Base Token Guess: Airdrop or ICO, who will get the big cake?

Compilation: Vernacular Blockchain

This episode of "Unchained" discusses the major news from Base Camp: Base announces the exploration of issuing a Token for decentralization, causing a stir in the industry. Host Laura Shin, along with guests Ryan and Ico Beast, delve into the significance of this move, potential designs, and impacts. Base's choice to "explore" rather than directly launch a Token may be related to the unclear regulatory environment (, such as the Clarity Act ), and narrative control.

The guest believes that Token allocation may primarily focus on Coinbase holding 20%-40%, along with treasury and community distribution. The launch method may combine airdrops and ICOs, with a need to guard against witch attacks. The use of Tokens may be similar to ETH, involving sequencer revenue, DeFi liquidity, and potential governance functions. Base insists on building on Ethereum, demonstrating synergy with the Ethereum ecosystem, while also announcing integration with Solana, reflecting a response to competition. The program also discussed the positioning of Base, Solana, and others in on-chain competition, predicting that the future crypto market will center around Token generation and trading volume, with competition driving industry consolidation and innovation.

The following is the content of the interview:

Laura Shin: Welcome to Unchained, your resource for everything you need to know about cryptocurrency. I'm your host, Laura Shin. Today we're discussing the big news from Base Camp: Base is exploring the issuance of tokens, a move that has caused quite a stir in the ecosystem. Our guest is Ryan, who recently worked at Coinbase Ventures, previously at Coin Fund, and is a narrative merchant at Proof of Play, Ico Beast. Welcome, Ryan.

Ryan: Hey, Laura, thanks for inviting me.

Laura Shin: Jesse Pollock announced that Base is exploring the issuance of a Token to achieve decentralization, despite previously stating disinterest in it. What is your initial reaction to this news?

Ryan: This is a very exciting development. With the continuous growth of Base, it has achieved significant growth without using a native Token. This indicates that Base has attracted fundamental growth in terms of users and developers. Clearly, the Base team now feels that they have reached a critical mass of enough developers and on-chain liquidity for the next phase of growth, and to further accelerate development and compete at the highest level, they are exploring the issuance of a Token to achieve this goal. So, this feels like a natural evolution, but for a centralized and publicly traded company like Coinbase, hearing this news is still quite shocking.

Laura Shin: Why do you think Base chose to announce the exploration of issuing a Token instead of launching it directly?

Ryan: They may have many unresolved issues themselves. Issuing a Token is no small matter; there are many details to handle, such as allocation, usage, and how to publicly discuss it. There are two aspects to this: first, users and developers now know that there will be a BaseToken, which will trigger a surge in activity on Base. Many users will pay for transactions, which will also attract more development teams to deploy on Base. In addition, they just released the new Bayat TDA and opened the waitlist; I can imagine that list will only get longer. Therefore, announcing this news will definitely reignite interest in Base, especially given how difficult it is to compete for market share across blockchains. Second, they may still be trying to resolve many complex details. Another important aspect is that the U.S. Congress is currently passing regulations and legislation related to the classification of certain Tokens. This is certainly an important input, and they may be waiting for the final results before finalizing the details of the specific plan.

Laura Shin: Jesse emphasizes that Base is committed to building on Ethereum to benefit from the global interconnected economy. Given the competition between blockchains, what is your opinion on this decision?

Ryan: This shows a strategic alignment. Ethereum has now charted its own course and is becoming an institutional asset and Blockchain. If you ask anyone on Wall Street about three things in cryptocurrency, they might say Bitcoin, stablecoins, and Ethereum. Base is built on EVM, which was their early decision. As Ethereum becomes institutionalized as a settlement chain for various assets at the Wall Street level, I almost see Base as a sort of forward-looking, institutional and retail-facing branch of Ethereum, especially in the US market. The benefit is that they can grow alongside Ethereum. Ethereum continues to have critical mass among developers, and Base is obviously contributing to that. It’s more about staying aligned with something that is already effective and making the whole bigger through collaboration.

Laura Shin: How do you think the allocation of BaseToken will be designed? What should it ideally look like?

Ryan: A typical Token project allocation is usually divided into three parts: the team, early supporters and treasury, and the community. If this analogy is applied to the Base token, it corresponds one-to-one. I expect a significant portion may be held by Coinbase, recorded on their balance sheet, around 20% to 40%. There may also be an additional 20% held by an independent treasury, jointly managed by the Base team, Coinbase, and other community participants. The remaining portion will be allocated to the broader community, whether through public sales, airdrops, or some form of continuous distribution. This can establish sufficient ownership, especially on Coinbase's side, to incentivize Coinbase to continue providing value and traffic on Base.

