BASE Chain: Making Onchain the Next Online, Coinbase's Secret Plan

#567

GM,

Let me announce some good news first. Recently, a brand new blockchain Celestia is about to go live, and announced the TIA token airdrop. The deadline for claiming this airdrop is quite tight, only until 8 pm Taipei time on October 17, 2023. I suggest that you take the time to check whether your wallet address meets the eligibility criteria, and you will not be able to claim it after the deadline.

The TIA token has not been issued yet, and no one knows how much it is worth. But Celestia received a $55 million investment from several venture capitalists last year, and TIA should not become a "air coin". The target of this airdrop must have operated on the Ethereum layer 2 network before January 1, 2023. In addition to rewarding these early participants, they also want to attract them to become the first batch of Celestia users. Please register in time! In addition, next Tuesday is a national holiday, and there will be no issue. I wish you all a happy holiday. Let's get to the point.

Ethereum's layer 2 network emerged like bamboo shoots after a spring rain this year, and BASE Chain, built by the world's second-largest exchange Coinbase, also officially went live recently. The most discussed application among them is the social platform Friends.tech. Blocktrend introduced BASE Chain in March this year, and I said that Coinbase's ultimate goal of launching its own blockchain is to drive users out of the exchange, and now they have successfully taken the first step.

But people still have many doubts about BASE Chain. Recently, Jesse Pollak, the main promoter of BASE Chain, proposed a new slogan in a speech - Onchain is the next Online - to respond to people's many questions about BASE Chain.

The birth of BASE Chain can be traced back to a secret plan in 2016.

Secret Plan

Coinbase is a company with ideals. In 2016, most people had not entered the crypto world yet, and CEO Brain Armstrong wrote down The Coinbase Secret Master Plan. He predicted that blockchain development can be divided into four stages: network protocol, infrastructure, user interface and decentralized applications. This also became an important basis for Coinbase to build products later.

The first stage of network protocol refers to the first few years when Bitcoin and Ethereum came out. At this stage, only developers in the open source community have the ability to participate, and people discuss technical content at the bottom layer. Just like now everyone can go online and write emails, but only a few people have personally participated in the development of network protocols such as TCP/IP and SMTP.

The second stage of infrastructure refers to exchanges and vaults for securely storing cryptocurrencies. Although most people don't understand technical development, it is not difficult to register an account and buy and sell cryptocurrencies with their fingers. Just like we don't need to understand how the Internet works, as long as we know how to rent Internet from Chunghwa Telecom.

The third stage of user interface refers to personal wallets. Before Mosaic browser came out in 1993, some people had heard of the Internet, but didn't know how to enter the Internet world. If there is no wallet, people will not be able to enter the blockchain either. So everyone says that wallets (such as MetaMask) are the entrance to the blockchain world.

The last stage of decentralized applications refers to Finance 2.0. This is the real highlight that can attract users to join! Similarly, using the Internet as an analogy, with the Internet architecture, finding Chunghwa Telecom and installing a browser, if you can't tell where the fun of going online is, there are only a few kittens online. This is human nature and also the current situation of blockchain development.

I happened to send cryptocurrencies to Blocktrend partners recently, but found that half of them still don't have wallets 😅 But unlike a few years ago, creating wallets now doesn't require someone to guide you from the side, everyone can get started quickly by intuition. Obviously everyone is not incapable of operating, but lacks usage scenarios. After all, most of the current chain applications are serious financial services with strong purposefulness and high participation thresholds. Few people go on chain for no reason.

But application developers will also come out and complain that it is the high on-chain fees that lead to entertainment-type applications being difficult to implement. In other words, in order to get people on chain, the first task is to lower fees so that developers have room for maneuver and attract users to join. And BASE Chain launched by Coinbase is an Ethereum layer 2 network with very low fees. Currently each transaction costs about 1 Taiwan dollar equivalent of ETH.

BASE Chain

Coinbase did not issue cryptocurrencies, so BASE Chain is not used to serve its own token economy. This is the biggest difference from other exchange blockchains.

In the past, exchanges launched blockchains to create market demand for tokens and drive up prices. For example, Binance's BNB Chain or Crypto.com's Cronos Chain, both use their own tokens as on-chain fees. The wider the use scenarios of tokens, the higher their market value. By building their own blockchains, exchanges can expand the use scenarios of tokens from centralized exchanges to on-chain applications such as DeFi and NFT.

