EVM, using optimistic parallelization and other things, without breaking EVM compatibility. Although you can't get the full benefits, there is still a lot of work that can be done in this regard.

Again, we have been working closely with the Paradigm team and they have thought deeply about this issue. We are happy to continue working with them.

I also think there are some things that may cause some compatibility to break. For example, if access lists are required, developers must explicitly specify what they will access in that contract or call, which will be able to perform better. This would be a breaking change because all the old contracts that are deployed do not have these access lists defined, and we need to change them for newly deployed contracts.

This has some value in thinking broadly in the L2 space and how to evolve the EVM on L2. There is a project called RIP (Rollup Improvement Proposal) where Ethereum core developers are working with L2 to jointly promote the development of the L2 EVM, and I think we will see a lot of progress and impact as a result of these experiments.

Moderator: Jesse, crypto native users are used to paying fees for transactions, right? So you transitioned from Ethereum to Base and were like, "Oh my god, this is so much cheaper, great!" right? But the average user, the mainstream user, the billions of users you're talking about attracting to the chain, they are simply not used to paying transaction fees for various operations in Web 2.0. What do you think about this? Why is this the case? If someone came to you externally and said, "Jesse, a penny is good, but what's better than a penny is zero fees." Why can't you do that?

I completely agree with that, but as the cost of Layer2 and other computing environments decreases, developers will internalize the costs more into their business models and structures. At the moment, because fees have been high and the technology has not been well supported, users have been paying these fees. But I think we're going to gradually move towards a world where developers bear all the computational costs and then make money in some way through their own business and use that revenue to pay the fees.

This isn’t some crazy new idea, this is how online business has always worked, right? You don’t have to pay AWS fees to use Google Chrome, Riverside, or TikTok, that would be weird. Instead, TikTok or other companies pay those fees, and they pay those fees through their profits.

I didn’t think this was realistic before, but now with lower fees and tools like Paymasters in Smart Wallet and 4337, we’re seeing more and more developers doing this.

We’re providing gas subsidies to all developers on Base, and if you go to Coinbase Cloud, Coinbase Developer Platform, Alchemy, Byconomy, StackUp, Pimlico, or your favorite account abstraction tool, you can get gas subsidies from Base to provide free transactions for your users. This also provides you with an opportunity to experiment and learn about how to evolve your business model and product so that you can continue to provide a gas-free experience while generating revenue that can be used to pay for gas.

Moderator: This will be a very innovative area that will greatly improve the user experience, and it is not something that you actively participate in as part of the Base protocol, but you put this responsibility on application layer developers and provide them with support and tools to enable them to realize the vision of no gas fees.

Yes, we think building infrastructure on-chain is the best option. There always needs to be pricing in some way to form an effective market, and people pay the corresponding value. If this mechanism is not available, there will be many other challenges.

If you have communicated with the Solana team, you will find that they are actually facing some problems now, that is, there is currently no economic model for priority fees on Solana. This leads to people trying to manipulate the system by submitting thousands of transactions, which leads to network instability.

Economic mechanisms are very valuable in designing highly available, highly decentralized, and highly resilient blockchain systems and calculations, so I think they must exist. And building a series of infrastructure on the upper layer so that we can have a seamless experience on it, we can accomplish a lot of work.

I have expressed some views on this issue on Twitter before. I think we are currently missing a very important infrastructure, that is, better infrastructure for hedging L1 gas prices and L2 gas prices. Ideally, a market could be created on Base that efficiently prices future gas costs and gas markets so that we can give developers a more stable experience where they can say, "Oh, we're going to spend 10 million gas over the next three months to run our app, let's buy that upfront and know the known cost, and then smooth that out through the market so that other people are taking on the risk and are willing to trade." I'm talking to a lot of teams doing this, and I think this will be the next important infrastructure to unlock more design space.

Coinbase's Relationship with Base

Moderator: Next, I would like to discuss the relationship between Coinbase and Base. I would like to quote a tweet from Max Bransberg, who said, "In the future, Coinbase will store more USDC balances of businesses and customers on Base, which allows us to manage and protect customer funds with lower fees and faster settlement times without any impact on the Coinbase user experience. We are excited to continue to move our business to the chain and hope that other companies will follow our example." Since this tweet was released, the supply of USDC on Base has shown an absolute exponential growth. I can only imagine that this is because Coinbase is truly using Base as their own backend as they said. Can you talk about this decision?

