Base creator Jesse Pollak weighs in on the crypto industry's shift from building mostly financial products to real-world use cases on the blockchain. Plus, the significance of stablecoins like USDC and EURC when it comes to improving payment systems.
When you look at the history of crypto, I think it started as a historically speculative thing. Uh even in the last kind of five years of smart contracts and building on chain that was predominantly financial. But I think in this current wave that's happening right now, we're starting to people see people build social. We're starting to see people build real games. We're starting to see people do things with food and music and art and media on chain. And I think that energy, that's the energy that's gonna actually be able to bring millions and tens of millions and hundreds of millions and billions of people on chain. It's Tuesday, July 16th and this is market ST a show where we get into the minds of some of the most experienced and smartest investors, ceo S analysts, researchers and anyone with a hot or smart take on the markets. Joining today's show is the creator of base Coinbase is layer two Blockchain. Jessie Pollack, Jesse. Welcome back. Thanks for having me on Jen. Super excited to be here. All right. First of all, congratulations on that honeymoon. I know you were offline for a little bit that sounds lovely. Thank you. It was great. You know, it was hard to get away from all of the incredible excitement on chain right now, but we had to do it and it was awesome. Yeah, you got to go off chain when you're having your honeymoon. Come on. All right, let's let we have some news to unpack today. That's really exciting. But it's not every day we have you on the show. So I just want to get a quick update. There's so many things going on in the base ecosystem. Tell me about some of the things that you're most excited about as we head into the latter part of the year. Yeah. So we are in on chain summer right now, which is an incredible moment where really the whole world is starting to move on chain. And I think the thing that I'm most excited about is the amount of builder energy happening on chain right now. For instance, we just held a month on bath on, in the month of June. We had 7000 builders from around the world build 1200 different apps. It was the largest hackathon on chain ever in the history of on chain. And I think that sort of energy it wasn't here a year ago. Uh it wasn't even here six months ago, but now the technology is finally ready. It's cheap, it's fast, it's easy to build and we're seeing all sorts of new consumer products being built on chain? Ok. You said 1200 apps and the people who listen to the show are listening for Alpha, they're listening to inform themselves on what's going on in the space so that they can make the right bets as they're trying to build out their portfolios. Is there a theme that you're seeing or a predominant narrative when it comes to what builders are focusing on right now? Yeah, absolutely. I think for the first time we are seeing consumer products be built. You know, when you look at the history of crypto, I think it started as a historically speculative thing. Uh even in the last kind of five years of smart contracts and building on chain that was predominantly financial. But I think in this current wave that's happening right now, we're starting to, people see people build social, we're starting to see people build real games, we're starting to see people do things with food and music and art and media on chain. And I think that energy, that's the energy that's going to actually be able to bring millions and tens of millions and hundreds of millions and billions of people on chain. Because at the end of the day, a lot of people like to speculate and a lot of people like to trade. But even more people love to connect with their friends, their family and other people all around the world to do engaging things online. And now on chain. It's like real things are finally being built, real things are finally making their way to this world that we've been operating in for so long as someone who's been building yourself, you know, you've been building for a really long time to finally see these real things, these real use cases that expand on things that already exist. What does that feel like for you to be witnessing and enabling? Oh my God, it's, it's so fun. I mean, I've been doing this for 12 years now and so I think I thought it was gonna happen a lot faster than 12 years, but it's so fast. I know right, when you compare it to the internet, when you compare to these major technology shifts, um it is fast and I think this is something that a lot of people probably underestimate. I think folks are still underestimate how fast this is going to happen now. That technology is actually here. And in particular because there are already phones all around the world. Everyone has a phone. All we need to do is upgrade the software. We don't have to go through the whole hardware deployment life cycle. Like with the internet, we just have to upgrade the software. And that means that this cycle where people actually start to adopt real utility on chain, I think it is going to happen a lot faster than people anticipate and maybe just to give you a few examples, right. Now we are seeing social products being built on chain with things like Forster. Uh we're seeing food move on chain with small businesses having higher margins and customers having better uh restaurant experiences with things like Blackbird. We are seeing uh creators come on chain. Um Yesterday we saw earlier last week, um we saw Daniel Arsham, a really famous artist do a collaboration with the United States basketball team and drop it on chain with Coinbase. I think that sort of creativity that spans music, food, social is really incredible and it's really the first time we're ever seeing it. Give me an example of food being on chain. I'm unfamiliar with the project you mentioned. Yeah. So Blackbird is a product. It's founded by Ben Leventhal, who's the creator of Eater and Rey, probably two of the most successful restaurant businesses out of the United States over the last decade or a couple of decades. And what it lets you do is it lets you go into any of the restaurants that support back Blackbird, you tap to check in and you're gonna get an upgraded experience. So maybe they'll bring you uh a free side of fries or a free drink or a free dessert. And they're going to get to know you a little bit more so that as you come back, you can have a better and better experience. And then on the flip side for restaurants, they're gonna enable you to pay with stable coins with us DC. So you can actually have a fast payment experience and then restaurants can save the 2.5 to 3% that they're currently paying right now to credit card processors. And when you look at a restaurant today, about 50% of their overall profit is going to credit card processing fees. They make somewhere between 5 to 6% of gross margin and then 3% is going to credit card