Jesse Pollak, a star engineer at Coinbase, faced a new challenge in 2021. After working at the company for five years and expanding the team from 3 to 250 people as the head of consumer products, he developed a desire to start his own venture.
To retain this talented engineer, Coinbase CEO Brian Armstrong told Pollak, “Find a way to bring Coinbase to the chain.” “On-chain” is a cryptocurrency term that refers to activities that occur on the blockchain.
Faced with this challenge, Pollak first envisioned building a decentralized autonomous organization (DAO), an obvious choice in the crypto space that relies on a loosely-knit group of mostly anonymous individuals to make decisions.
Presenting his idea to the executive team of the Fortune 500 company, Pollak made his request: could they allocate $1 billion and 60 employees to transform Coinbase into a DAO?
“They said, ‘We like your enthusiasm, but you’re looking in the wrong place,'” Pollak recalled with a smile.
Afterward, he began considering the advertising market, then the app store, and then identity applications. After a year and a half of exploration and trying various potential solutions, Pollak realized one thing: “First, we need a real software platform.”
Coinbase’s own Layer 2 blockchain, Base, was born. Built on top of Ethereum, Base can aggregate batch transactions and write them to the main chain. Base was launched in August of last year and was widely regarded as a hit L2. In the first quarter of 2024, Base’s transaction volume reached twice that of Ethereum, generating over $56 million in revenue. Prominent applications on the chain include Uniswap, Chainlink, and OpenSea.
“We’re redesigning the software stack because we need to rebuild most of Coinbase’s functionality on this new platform,” Pollak explained during a video interview with Fortune Magazine in his Washington, D.C. childhood bedroom. Behind him was a mural tree painted by his father, with branches thriving around him. But his ambition goes far beyond that: “We’re building the next generation of the internet.”
“I feel like I was born to do this.”
Pollak is a talkative person who enjoys discussing lofty ideals rather than mundane details, breaking stereotypes of most engineers. After studying at a Quaker school for 15 years, he believed that some Quaker values – simplicity, community, equality, stewardship – were the driving force behind founding Base.
Pollak’s entry into the cryptocurrency field was purely accidental. He had been involved in a startup that developed encryption for tech companies, but when it failed, he joined Coinbase as an engineer. He wasn’t initially enthusiastic about cryptocurrencies, but the company provided him with a path to work hard and create meaningful things.
“I don’t think my view of cryptocurrencies has ever been from a libertarian perspective. It’s more like, ‘All the systems we have now are terrible. What if we use this technology to improve them?'” he said.
By 2023, Pollak had gained respect from the blockchain community and gained recognition among engineers, entrepreneurs, and influencers. But with the launch of Base, he now holds a position closer to a leader in the cryptocurrency world. “I feel like I was born to do this,” he said.
The success of Base is largely attributed to Coinbase. The launch of L2 received recognition from the consumer-facing public company giant. Coinbase users automatically use Base, and wallet users then transition to other applications from there.
Tom Schmidt, a partner at Dragonfly, a crypto venture capital firm, told Fortune Magazine, “The tight integration with Coinbase makes the whole thing sweeter.” “There are very few people in Coinbase who truly understand cryptocurrencies, and Jesse is one of them.”
Pollak believes that the Base community is as important as any brand recognition. He compares the sentiment among Base developers to the early days of Silicon Valley. On Farcaster, a decentralized social media platform, there is a channel with 240,000 people (the largest channel on the platform to date) where developers share ideas with each other.
For Coinbase, having its own blockchain network provides a source of revenue that is not heavily dependent on the ups and downs of cryptocurrencies. This need for diversified revenue has also prompted Coinbase’s competitors Kraken and Binance to build their own blockchains. Unlike projects like Base built on Ethereum’s L2, these projects have gained attention because of L2.
Ryan Wyatt, head of the Optimism Collective, a blockchain builder community, told Fortune Magazine that one reason is that Base wants to be an interesting community. Wyatt said, “In addition to finance, various different consumer experiences are starting to emerge.”
The traffic on Base is concentrated in social and gaming apps: according to a recent report by asset management firm Franklin Templeton, almost half of SocialFi transactions occur on Base.
According to the Base website, there are 353 applications in its ecosystem. Currently, the most popular ones are DeFi-related applications, with Uniswap and Jumper leading the pack. But consumer-centric applications are also making progress. One of them, Friend.Tech, has caught people’s attention, allowing users to purchase “shares” of influential figures to gain access to their private chat rooms. Another popular app is the restaurant loyalty application Blackbird, which allows regular customers to accumulate native tokens and receive perks like welcome drinks.