Laura Shin: How do you think Base will launch the Token? Is it an airdrop, ICO, or another method? What is the use of the Token?

Ryan: It could be a combination of multiple approaches. There are three aspects to consider. First, how to allocate Tokens to developers? This could be measured by trading volume or the amount of Gas consumed by applications on Base. They might run statistics to find out which projects joined Base early and contributed to the ecosystem, and give them some allocation. Second, from the user's perspective, their goal might be to make TDA and Base applications the consumer front end of Base, serving as the primary consumer and user channel to develop and own relationships with consumers. It makes complete sense to conduct loyalty activities through that interface. Finally, there is the public sale. Many people have been comparing Coinbase and Robinhood. Robinhood has a product that allows users to invest early in IPOs. I think similar situations are starting to appear in crypto projects, such as the ICO-style crowdfunding platform models like Legion and Echo making a comeback. They might leverage similar products to conduct the largest-scale ICO sale of Base tokens, either through Coinbase or otherwise, which will be their response to Robinhood-style products, but in a crypto-native and Coinbase-native way. They want to make a big splash, and this would clearly be the largest or most interesting fundraising event, which people would want to participate in.

Laura Shin: ( welcomes Ico Beast. What is your initial reaction to Base exploring the issuance of Tokens?

Ico Beast: My initial reaction was "I knew it," and many people might feel the same way. I previously posted about this on X because I am very active on Base. At that time, I said I bet we would be ready with our wallets for this airdrop. Many people rebutted that there would never be an airdrop because they have stocks and do not understand that Base and Coinbase are not the same entity. But I was excited to hear this news and thought it was very interesting. Curiously, they left themselves a lot of room, claiming they are just "exploring" the idea of a Token. Everyone wants to read into it, but this gives them a lot of leeway to delay, or if they feel it is necessary, even completely abandon it. The wording of this announcement is very clever and provides flexibility for future operations.

Ico Beast: This is a tough question because airdrops are a hot topic. There has been a lot of discussion recently about the purpose and design of airdrops. Ideally, most should be allocated to users, but we also know that if too many tokens are distributed to users, the price movements can be terrible because everyone will want to sell. If it follows the Base philosophy we have observed over the past year, it may lean more towards incentivizing developers. So those who are actually building projects on Base, using Base applications, or bringing a substantial number of users to the Base ecosystem, like important protocols such as Virtual and Drum, may receive a considerable allocation. As for Coinbase's holding proportion, I think it is entirely reasonable. The significance of network tokens lies in benefiting from sequencer revenue or other network effects. If this is the case, it can be expected that they will retain a significant portion of the tokens to capture most of the sequencer revenue. Furthermore, if they allocate a substantial portion for themselves, in my opinion, this is a good signal for token prices because you wouldn't expect Coinbase to let the price crash immediately after acquiring a large number of tokens. Therefore, I would feel more comfortable with them holding a substantial supply than allocating 40% to the community, as the latter's outcome is more predictable.

) Laura Shin: What do you think is the best way for Base to launch a Token? What will be the use of the Token in the long run?

Ico Beast: I even wish they hadn't announced it in advance, but instead adopted the Arbitrum approach and directly launched the Token. But at the same time, the most successful airdrop, in my opinion, would be one that actively filters out witch attacks, whether through voluntary reporting or through bounty mechanisms. Now everyone has many wallets on these networks, like Privy wallet and other temporary wallets set up for various applications. One approach is to have people link all their wallets together and operate as a single entity; another approach is to set bounties for capturing witch clusters, similar to what LayerZero does, incentivizing people to go after cheaters. Because Tokens need to be widely distributed, especially to enhance network effects or truly achieve decentralization. Witch attacks ultimately undermine this goal. Therefore, the reality of users operating multiple wallets on the network must be handled cleverly.

Laura Shin: Jesse stated that Base is committed to building on Ethereum. What are your thoughts on this, especially in the context of Ethereum competing with other Blockchains?

