BASE Token Grand Vision: How to Thoughtfully Design Tokenomics to Create $4 Billion in Value?

Blockbeats10-11

Original Title: BASE Token Design ProposalOriginal Author: Achim Struve, Outlier VenturesOriginal Translation: AididiaoJP, Foresight NewsDue to several of our portfolio companies building on Base, we ...

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This proposal aims to build community by outlining a challenge to traditional L2 model token design. It addresses the fundamental paradox of revenue and growth through an adaptive pricing currency mechanism. The BASE token represents an opportunity to redesign L2 economics from first principles.BASE Token Discussion: Redesigning L2 TokenomicsLayer 2 faces a fundamental economic challenge: the competitive pressure to keep transaction fees low has weakened revenue potential. Base boasts a $4.95 billion TVL, 1 million daily active users, and $5.1 million in monthly transaction fees, mainly due to its native integration with Coinbase, a competitive low fee of just $0.02 per transaction, and deep integration with the broader EVM-based ecosystem.This proposal outlines potential forms of token design for Base. It is not just about staying ahead but about establishing leadership. The key suggestion is to reduce reliance on fee extraction as a primary revenue source. By combining a proven bribe mechanism-enabled pricing currency mechanism with adaptive economics, sustainable value capture is created for Coinbase, Base, and the BASE token.BASE Token OpportunityTraditional L2 focuses on transaction fees, overlooking the primary value drivers of successful crypto assets. As observed by @mosayeri, the crypto community has long mistakenly judged the value accumulation narrative of L1 assets, assuming that transaction fees are the primary driver. The value of ETH and SOL mainly comes from being locked in AMM pools as a pricing currency, not from Gas fees.This presents an opportunity for BASE to establish itself as the primary pricing currency on a Base ecosystem DEX approved through whitelisting. BASE is not vying for dwindling fee revenue but generating demand through actual liquidity needs across trading pairs.Quote Currency MechanismUsers lock up BASE tokens to receive veBASE (voting escrowed BASE), providing governance rights over the fee allocation algorithm. VeBASE holders direct rewards to the AMM pool that uses BASE as its quote currency, with the allocation ratio automatically adjusting based on network health metrics. Ecosystem growth directly increases demand for locked BASE tokens as they are tied to liquidity incentives.This system builds upon the mature quote currency concept similar to Virtuals while adding a voting escrow mechanism similar to Aerodrome, but without redistributing pool fees to voters. A portion of sequencer revenue is used to sustainably capture incentives for BASE denominated pool voting decisions. This is effective even beyond the initial bootstrapping phase. Moreover, unlike a fixed allocation model, dynamic fee allocation responds to real-time conditions through a fine-tuned machine learning algorithm. These algorithms analyze network utilization, DEX trading volume patterns, and ecosystem growth metrics to determine overall incentive emissions.This mechanism will trigger liquidity wars similar to Curve Wars as the protocol accrues BASE governance tokens to ensure liquidity incentives. As the Base ecosystem expands, more protocols requiring BASE liquidity will reduce circulating supply and create natural demand pressure. Simultaneously, this approach provides an opportunity for large-scale token swaps with leading protocols already established on Base. This further strengthens decentralized ownership within the ecosystem. Base can use tokens from other ecosystems to bootstrap its own BASE quote liquidity pool. Transaction fees collected from protocol-owned liquidity can serve as a sustainable long-term revenue source.Adaptive Economic SystemCurrent L2 token designs employ a fixed allocation schedule that cannot respond to changing market conditions. BASE introduces a sophisticated adaptive system that goes beyond simple fee adjustments like Ethereum's EIP-1559.Built on the earlier released principles of adaptive attribution, BASE implements a dynamic emission plan through two strategically allocated pools that respond to ecosystem demand signals:· Allocation-Focused Distribution Pool (Coinbase Strategic Reserve, Protocol Treasury, Community & Users): Receives increased emissions during strong KPI performance periods to optimize value distribution during high adoption rates.· Growth & Development Allocation Pool (Ecosystem Fund & Builders, Validators & Infrastructure): Receives increased incentives during weak KPI performance periods to stimulate development and network security when additional support is most needed.The Growth and Development Allocation Pool includes all quote currency pool incentives, distributed through the ecosystem fund to protocols using BASE as their primary trading pair. This will align the adaptive emission system directly with the quote currency's value capture.During any allocation pool vesting period, emissions will never reach zero, and the system adjusts the relative weights between allocation pools based on market conditions and ecosystem health. A machine learning model analyzes multiple factors to prevent governance bottlenecks while ensuring optimal alignment of stakeholders across market cycles.BASE Token Allocation FrameworkBASE token allocation and longest vesting period example, the actual vesting period may change based on precise adaptive emission parameterization.Key Features:· Adaptive Emission System: All allocations use a dynamic schedule, with allocation-focused pools receiving increased emissions during periods of strong adoption, and the Growth and Development Allocation Pool receiving increased incentives during weak periods.· COIN Alignment: Coinbase's 20% strategic reserve creates direct value alignment without regulatory complexity.· Progressive Decentralization: Validator incentives (20%) ensure network security in the early stages, while community allocations support sustainable decentralization of BASE token ownership.