Schmidt from Dragonfly admits he is impressed by the “decentralized” nature of Base, and he attributes this atmosphere to Pollak.
“You need to show people something.”
Coinbase CEO has been committed to diversifying the company’s revenue since 2022. Armstrong told CNBC, “We want to move away from transaction fees and towards subscriptions and services.”
This pursuit has started to pay off, as in the first quarter of 2024, about a third of Coinbase’s net revenue came from “subscriptions and services.” This includes interest income from its stablecoin USDC and staking income, which involves helping customers lock up Ethereum in exchange for rewards. Meanwhile, Coinbase also generates revenue as the custodian for eight physically-backed Bitcoin ETFs and through Coinbase One, a subscription plan that offers enhanced trading capabilities to over 400,000 accredited investors. During the last severe bear market, subscriptions and services were a lifeline, bringing in about half of the company’s revenue in early 2023.
But Base stands out as Coinbase’s true native crypto application. The $56 million in revenue generated in the first quarter comes from payment-related revenue and “sequencer fees.” The sequencer can be seen as the infrastructure that verifies, orders, and packages transactions on Base before releasing them to L1. In return, the sequencer takes a cut from the fees paid by users, and Coinbase calls these fees the “primary driver” of growth.
Coinbase CFO Alesia Haas told investors in the latest earnings call, “I want to point out that Base does have strong unit economics.” She said that as transaction volume grows (a key growth metric Coinbase focuses on), Base can become a “long-term significant contributor” to their revenue and profits.
But Pollak admits that getting non-crypto enthusiasts into the crypto space is still a huge challenge. Convincing people to enter this space shouldn’t be driven by political or ideological considerations, but rather by providing them with high-quality products they want to continue using. Later this summer, Base will partner with major brands like Coca-Cola to launch an “Onchain Summer” promotion, giving away $2 million in prizes, grants, and points to incentivize potential users.
“To truly make a breakthrough, you need to show people something,” he said. “We’ve overcome the hurdles.”
Original Article:
Author: Niamh Rowe, Fortune Magazine
Translation: Luffy, Foresight News
In 2021, Jesse Pollak was preparing for a new challenge. After five years at Coinbase, where he rose to prominence, grew the team from 3 to 250, and was in charge of Coinbase’s consumer products, he developed a desire for entrepreneurship.
To retain this star engineer, CEO Brian Armstrong told Pollak, “Figure out a way to bring Coinbase on-chain.” “On-chain” is a crypto term referring to activities occurring on the blockchain.
Faced with this challenge, Pollak initially envisioned building a decentralized autonomous organization (DAO), an evident choice in the crypto world that relies on a loosely connected, mostly anonymous group of individuals to make decisions.
Presenting his idea to the executive team of the Fortune 500 company, Pollak made his request: could they allocate $1 billion and 60 employees to transform Coinbase into a DAO?
“They said, ‘We love your energy, but you’re looking in the wrong place,'” Pollak recalled with a smile.
He then began considering the advertising market, followed by the app store, and then identity applications. After a year and a half of exploration and trying various possible solutions, Pollak realized one thing: “First, we need a real software platform.”
Coinbase’s own Layer 2 blockchain, Base, was born. Built on top of Ethereum, Base can aggregate batch transactions and write them to the main chain. Base was launched in August of last year and was widely regarded as a hit L2. In the first quarter of 2024, Base’s transaction volume reached twice that of Ethereum, generating over $56 million in revenue. Prominent applications on the chain include Uniswap, Chainlink, and OpenSea.
“We’re redesigning the software stack because we need to rebuild most of Coinbase’s functionality on this new platform,” Pollak explained during a video interview with Fortune Magazine in his childhood bedroom in Washington, D.C. Behind him was a mural tree painted by his father, with branches thriving around him. But his ambition goes far beyond that: “We’re building the next generation of the internet.”
“I feel like I was born to do this.”
Pollak is a talkative person who enjoys discussing lofty ideals rather than mundane details, breaking stereotypes of most engineers. After studying at a Quaker school for 15 years, he believed that some Quaker values – simplicity, community, equality, stewardship – were the driving force behind founding Base.