Yeah, I guess it will probably start with USDC in customer and business accounts, but it could expand.

Moderator: Talk about what that means and where it's headed.

If you look back at Coinbase's mission, vision, and strategy, Brian wrote a blog post in 2016 that we've had a four-phase plan for the last eight years to build an on-chain economy. He said, first we'll build the protocol, then we'll build the exchange, then we'll build the consumer interface, and then we'll have millions of applications used by billions of people.

I think we're somewhere between phase three and phase four, and we've got the beginnings of these interfaces, Coinbase, Coinbase Wallet, and other browser plugin wallets. We're also starting to see the beginnings of these applications, and a lot of them are being developed on-chain, on Base and other browser wallets. But we're still a long way from having millions of applications used by billions of people.

We started in 2012 as just a web company that allowed you to buy Bitcoin, 12 years later, in many ways we are still an offline custodial centralized business that contains cryptocurrency. We allow people to use cryptocurrency in web products, but they do it in offline web products. I think we see an opportunity to see what it would look like if we moved these users, assets, and products to chain.

First of all, it is much cheaper to use chain technology, you can build the same product for 10 times less than offline technology. I think Uniswap is a great example of this, it only took two engineers to build the first version of Uniswap, while it might take dozens or even hundreds of engineers to build a centralized exchange.

The second benefit is that it is globally available from the beginning. If you build a product on chain, it is available to everyone by default. If you build a product in an offline environment, there are more challenges and you need to think about how to get people to use it and the different types of participation required to unlock it in different places.

The third benefit is composability. If you build something on-chain, it's automatically compatible with things on other chains. The components can plug into each other, and people can build on top of it and leverage it. Whereas if you build in an offline environment, then everyone needs to integrate with you through traditional APIs. So from a business perspective, from a Coinbase perspective, when people like Max who run our consumer business see this, they think we need to do this because it's good for our business.

But also because if we do that, we'll build a whole bunch of tools and play and knowledge that will help other people make that transition, and I think that's what his announcement about USDC is indicative of, we're trying to find the steps that we can take to move more parts of our business on-chain.

One of the things that I'm really excited about is, if you think about Coinbase right now, it's like a glacier, it's a huge company, there's a lot going on. And today, most of the on-chain stuff is underwater, it's not happening yet, and people are just seeing the tip of the iceberg, "Oh, USDC balances are starting to come on-chain, great, Coinbase is starting to let people do things on-chain, great." But I think over the next year, the whole iceberg will come out of the water, "Oh no, every part of Coinbase can move on-chain!"

Putting USDC on-chain is definitely the most immediate thing, that's the first step, and I think one of the things that's going to enable us to do that is the new smart wallet that we've talked about a lot. The way I think about this smart wallet is that first we have to build Base, which is a developer platform that you can build applications on. But even on this developer platform, there are still a lot of really hard problems for developers. Like how do you integrate on-ramps, how do you make sure the wallet experience is really good for users…

The smart wallet is the next platform we’re building, and it’s going to sit on top of Base, so that both users and developers have an incredibly simple, unified experience that allows them to use all of these applications.

Today every developer has to worry about how to bridge users from L1 or other chains, how to onboard users, how to provide gas subsidies, etc., but in this new smart world, you don’t have to worry about that, the bridging is built in, the gas subsidies are built in, you don’t have to worry about multi-chain balances, you don’t have to worry about doing custom gas operations, you just use the payment interface and focus on building your application.

Similarly, on the user side you don’t have to worry about moving funds from Coinbase to your wallet, because you can just use your Coinbase balance and it will work, you don’t have to sit down every time you bootstrap a friend and explain to them that if they screw up they will lose all their money, because these wallets will have controls built in so that users can’t lose all their money, just like we have existing financial tools.