fees. And so technology like this is upgrading the system and it's putting more money back into the hands of small businesses like restaurants while giving a better experience to consumers. That's Blackbird's incredible new product built on base. Now, the news we're going to talk about has to do with Stablecoins. But I have to ask you based on what you just said to me, do you think stablecoins and credit cards are going to coexist in the future that you imagine, or because of the fees because of some of the more, um, I guess traditional mechanisms that credit cards use, will they maybe phase out in a way? I think they're going to coexist for a long time. But I think when you look at staple coins, really, what they're doing is they're upgrading the system and they're making it faster, easier and cheaper for both consumers and businesses to do payments and so on the long run, that's a really compelling value prop. And I think we're gonna see a lot of change where businesses opt into this transition because it just works better for them and consumers do the same. And I think when we think about base's mission, we are building a global on chain economy that increases innovation, creativity, and freedom and stablecoins sit at the center of that. They are something that enables anyone to come on chain in an intuitive way to pay their friends, to pay their small businesses to pay online retailers. And all of that happens on base in this new economy that we're building. All right, let's talk about that news. Now, Eu RC is coming to base us DC is already there. I know we had Dante Dear on the show recently talking about the MICA approval for EU RC, the first I guess licensed stable coin in Europe. Now talk to me about this news. Why is it so important to have a local currency based stablecoins on base? And how many do we do you expect to get like let's say in the next year? Yeah, absolutely. So base has already established itself as the home of us DC. When you look at the number of users who are transacting with us DC base is the fastest growing EVM network. And the reason why people are transacting with USDA C on base is because it's easy, fast and cheap, easy, fast and cheap. That's what people want from their money. They want to be using new systems that give them better experiences. And so what we're so excited about is that your c which is the third largest currency in the world is coming to base. And that means that European economies can start to get the same benefit that United States economies are seeing right now from moving on chain and for businesses that's going to be faster and cheaper and easier payments, it's gonna be easier cross border settlement. So exchanges between us DC and UC and other currencies are gonna be super simple and it means a better experience for the customers who actually want to interact with those businesses in this new internet. And so I think what we're really excited to see is that this is number two, we go from us DC to having us DC and us C but we're not stopping there when we think about how people are going to come on chain. We really believe that stablecoins are going to be at the center of it because it's gonna let people go from having their old money in the old systems that are broken and slow and hard to use to using new money in a new system that feels the same. You know, I have a Euro now I have UC or I have a US dollar and now I have us DC, but it's powered by a new technology and that means they're gonna have the same mental models, but everything is gonna be better. And that sort of seamless user transition where they get to have the same experience just 10 times better is how we bring the world on chain. And so we've done it with us DC. We're doing it with us C right now and over the next year, like you said, we're going to do it with a lot more currencies because at the end of the day, we believe that everyone should have the right to bring their currency on chain because that's gonna give their local region uh sovereignty in the new internet. It's gonna let them more easily transact with the global economy. It's give every consumer no matter where you are, no matter where you borrow, no matter where you live, the benefit of this new global economy that's being built on chain. You mentioned on chain Summer. And I I know the um the purpose of on chain summer is to bring mainstream business, mainstream audiences on chain. Talk to me about the adoption of stablecoins from both mainstream businesses and mainstream consumers. Like, are they getting it? What challenges still exist? Because as you explained it, to me, it sounds like all fairy tales and rainbows and like it's working. Uh but is it, it's absolutely working and you know, these things always start small. But I will say that just in the last 6 to 12 months, the experience has finally gotten good enough and this is really powered by two things one is that the, the chains like base have gotten fast and cheap. So, whereas before, if you were transacting with us DC on Ethereum, it might have cost $5 to send a dollar of us DC. That clearly doesn't work. Now on base, you can send any amount of us DC for a fraction of a cent. That's the first big change. The second big change is that wallets have gotten so much better. So for instance, Coinbase just launched a new smart wallet. Now, any consumer can get set up with a smart wallet without a separate app without a separate extension, just with a fingerprint. And that means that anyone can get started using this technology without needing a high level of technical sophistication. And so what I'm seeing on the ground and I'm on the ground pretty much every week talking to consumers and businesses is that for the first time, you're actually starting to see real small business adoption of stable coins. This summer, we have coffee shops around the country, adopting stablecoins. There's a whole effort where barbershops are adopting stablecoins. And we're seeing this kind of happen at the bottom of the kind of business hierarchy, the small businesses, the people who are actually most impacted by these legacy systems where high fees cut out their business and make it harder for them to operate. And they're saying, hey, yeah, maybe it's still a little bit rough around the edges, but we're willing to opt in, we're willing to work really closely with the Coinbase team and the Circle team and the A team to make it. So these experiences get really great. And I think over the next 12 months, we're gonna see them kind of cross this threshold where every business both on the ground doing brick and mortar sales and on the internet are gonna be able to use stablecoins and they're gonna choose to use Stablecoins because they're gonna be faster and cheaper, both for the business and for consumers. You know, I gotta ask you recently, uh the crypto markets are seemingly more and more correlated with what's happening from a political perspective here in the US. How closely are you watching that? And has that come up in conversations with small business owners