Layer 2s, separate blockchains built on top of a layer 1 that help scale it and reduce transaction fees, have been a key trend in 2023. And this year Coinbase, hitherto a centralized exchange, created its own layer 2 called "Base."
It was a hit.
This profile is part of CoinDesk's Most Influential 2023. For the full list, click here.
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That's why Jesse Pollak, the creator of Coinbase's "Base" layer 2, was chosen this year for CoinDesk's Most Influential list. He and the Base team brought the major exchange on-chain, showing how Coinbase can be a blockchain builder, growing sources of new revenue while extending its operations beyond being just a marketplace for crypto.
"You're going to see every major player over the next five years realize, 'Oh, wow, in order to get the benefits of participating in this open on-chain economy, we need to bring more of our technology, we need to bring more of our customers, we need to bring more of our asset base on-chain into these open systems,'" Pollak told CoinDesk in an interview.
Originally hailing from Washington, D.C., Pollak joined Coinbase in 2017 where he led their consumer businesses on the engineering side. But it wasn't until the fall of 2021 that Coinbase started to think of ways to bring its business on-chain.
That led Pollak and his team to look into the options for about a year. By the end of 2022, the group was convinced that Ethereum was the best place to focus its energy, and that a layer 2 was the best place to enter this market.
"I think that we kind of believe that there's going to be many layer twos that collectively scale Ethereum rather than just kind of one single monolithic one," Pollak said in an interview. "We saw this opportunity to really build our contribution to scaling crypto and scaling Ethereum. And that's what ultimately ended up being Base."
But the team at Base still views their layer 2 as a developer platform, with its vision to attract "a million developers, a billion users." That is about four or five orders of magnitude away from where the platform is today, according to Pollak.
The introduction of Base started a new trend: other exchanges are following suit. According to people familiar with the matter, Kraken, the second-largest U.S. crypto exchange and a competitor to Coinbase, is planning to come out with its own layer 2. OKX, another crypto exchange, recently announced their X1 layer 2 chain built on Polygon technology.
Pollak thinks that layer 2s will be brought to market by many more players in the industry. "It's not just going to be crypto exchanges that do this. It's literally going to be everyone," Pollak said.
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