· Balanced Development: Equal weighting between community rewards and ecosystem development ensures success in both adoption and builder retention.The final allocation requires extensive tokenomics analysis, legal review, and community feedback to achieve economic sustainability, regulatory compliance, and user alignment.Strategic Value and Impact on CoinbaseThe tokenization of Base represents a fundamental shift in revenue diversification. While Base currently generates modest sequencer fees (kept at a low level for competitive reasons), tokenization can immediately create over $40 billion in value through strategic reserve holdings.The current model faces limitations. Brian Armstrong highlighted the emphasis on low fees, recognizing that higher fees would push users to competitors offering token incentives, creating a revenue-growth paradox.Tokenization breaks this paradox by shifting incentives from fee extraction to ecosystem acceleration and value accrual. The 20% strategic reserve aligns Coinbase's interests with Base's long-term success while alleviating the pressure to maximize fees. Token emissions provide funding for growth without impacting the balance sheet, enabling competitive rewards aligned with other L2 incentives.The strategic impact goes beyond immediate returns through a variety of income diversification opportunities. Tokenization enables Coinbase to offer institutional custody services for BASE holders, generating recurring custody fees, while positioning itself as the premier institutional gateway for BASE exposure. The Coinbase One integration reduces customer acquisition costs by providing BASE rewards, discounts, and platform privileges to subscribers, creating stickier customer relationships and higher lifetime value.Distribution StrategyThe distribution strategy should balance Coinbase's customer base with Base ecosystem participants. While @Architect9000 proposed \"airdropping only to Coinbase One members\" for anti-whale attack mechanisms and customer alignment, fair distribution should include active Base on-chain users and validated builders from the Discord community.Roles obtained on the Base community Discord server can be used to gauge user consistency and commitment, tied to individual BASE airdrop allocations.This dual approach ensures CEX user retention and genuine L2 ecosystem involvement.Tokenization positions BASE as institutional-grade collateral bridging TradFi and DeFi. As noted by @YTJiaFF, \"with COIN support, the BASE token will become a secure bridge connecting publicly traded companies with crypto assets.\" Institutions can custody their BASE holdings on Coinbase, using these assets as both on-chain collateral in DeFi protocols and off-chain collateral in traditional credit markets. This dual-collateral function creates the first crypto token designed for the corporate credit market, enabling traditional financial institutions to access crypto liquidity while maintaining regulatory compliance through established custody relationships.Progressive Decentralization RoadmapThe transition follows a three-stage approach, balancing innovation with stability. As observed by @SONAR, Base has achieved \"Stage 1 decentralization in 3 stages\" and \"once Stage 2 arrives, fees will need to be paid to a third-party sequencer,\" making tokenization strategically necessary.Stage 1: Coinbase maintains sequencer control while initiating token incentives and community governance for fee distribution. In this controlled environment, a few basic KPI-driven incentive distributions validate the quote currency model.Phase 2: Hybrid Mode, including an initial set of decentralized validators requiring BASE staking, with Coinbase retaining 3 permanent seats to ensure transition stability. This phase introduces Futarchy governance, where veBASE holders bet on successful implementations, and market-proven proposals receive fast-track approval.Phase 3: Fully decentralized, open validator participation, and complete community control. Coinbase transitions to a regular network participant while maintaining strategic token holdings. Advanced cross-chain MEV coordination becomes operational, and institutional credit markets expand into traditional finance.Market Positioning and Competitive EdgeBASE has entered a landscape where existing L2 tokens struggle to capture network value. Despite significant ecosystem growth, ARB, OP, and MATIC still lag behind ETH, highlighting structural issues in traditional L2 token designs. These protocols face sell pressure from token unlocks without matching demand.BASE's quote currency model creates genuine utility demand through AMM quote liquidity deposit, addressing these structural issues. This has generated organic buying pressure that expands with ecosystem growth, moving beyond speculative utility towards essential infrastructure participation.Competitive differentiation goes beyond token design, extending to regulatory clarity, institutional access, and enterprise-grade compliance. Coinbase's regulatory expertise provides an unparalleled advantage that decentralized competitors cannot match, while the quote currency model establishes a clearer utility definition, reducing securities classification risk.Conclusion: The Decisive Choice Between Fee Capture and Exponential ValueThe fundamental question is not whether Coinbase should launch a token, but whether they should capture constrained fee revenue or create exponential value through tokenization.The current revenue structure indicates generating $180 million over three years (monthly $5 million x 12 months x 3 years). On the other hand, strategic BASE tokenization can unlock value through token distribution (initial fully diluted valuation of $10 billion x 0.2 = $2 billion) and due to· Quote currency demand· Adaptive smart incentive issuance· Protocol Owned Liquidity (POL) providing revenue equivalent to current sequencer fees· Ecosystem acceleration· Valued at an additional $20 billionCreating approximately $40 billion in combined value.These are conservative estimates, assuming valuation on par with other L2s and adjusted based on current fee and TVL data. Note that the Coinbase premium is not included.This is a significant value creation opportunity for Coinbase. The quote currency model solves the growth-revenue paradox while positioning BASE as the infrastructure for a continually expanding Base ecosystem. The early-mover advantage created by this L2 token design establishes a competitive edge that can further solidify Base's leading market position.For the broader crypto ecosystem, BASE tokenization may signal a further maturation of L2 economics, moving beyond reliance on transaction fees to true utility-driven value capture. As observed by @jack_anorak, \"The BASE token is a product decision, Base needs token incentives, and it must be neutral block space.\"Coinbase's choice between constrained fee capture and exponential tokenized value represents a pivotal moment that will shape BASE's development trajectory and Coinbase's position in the crypto space.Original Article Link\nWelcome to join the official BlockBeats community:\nTelegram Subscription Group: https://t.me/theblockbeats\nTelegram Discussion Group: https://t.me/BlockBeats_App\nOfficial Twitter Account: https://twitter.com/BlockBeatsAsia","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0,"need_auth":false,"code":"91000000","status":"200"},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.35.11","shortVersion":"4.35.11","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2574482258","isCrawlerRequest":true}