Dialogue Base Leader: How to achieve orderly growth of the ecosystem?

Original Title: “Building Base: Coinbase Engineer Jesse Pollak on Ecosystem Growth”

Author: Medha Kothari, Variant

Compiled by: Kate, Marsbit

I recently interviewed Jesse Pollak, the head of the Coinbase protocol, who is in charge of the company’s latest incubated project—Base, an open Ethereum Layer 2 network.

In this Variant Network event aimed at our portfolio leaders, we discussed everything from Jesse's beginnings as a Coinbase engineer to the technical considerations behind the OP stack (the open-source framework on which Base is built). But the conversation kept returning to the question of how to grow.

Below is the video of our conversation, along with my thoughts on some of Jesse's most prominent points about building engineering teams, scaling crypto companies, and growing the web3 pie.

https://youtu.be/yngPOHxNolg

Scaling is a Job in Itself

When Jesse joined Coinbase as an engineer in 2017, he managed a team of four. Over the next five years, that team rapidly expanded to 200, while Coinbase itself grew to a scale befitting its Fortune 500 status.

But having more people doesn’t necessarily make a manager's job easier. In fact, it added a lot to his plate. Jesse said, "During those rapid growth periods, it was both a people challenge because we had to figure out how to recruit talent and make them successful, and a technical challenge: how do we attract more users and keep the site running? This was a significant part of my job."

Grow Methodically, Not Rapidly

While Coinbase achieved rapid growth, Jesse stated that most of the time, it’s better to choose a slower approach: "The temptation is always to grow quickly with people at the center, but it’s almost always a bad idea because your people grow too fast."

Instead, he said, "Don’t grow unless you have to"—and then "do it as methodically as possible from a people perspective." His rule of thumb is to avoid doubling in size within a year unless you started with a single-digit number of employees.

Don’t just think about numerical growth. It’s also about roles. Jesse encourages maintaining a "good, healthy ratio between engineers and product and design." For example, Coinbase requires that 30% to 40% of the company’s employees are engineers.

Scaling On-Chain is Easier

So, if you want to avoid growing too quickly but your to-do list keeps getting longer, what should you do? Go on-chain. Jesse said, "What I’ve always seen is that if you build using on-chain native tools, you can achieve 10x the impact and leverage."

He continued, "If you’re writing smart contracts, you’re building applications that are funded by smart contracts, you’re using infrastructure around smart contracts, you can deliver things with 10 times fewer engineers than you currently have, and those things can reach 10 times more people." "People like us in this room have an unfair advantage compared to others in the world; if you are rigorous, thoughtful, and inclined towards this new technological trend, you can outpace everyone else at a 10x scale."

As evidence, he cited Base. Unsurprisingly, the Layer 2 scaling solution was developed internally at a crypto company with 4,000 employees. Remarkably, it primarily came from Jesse and a four-person engineering team.

On-Chain vs. Off-Chain is the New Centralization vs. Decentralization

Coinbase is the largest cryptocurrency company in the U.S. It is also a centralized player that promotes a technology that worships decentralization. This ideological conflict often invites criticism. But Jesse believes this framework is unhelpful.

He said, "In fact, I’ve started using the terms on-chain and off-chain instead of centralized and decentralized because I find it to be a better description."

In reality, both crypto and non-crypto products will have on-chain and off-chain components, with varying degrees of decentralization in both branches. Or, as Jesse put it, "You can have centralized and decentralized off-chain systems, as well as centralized and decentralized on-chain systems."

Focusing on User Experience Will Create More Use Cases for Cryptocurrency

Jesse believes that Coinbase's business model is "essentially about making it easier for people to use cryptocurrency." But the problem is that there isn’t a compelling reason for most people to do so.

"For the past decade, cryptocurrency has had one use case: speculation. So we’ve just made it easy for people to use cryptocurrency to do one thing: buy and sell cryptocurrency."

The goal of Base is to apply the spirit of making things simple at Coinbase to the developer platform, so they can "create more innovation, which then creates more use cases downstream, which then creates more things for people in Coinbase products."

In Jesse's view, a "chain-native developer platform" built by a company focused on user experience will bring certainty to Coinbase's internal teams and attract third-party developers to build on it, knowing "it’s feasible."

Open Source Increases Choices

One of Jesse's arguments is that Coinbase collaborating with open-source technology (rather than keeping it proprietary) will provide developers with more choices.

Base uses the OP stack, which is modular, allowing different parts of the stack to switch as technology evolves. After all, Jesse believes that the scaling landscape will look very different in the near future: "Over time, we will see more optimistic provers being developed, and we will see ZK provers or validity provers mature and develop more such products. Essentially, we will choose what we want to use to secure the chain."

There’s more than one way to build a chain.

Jesse's interest in bringing on-chain aligns with the motivation of developers wanting to create applications that users want. When Coinbase began exploring how to bring its business on-chain, it considered several ideas. But the development team kept getting stuck on some simple questions: "How do we build on-chain—meaning, what smart contract language are we using?"

Every decision led to more questions: "Where do we build on-chain? Okay, now we have these contracts. Where do we put them? If we put them here, will it work with our other products? Will it strengthen the Coinbase ecosystem? Will it help our business?"

In 2022, Coinbase decided to focus its efforts on incubating Ethereum L2. "It became very simple, like, we certainly want to contribute to scaling Ethereum… of course, we want to put our resources into these critical public goods."