Ico Beast: I hope so. All L2s should be collaborative and ultimately create value for Ethereum. In practice, whether this will be the case in the long run is still uncertain, but I believe the core philosophy of Base is currently aligned with Ethereum. This also involves the issue of Tokens; if it eventually becomes a Gas token or some kind of alternative, or even a validator-style Token that requires staking, this could indeed raise some issues. For example, the income of sequencers is typically expected to be used to pay for the "rent" of operating on Ethereum, and it is unclear whether these aspects are aligned. But it's good to hear them confirm plans to do so. This is the risk Ethereum took when choosing the Rollup scaling path, hoping that L2s won't end up becoming independent. I hope the outcome is as such; at least this is the intention they express at this stage.

Laura Shin: Base also announced its integration with Solana, which has been completed on the testnet. What do you think this means for the competition between Ethereum and Solana?

Ico Beast: This depends on the actual experience. We all know the fragmentation of liquidity and the complexity of being dispersed across multiple chains and layers. Ultimately, someone will provide a very useful and smooth unified liquidity layer that allows users to operate on-chain without even knowing which chain they are using; all of this is abstract for the end user. We have not yet reached that stage and cannot predict when it will be achieved, but currently, we haven't seen many cross-chain scenarios from EVM to SVM. Usually, you need to transfer funds across chains through protocols like Synapse and Relay, and there is no real native integration between the two. So it's interesting to see how the user experience will be. Unless the pros and cons of user experience are experienced, it is difficult to predict its second and third-order effects. If the experience is seamless, then which chain the value ultimately flows to will be an interesting point to watch. It depends on which chain is outputting more native Tokens, which is the more noteworthy aspect, provided the experience is seamless.

Ryan: My view is that this is just Base acknowledging that Solana is its biggest competitor. If you talk to the biggest projects in this space, especially those on Base, they acknowledge that Solana is the only other chain they would consider building on. This is a big step for many projects because these are two completely different tech stacks with high costs, but projects are willing to consider it because it's a decision that leads to positive returns on investment, demonstrating Solana's strength. On one hand, there's liquidity DeFi, and on the other, there's consumer. Solana may currently be doing better in terms of consumer and user culture. Look at everything happening on Pump; anything closer to ordinary people or Gen Z, if they're using crypto applications, is likely on Solana. In contrast, Base, while it also has users, clearly leans more towards DeFi and liquidity. The best part of Base is all the DeFi liquidity projects, which makes sense since Coinbase is a financial services company. Thus, the core products that are popular on Base naturally arise from this, whether it's Bitcoin loans on Morpho or DEX trading on Aerodrome. What Base currently lacks compared to Solana is a strong user and consumer culture. Through this integration, they are essentially saying that projects considering deployment on Solana can now choose to deploy on Base for more liquidity or consider growth from an EVM perspective. Conversely, if there are projects on Base considering moving to Solana, they don't necessarily need to completely leave Base; they can view Solana as a second option. The high-level conclusion is that Base is feeling the pressure from Solana, which is their biggest competitor, and this is their way of attracting developers to access both ecosystems simultaneously.

Laura Shin: As competition intensifies on-chain with players like Coinbase through Base, Robinhood, and Solana, how do you think this competition will evolve?

Ico Beast: If I knew the answer, I could perfectly position the cryptocurrency market for the next five years. I don't know the answer, so I keep an open stance on all of this. The entire cryptocurrency market will just continue to expand. My thought is that in about three years, there will no longer be a distinction between companies like Solana or Ethereum, and there may not even be a concept of cryptocurrency companies. They will all be companies that selectively use blockchain technology as needed. For me, this means keeping an open stance towards all participants and allowing the market to develop naturally, as keeping an open stance is the winning strategy in this situation.

Ryan: Ultimately, crypto is financial technology, and its core product is Token. Therefore, as long as a chain can generate the most Tokens, and these Tokens have the most trading volume and liquidity, the combination of the two will determine who will win this competition. Solana's approach is meme coins. Base's approach is the liquidity brought by Coinbase. Hyperliquid provides on-chain dedicated markets for the broader crypto market. These are the two most important directions. The next question is, what identity do you want to take in these two directions? Solana is clearly about increasing the number of Tokens and then hoping that more trading volume will be generated over time. On the Base side, it brings Tokens with a large trading volume, such as Bitcoin or USDC packaged by Coinbase, while also thinking about how to create an economy that issues a large number of Tokens on-chain, which is why they experiment with projects like creator coins. If you are a Blockchain, you are engaged in Tokenization business, and these might be the two winning ways.

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