just given the that there is not really any legislation here, there's no stable coin bill. We have an election coming up in November. It's very unclear on the future of crypto. Has that been a challenge when getting small businesses like barbershops to adopt the technology and try it out. I'd say for the small businesses, it's less of a challenge, right? If they have a technology that works and and serves their business, they're excited to adopt it. I think the place where we really see challenge is for the people who are actually building that technology, right in the United States right now, there's a lack of regulatory clarity and what that means. It means that entrepreneurs on the ground, the start ups, the builders who we care the most about in this country that has historically been a leader in innovation. They're spending more money on lawyers and regulatory advisory services than they are on engineers because there isn't regulatory clarity in the United States. And that's actually pushing innovation out of this country. And so I'd say the biggest place we see impact is on that early stage, start up environment. And the thing that we're pushing for and the thing we've been really consistent about as Coy Mason as based is that we want to see regulatory clarity and there's a lot of progress happening. It's happening in the courts where they're, they're giving us more certainty. Uh It's happening in Congress where we're actually seeing things like fit 21 get passed by bipartisan majorities. And I think over the next 6 to 12 months in this election year, we're gonna see more and more energy around making common sense policy in the United States that keeps innovation here that stops people from going offshore and, and creating riskier environments and losing our best talent and really makes America the home for on chain of innovation because as we build this global economy, we want America to be at the center of it. Now, just before we wrap up, I want to come back to something you mentioned at the beginning of this interview on chain social, I know that you've said before, this is going to be massive unpack this for me a little bit more. I mean, do you see on chain social unlocking new financial opportunities for folks and what might that look like? Yeah, absolutely. If you look at the social platforms today, um 99% of the value that are made on those social platforms, go back to the actual platforms and not to the creators who create the content on those platforms. And the content is where all the magic is, right? It's you and it's me and it's all the other people around the world who are bringing their creativity online to create this incredible network effect. And I think what's shifting in on chain social is those economics and the the power dynamics are shifted where instead of having large centralized corporations that are controlling these platforms and taking all of the value, you have open source decentralized protocols that are enabling creators to benefit more. You can earn more. When you create on chain, you can connect more directly with your fans when you create on chain and you can have a better product experience because there's all sorts of compos ability and interoperability that actually happens between these products uh when they're built on this new technology platform. And so today we're seeing this happen like Gangbusters. It's crazy. You have products like forecaster and Zora and Rodeo and, and uh Moshi cam. There's hundreds of social products that are starting to crop up on base and other EBM networks. And in Solana of course, um that are starting to really the incredible product experiences. And because they're better for creators, they're starting to actually win those creators over into this new platform. And just like we talk about how the legacy financial systems are broken for everyday people. The same thing is true for our legacy social systems. They don't actually serve the people who are creating the most value, who are bringing their creativity. And so we want to upgrade those systems, we want to build new ones on chain that serve creators that serve consumers that deliver incredible experiences that make everyone's lives better. I think it makes total sense for the artist or the creator, right? But how do you think audiences are going to transition over? Is it just going to be, you know, they follow their favorite creators to the platform they're on or is there a bigger challenge to overcome? Yeah, I think a lot of it's gonna happen because folks follow their favorite creators. Um I also think that a lot of it's gonna happen because on this new technology platform, we're gonna actually gonna be able to build differentiated experiences that just work better for everyday people. And so that's gonna lead to people opting in to these new experiences. And I think we've been a little conditioned in crypto to this kind of like flatt growth with some speculative spikes. But when you look at social products, right, you look at the growth of tiktok, um those things grow really quickly because so it unlocks a new behavior, a new kind of way of working uh for the consumer experience and that just kind of rockets off. And I think we're just entering the phase where for the first time people are building those consumer products on chain and folks are starting to adopt those consumer products on chain. And we're gonna have a few of those that really start to hit and they're going to enter similar social growth cycles. And we're going to be pretty surprised. I think at how quickly that starts actually bring everyday people into this new on chain economy. OK. And Jesse just before I let you go, I am in the habit of asking for predictions, specific projects. Any uh what uh chain social platforms are you watching? Like, are there any specific ones that you think are doing something very novel and they might have that growth trajectory of some of the more traditional platforms uh that we've seen? Yeah, absolutely. I mean, I think there's, there's a couple that, that I've worked really closely with and known forever forecaster and Zora forecaster is more Twitter like Zora is more Instagram like those have both been making really awesome progress. Uh You know, both of them have key uh you know, integral parts that are built on base and we're seeing a ton of adoption there. We also have more kind of early stage ones, things like Rodeo and Motion CM, which are a lot more experimental. Uh And I think we're starting to see real growth there as well. I wouldn't be surprised if some of them start to break out as well. And so again, there is this real collection of products that are starting to innovate building on this new technology platform and so much of it is happening on base. So we're really excited about it and uh we could be more excited to keep supporting these folks to bring the world on Jane Jessie. It's been such a pleasure having you on Markets Daily today. Thanks for joining the show. Thanks so much.
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