BASE Token Imagination: How to Design Tokenomics Reasonably and Create $4 Billion in Value?

Original Title: BASE Token Design Proposal

Original Author: Achim Struve, Outlier Ventures

Original Translation: AididiaoJP, Foresight News

Since many of our portfolio companies are building on Base, we have a strong interest in the success of this ecosystem. This proposal aims to build a community by outlining a token design that challenges the traditional L2 model. It addresses the fundamental revenue versus growth paradox through an adaptive quote currency mechanism. The BASE token represents an opportunity to redesign L2 economics from first principles.

BASE Token Discussion: Redesigning L2 Token Economics

Layer 2s face a fundamental economic challenge: the competitive pressure to keep transaction fees low undermines their revenue potential. Base boasts $4.95 billions in TVL, 1 million daily active users, and $5.1 million in monthly transaction fees, primarily due to its native connection with Coinbase, competitively low average transaction fees of just $0.02, and deep integration with the broader EVM-based ecosystem.

This proposal outlines a solution for what a token designed for Base might look like. It’s not just about staying ahead, but about establishing leadership. The key suggestion is to reduce reliance on fee extraction as the primary source of revenue. By combining a proven bribe-enabled quote currency mechanism with adaptive economics, sustainable value capture is created for Coinbase, Base, and the BASE token.

BASE Token Opportunity

Traditional L2s focus on transaction fees, overlooking the primary value drivers of successful crypto assets. As @mosayeri observed, “Crypto has long misjudged the value accrual narrative for L1 assets, believing the main driver is transaction fees.” The value of ETH and SOL comes mainly from being locked as quote currencies in AMM pools, not from gas fees.

This gives BASE an opportunity to establish itself as the primary quote currency on whitelisted Base ecosystem DEXs. Rather than competing for shrinking fee revenue, BASE generates demand through real liquidity needs across trading pairs.

Quote Currency Mechanism

Users lock BASE tokens to receive veBASE (vote-escrowed BASE), granting governance rights over the fee allocation algorithm. veBASE holders direct rewards to AMM pools using BASE as their quote currency, with allocation ratios automatically adjusted based on network health metrics. Ecosystem growth directly increases demand for locked BASE tokens, as they are tied to liquidity incentives.

This system builds on the mature quote currency concept seen in Virtuals, while adding a vote-escrowed voting mechanism similar to Aerodrome, but without redistributing pool fees to voters. A portion of sequencer revenue is used to sustainably acquire incentives for BASE-denominated pools as determined by voting. This remains effective even after the initial launch phase. Unlike static allocation models, dynamic fee allocation responds to real-time conditions through finely tuned machine learning algorithms. These algorithms analyze network utilization, DEX trading volume patterns, and ecosystem growth metrics to determine overall incentive emissions.

This mechanism will trigger Curve Wars-like liquidity competition, with protocols accumulating BASE governance tokens to secure liquidity incentives. As the Base ecosystem expands, more protocols will require BASE liquidity, reducing circulating supply and creating natural demand pressure. At the same time, this approach provides opportunities 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 build its own BASE quote liquidity pools. Trading fees collected from protocol-owned liquidity can serve as a sustainable long-term revenue source.

Adaptive Economic System

Current L2 token designs use fixed allocation schedules that cannot respond to changing market conditions. BASE introduces a sophisticated adaptive system that goes beyond simple fee adjustments like Ethereum’s EIP-1559.

Based on previously published adoption-adjusted vesting principles, BASE implements a dynamic emission schedule responsive to ecosystem demand signals through two strategic allocation pools:

· Allocation-focused pool (Coinbase strategic reserve, protocol treasury, community, and users): Receives increased emissions during strong KPI performance to optimize value distribution when adoption is high.

· Growth and builder pool (ecosystem fund and builders, validators, and infrastructure): Receives increased incentives during weak KPI performance to stimulate development and network security when additional support is most needed.

The growth and builder pool includes all quote currency pool incentives, distributed via the ecosystem fund to protocols using BASE as their primary trading pair. This directly aligns the adaptive emission system with quote currency value capture.

During any allocation pool’s vesting period, emissions never reach zero; the system adjusts the relative weights between pools based on market conditions and ecosystem health. Machine learning models analyze multiple factors to prevent governance bottlenecks while ensuring optimal stakeholder alignment across market cycles.

BASE Token Allocation Framework

BASE token allocation and maximum vesting period example; actual vesting periods may change based on precise adaptive emission parameterization.

Main features:

· Adaptive emission system: All allocations use a dynamic schedule, with the allocation-focused pool receiving increased emissions during strong adoption, and the growth and builder pool receiving increased incentives during weak periods.

· COIN shareholder alignment: Coinbase’s 20% strategic reserve creates direct value alignment without regulatory complexity.

· Progressive decentralization: Validator incentives (20%) ensure network security during the launch phase, while community allocation supports sustainable decentralized ownership of BASE tokens.