Moderator: When I read that tweet, one thing came to my mind, which was probably just me speculating in my own imagination and desire. So Jesse you either confirm my point or pull me back to reality. Read that sentence again, "This allows us to manage and protect customer funds with lower fees and faster settlement times", when I saw that tweet, I thought of centralized companies like Coinbase with the front end in the front and the back end as the foundation, like user accounts in the back. For me, this has always been one of the visions of going on-chain in the first place, or why blockchain was invented, if we had had transparency like Coinbase in 2008, using customer funds on-chain, we wouldn't have had the crazy disasters with the mess of credit default swaps without any accountability. This is also why the courts had to intervene because we don't know what happened, we don't know who settled what contract, who owns what. So when I see a financial institution say, hey, we're going to use this blockchain to manage customer funds, and it's completely public and open and can be audited by users, I see insurance in 2008, there's going to be a layer of protection against whatever the motivation was to create this space.

Yeah, I think that's definitely our way of thinking, we're going to move everything on-chain, and that's the open global economy that we want, an on-chain global economy that increases innovation, creativity, and freedom, that's transparent, that's decentralized, that has all of the features that everyone expects, but we're building it on this new platform. I don't think most people really understand what this shift means specifically or how transformative it's going to be.

And maybe just to further emphasize that, sometimes people ask, why are you doing this at Coinbase? Isn't Coinbase a crypto company? And I say, yes, Coinbase is a crypto company, Coinbase was founded in 2012, and we're the largest crypto company in the world, and we're the most crypto-forward-looking public institution in the world, and it still takes time, it still takes convincing, it still takes a lot of understanding and infrastructure to get to this cosmic way of thinking that we're going to move everything on-chain. It's still happening internally, it's still a process that we're working through, but I think we're moving faster every day.

Moderator: Jesse, some people think of Coinbase as a centralized exchange and a public company, and they look at Base and say that Base is centralized and whether it fits the idea of cryptocurrency being decentralized, what do you think about that?

Yeah, that's a great question. One of our values from the beginning has been decentralization and open source, and everything we do moves in that direction. I think there's a level of thoughtfulness that we need to bring to creating a place of great trust for people to grow their economy, and that thoughtfulness also means that we have to move forward moderately, and when appropriate, we have to move slowly.

So there are two aspects to Base decentralization, one is the decentralization of governance, and the other is the decentralization of technology. When we built the network on day one of mainnet, there were some requirements to get to the level of decentralization that we felt was sufficient for us to keep Base open, permissionless, and global, which was that there could be no single point of failure or single point of control that could arbitrarily change anything in the network.

Because if that were the case, then there would be a whole series of ripple effects in terms of how regulators view this network and how we can really position it and talk about what we're building. So from day one of Base, that wasn't the case. Coinbase doesn't have a single point of control where the decision-maker has the power to make decisions, but there are still components of the network that are more centralized than decentralized.

For example, when we first launched the network, the way the contracts were upgraded required two 2-of-2 multisigs, which actually became two larger multisigs, one managed by the Optimism Foundation and one managed by the Basecore team inside Coinbase. These two large multisigs need to work together to make changes, which means that Coinbase can't change arbitrarily, the Optimism Foundation can't change arbitrarily, we both need to make changes together. But it's still only two institutions, so what we're working on now is to expand the size of the security committee to make it geographically distributed and include more parties, which is built in partnership with Optimism and is being rolled out. This will eliminate a major point of failure, and we will further eliminate control of the security committee, achieve decentralization, etc.

The second point is that in the first version of the network, there are only two people on the chain who have the ability to verify the chain and react if the sequencer (run by Coinbase) behaves maliciously. These two people are the Optimism Foundation and Coinbase. As long as one of them can question the sequencer for bad behavior. We are working on rolling out proofs of failure right now, which will allow anyone to challenge it. This is currently live on the testnet, and we have just completed all the audits and are about to launch the mainnet.

So from a technical decentralization perspective, these two important technical changes are our main focus next, and according to Vitalik's framework, they will get us from phase zero to phase one, and then over the next year, we have a pretty clear path to transition from phase one to phase two. By the way, this is Vitalik's framework, which is also the framework on L2BEAT, and it provides some methodology for what Layer2 decentralization means.

Moderator: This refers to a pie chart on L2BEAT that currently has five different parts, Base has two green parts, and the other three are red. What you mean by reaching phase one is to turn them all yellow and green, right?

Yes, we have made very good progress on this, and this is the path to technical decentralization. The second path to decentralization that I think about is more about governance decentralization, and it involves that technical system, the rollout of layer 2 scaling. Within that technical system, there are governance decision points, like who gets to play the role of the participants in a multisig? Or who gets to set the gas target? Those are all governance decentralization questions.