Pollak’s entry into the cryptocurrency field was purely accidental. He had been involved in a startup that developed encryption for tech companies, but when it failed, he joined Coinbase as an engineer. He wasn’t initially enthusiastic about cryptocurrencies, but the company provided him with a path to work hard and create meaningful things.
“I don’t think my view of cryptocurrencies has ever been from a libertarian perspective. It’s more like, ‘All the systems we have now are terrible. What if we use this technology to improve them?'” he said.
By 2023, Pollak had gained respect from the blockchain community and gained recognition among engineers, entrepreneurs, and influencers. But with the launch of Base, he now holds a position closer to a leader in the cryptocurrency world. “I feel like I was born to do this,” he said.
The success of Base is largely attributed to Coinbase. The launch of L2 received recognition from the consumer-facing public company giant. Coinbase users automatically use Base, and wallet users then transition to other applications from there.
Tom Schmidt, a partner at Dragonfly, a crypto venture capital firm, told Fortune Magazine, “The tight integration with Coinbase makes the whole thing sweeter.” “There are very few people in Coinbase who truly understand cryptocurrencies, and Jesse is one of them.”
Pollak believes that the Base community is as important as any brand recognition. He compares the sentiment among Base developers to the early days of Silicon Valley. On Farcaster, a decentralized social media platform, there is a channel with 240,000 people (the largest channel on the platform to date) where developers share ideas with each other.
For Coinbase, having its own blockchain network provides a source of revenue that is not heavily dependent on the ups and downs of cryptocurrencies. This need for diversified revenue has also prompted Coinbase’s competitors Kraken and Binance to build their own blockchains. Unlike projects like Base built on Ethereum’s L2, these projects have gained attention because of L2.
Ryan Wyatt, head of the Optimism Collective, a blockchain builder community, told Fortune Magazine that one reason is that Base wants to be an interesting community. Wyatt said, “In addition to finance, various different consumer experiences are starting to emerge.”
The traffic on Base is concentrated in social and gaming apps: according to a recent report by asset management firm Franklin Templeton, almost half of SocialFi transactions occur on Base.
According to the Base website, there are 353 applications in its ecosystem. Currently, the most popular ones are DeFi-related applications, with Uniswap and Jumper leading the pack. But consumer-centric applications are also making progress. One of them, Friend.Tech, has caught people’s attention, allowing users to purchase “shares” of influential figures to gain access to their private chat rooms. Another popular app is the restaurant loyalty application Blackbird, which allows regular customers to accumulate native tokens and receive perks like welcome drinks.
Schmidt from Dragonfly admits he is impressed by the “decentralized” nature of Base, and he attributes this atmosphere to Pollak.
“You need to show people something.”
Coinbase CEO has been committed to diversifying the company’s revenue since 2022. Armstrong told CNBC, “We want to move away from transaction fees and towards subscriptions and services.”
This pursuit has started to pay off, as in the first quarter of 2024, about a third of Coinbase’s net revenue came from “subscriptions and services.” This includes interest income from its stablecoin USDC and staking income, which involves helping customers lock up Ethereum in exchange for rewards. Meanwhile, Coinbase also generates revenue as the custodian for eight physically-backed Bitcoin ETFs and through Coinbase One, a subscription plan that offers enhanced trading capabilities to over 400,000 accredited investors. During the last severe bear market, subscriptions and services were a lifeline, bringing in about half of the company’s revenue in early 2023.
But Base stands out as Coinbase’s true native crypto application. The $56 million in revenue generated in the first quarter comes from payment-related revenue and “sequencer fees.” The sequencer can be seen as the infrastructure that verifies, orders, and packages transactions on Base before releasing them to L1. In return, the sequencer takes a cut from the fees paid by users, and Coinbase calls these fees the “primary driver” of growth.
Coinbase CFO Alesia Haas told investors in the latest earnings call, “I want to point out that Base does have strong unit economics.” She said that as transaction volume grows (a key growth metric Coinbase focuses on), Base can become a “long-term significant contributor” to their revenue and profits.
But Pollak admits that getting non-crypto enthusiasts into the crypto space is still a huge challenge. Convincing people to enter this space shouldn’t be driven by political or ideological considerations, but rather by providing them with high-quality products they want to continue using. Later this summer, Base will partner with major brands like Coca-Cola to launch an “Onchain Summer” promotion, giving away $2 million in prizes, grants, and points to incentivize potential users.
“To truly make a breakthrough, you need to show people something,” he said. “We’ve overcome the hurdles.”
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