· Balanced development: Equal weighting between community rewards and ecosystem development ensures success in both adoption and builder retention.

Final allocation requires extensive token engineering analysis, legal review, and community input to achieve economic sustainability, regulatory compliance, and user alignment.

Strategic Value and Impact for Coinbase

Base tokenization represents a fundamental shift in revenue diversification. While Base currently generates modest sequencer fees (kept low for competitive reasons), tokenization can immediately create over $4 billions in value through strategic reserve holdings.

The current model faces limitations. Brian Armstrong has highlighted the importance of low fees, recognizing that higher fees would push users to competitors offering token incentives, creating a revenue versus 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 removing the pressure to maximize fees. Token emissions fund growth without impacting the balance sheet, enabling competitive rewards to match other L2 incentives.

The strategic impact goes beyond immediate returns from multiple revenue diversification opportunities. Tokenization enables Coinbase to offer institutional custody for BASE holdings, generating recurring custody fees while positioning itself as the primary institutional gateway for BASE exposure. Coinbase One integration reduces customer acquisition costs by offering BASE rewards, discounts, and platform privileges to subscribers, creating stickier customer relationships and higher lifetime value.

Distribution Strategy

The distribution strategy should balance Coinbase’s customer base with Base ecosystem participants. While @Architect9000 suggests “airdropping only to Coinbase One members” for Sybil resistance and customer alignment, fair allocation requires including active on-chain Base users and verified builders from the Discord community.

Roles earned on the Base community Discord server can be used to measure user consistency and commitment, and be linked to individual BASE airdrop allocations.

This dual approach ensures both CEX user retention and genuine L2 ecosystem participation.

Tokenization positions BASE as institutional-grade collateral connecting TradFi and DeFi. As @YTJiaFF points out, “With COIN’s backing, the BASE token will become a secure bridge connecting public companies and crypto assets.” Institutions can custody their BASE holdings with Coinbase, using these assets as on-chain collateral in DeFi protocols and as off-chain collateral in traditional credit markets. This dual collateral function creates the first crypto token specifically designed for enterprise credit markets, enabling traditional financial institutions to access crypto liquidity while maintaining regulatory compliance through established custody relationships.

The Path to Progressive Decentralization

The transition follows a three-stage approach, balancing innovation and stability. As @SONAR observes, Base has achieved “Stage 1 decentralization out of 3,” and “once Stage 2 arrives, fees will need to be paid to third-party sequencers,” making tokenization strategically necessary.

Stage 1: Coinbase retains sequencer control while launching token incentives and community governance for fee allocation. In this controlled environment, the quote currency model is validated through basic KPI-driven incentive allocation.

Stage 2: Hybrid mode, with an initial set of decentralized validators requiring BASE staking, while Coinbase retains three permanent seats to ensure transition stability. This stage introduces futarchy (prediction market governance), where veBASE holders bet on implementation success, and market-proven proposals receive fast-track approval.

Stage 3: Full decentralization, with 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 Advantage

BASE enters a landscape where existing L2 tokens struggle to capture network value. ARB, OP, and MATIC, despite significant ecosystem growth, still underperform ETH, highlighting structural issues in traditional L2 token design. These protocols face sell pressure from token unlocks without matching demand.

BASE’s quote currency model creates real utility demand through AMM quote liquidity deposits, addressing these structural issues. This generates organic buy pressure that scales with ecosystem growth, moving beyond speculative utility toward 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 advantage unmatched by decentralized competitors, while the quote currency model creates clearer utility definitions, reducing securities classification risk.

Conclusion: The Decisive Choice Between Fee Capture and Exponential Value

The fundamental question is not whether Coinbase should launch a token, but whether they should capture limited fee revenue or create exponential value through tokenization.

The current revenue structure suggests $180 million generated over three years ($5 million per month x 12 months x 3 years). On the other hand, strategic BASE tokenization can create approximately $2 billions in value through token allocation (initial fully diluted valuation of $10 billions x 0.2 = $2 billions) and, due to

· Quote currency demand

· Adaptive intelligent incentive distribution

· POL providing revenue comparable to current sequencer fees

· Ecosystem acceleration

· An additional $2 billions in valuation

for a total of about $4 billions in combined value.

These are conservative estimates, assuming valuations in line with other L2s and adjusted for 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 versus revenue paradox while positioning BASE as the infrastructure for the ever-expanding Base ecosystem. The early dominance created by this L2 token design establishes a competitive advantage that can further strengthen Base’s leading market position.

For the broader crypto ecosystem, BASE tokenization could mark further maturity in L2 economics, moving beyond reliance on transaction fees toward true utility-driven value capture. As @jack_anorak observes, “The BASE token is a product decision—Base needs token incentives, and it must be neutral block space.”

Coinbase’s choice between limited fee capture and exponential tokenization value represents a decisive moment that will determine the trajectory of BASE and Coinbase’s position in the crypto space.