But Coinbase can't do this business and can only watch others make money. It was not until Optimism proposed the concept of open source toolkit OP Stack in 2022 that Coinbase found an opportunity to enter. If Optimism blockchain is a building that has been built, OP Stack is to sort out all the tools and methods used to build a building and make them available for others who also want to build a building.

Blockchain is most afraid of doing its own thing. Although each system can be open and interoperable, it is often closed-door car building, and ultimately relies on centralized exchanges to act as "cross-chain bridges". Fortunately, there is OP Stack, a digital public good launched by Optimism, which allows everyone to use the same set of tools during development, making it easier to interoperate in the future. With the ready-made open source toolkit as the foundation, Coinbase finally found a feasible way to realize the last stage of the secret plan - building BASE Chain.

Coinbase has over 100 million users worldwide and should be able to follow industry practices, establish a token economy, and build a walled garden. But Coinbase chose to "drive" users out of centralized exchanges and enter the decentralized world. Jesse Pollak said that this is because Coinbase believes that decentralization is the path to economic freedom!

Is decentralization really better? A few years ago, probably 9 out of 10 people would disagree, but in 2023 the most politically correct answer should be that each has its own advantages and disadvantages. Coinbase itself is a representative of centralized exchanges, knowing that its position and goals are contradictory, but still firmly believes that decentralization is a better solution. If this is not a lie then it is faith, and it is also the reason why Coinbase is respected in the industry.

Coinbase chose to join the Optimism ecosystem and become a member of the decentralized world. This is not only completely opposite to other exchanges, but also not a decision that normal companies would make. After all, companies ultimately serve shareholders, and Coinbase also has to worry about how to balance shareholder interests and contribute to the open source ecosystem. Although BASE Chain does not have its own token economy, people pay ETH for on-chain fees, but Coinbase still has profits from operating layer 2 network.

The following chart shows the income chart of BASE Chain in the past few weeks. The horizontal axis is weeks and the vertical axis is income amount. Whenever people use BASE Chain, they have to pay miner fees. The blue bar is the total amount of fees received by BASE Chain each week, while the yellow bar is the profit after deducting the actual on-chain (Ethereum) cost. The more people use BASE Chain, theoretically Coinbase can receive more money from the fee difference.

The main profit (85%) of BASE Chain belongs to Coinbase company. But Coinbase also promised to become the second core development team of OP Stack, and will allocate 15% of BASE Chain's profit as RetroPGF fund, regularly supporting Optimism public goods development. In other words, if Blocktrend gets RetroPGF approval again in the future, Coinbase will become an indirect supporter of Blocktrend.

If Coinbase can balance shareholders and maintain the stable operation of BASE Chain, it will be the biggest good news for Web3 recently. Because BASE Chain lowers fees and lowers the threshold for entering blockchain, as long as there are enough developers joining, Coinbase exchange can gradually guide 100 million users on chain. Make on chain the next step after going online.

Onchain becomes online

People over 30 years old know that going online was not an easy thing in the past, nor was it a fun thing. People had to go to bookstores to buy books first, then install software, buy modems, set up computers, rent Internet lines, and finally succeed in going online. If going online was simple and fun from the beginning, elders would not have to pay for computer classes.

Going online was serious learning back then, and schools would arrange computer classes every week. But now there should be no children who need teachers to teach how to go online. Instead, I am invited to schools, enterprises or government units every few weeks to teach everyone how to go on chain. This can see the current situation of blockchain development.

In the future, on chain should not be serious learning where everyone sits in rows and listens to me, but rather everyday life that everyone will come into contact with. When the on-chain fees are cheap enough and the threshold for entering the blockchain is low enough, more people will be willing to participate. By then, not only articles or images will be on chain, but also restaurants, games, social media, instant messaging, advocacy organizations will have the possibility of being on chain. After all, many applications now are things that people couldn't imagine a few years ago.

In the past, people might have reasons not to go on chain, blaming wallets for being too hard to use and fees for being too expensive. But when these obstacles are removed one by one, and after the Ethereum Cancun upgrade at the end of the year, the fees of layer 2 network can be reduced to 1%~10% of the current level, now is the time for blockchain application developers to show their skills. If you still have people around you who think it's a bear market now, wait a little longer! You have to remind them that they might become "elders computer class" preparatory students in the future.