Today, those governance decisions are made by the Basecore team at Coinbase, and over time we want to expand the range of people who participate in those governance decisions. One of the things that I'm most excited about Base is that because we don't have a token and the kind of single governance decision-making structure that could exist in a token, we're starting to see a pretty incredible bottom-up kind of cultural institutions, organizations, and movements emerge within Base that are starting to have real cultural influence. These include communities like Base Management, Yellow Collective, or Base God, which people now think of as the flag for Base.

One thing I'm really excited about is exploring and experimenting with governance decision-making models, using those systems and cultural institutions to build meta-governance, bringing their perspectives together to achieve good results. We just finished allocating funds in the form of grants that a lot of people are responsible for, and most people do it by building a process for people to apply for grants and building evaluation systems. This is very expensive and takes a lot of time to build these systems.

In the last few weeks, we just launched a project called Base Builds, which is every week from Friday to Sunday, where you can post what you did this week and say what you did. Every week we allocate two weeks of funds, and if you post in it, we define a group of participants in the background who can like and retweet, and when they like and retweet, they will vote for you and allocate ETH to you in proportion, which means that a self-sustaining system is built, developers share their construction results on the chain in a social form, and there are a lot of people who spontaneously like and participate in it. This forms a feedback loop that allows us to understand the most valuable things that people are building. Then we just invest money and fund these people.

Another interesting point is that we are leveraging the positive cycle of infrastructure provided by Coinbase and third parties like Farcaster to promote growth and development, that grant program is not actually run by us, it's run by a team called Rounds, who grew out of the nouns ecosystem. They originally built Prop House, which is the second version of their product. They have been running it as an experiment and have shown incredible results.

We had hundreds of applications in the first week of launch, and if you go to their Rounds page now and look at the top hundred, two hundred projects, every single one of them is of high quality, without exception, and their diversity is outstanding. Our team doesn't have to manually review them one by one, it leverages our ecosystem to do this task, which has given us excellent results.

Moderator: That's incredible, I know it's always a good time to build on Base, but I think this coming summer may be a particularly good season to build on Base. Jesse, can you tell us about the second round of Onchain Summer?

Yes, last summer we did Onchain Summer, and we thought that this event was more important than Base itself, it was our time to tell the Onchain story to the world. We saw a really amazing response, people were excited to build. I think that led us to make a decision that Onchain Summer will become a regular event every year. From now on, until the world is fully on the Onchain era, we will always help, support and promote Onchain Summer. Every summer is a time for Onchain, of course every season is a time for Onchain, but I think there is a unique charm to the energy of summer, just like you know, the kids are on summer vacation, let them be free to build, let all of us have fun on the Internet and have fun with Onchain.

From the beginning of June to the end of August, if you're in the Northern Hemisphere, and if you're in the Southern Hemisphere, it's Onchain Winter, and we're going to be doing some fun things related to that. We have a fund of about 600 to 700 ETH that will go to fund builders, which is over $2 million worth. We're also going to have a month-long global hackathon in June, and there are a lot of incredible partners who are helping us organize that. We're going to promote everything that people build to as many people as possible. Imagine having millions of people using the application that you built, and there's going to be a lot of really cool brands, communities, and products launching new things this summer.

Coinbase is going to have a lot of really cool brands, communities, and products launching new things this summer, and Coinbase is going to launch new products this summer, and we're going to promote them as widely as possible. Overall, we're going to be working to bring the world into the Onchain era.

Moderator: Finally, will Base one day be separated from Coinbase as an organization and become independent?

Yes, I think when we talk about governance decentralization and technical decentralization, we are considering all options. We have said from the beginning that Base was incubated by Coinbase and we are gradually decentralizing, so we are not sure yet what exactly that will look like. But what I can say is that today the Base team operates independently within Coinbase, I report to Brian, have my own budget and P&L. I am like the CEO of the Base Labs team, and we execute on what we think is most important to grow the Base ecosystem, and then work closely with the rest of the business.

I think that independence, trust, support, and autonomy, and the feeling that we feel like we are incubated by Coinbase, is what allows Base to be Base. So I think the best version of these things will be the decentralized version. We cannot build an open global Onchain economy without decentralization. I expect that in the next few years, we will continue to work in this direction.

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