AMA with DuckDAO
On Friday the 16th of October, the DuckDAO community held an AMA with the founders of Base Protocol — Nick Ravanbakhsh and Dylan Senter.
Base Protocol — A Summary
The Base Protocol (BASE) is a synthetic crypto asset that derives its price from the total market cap of all
cryptocurrencies (cmc) at a ratio of 1 : 1 trillion. BASE exists to maintain a market rate that is stably pegged to its
underlying asset — the crypto industry. BASE’s peg to cmc is held stable through an elastic supply protocol.
The Base Protocol acts as a one-stop trading instrument which allows holders to speculate on all cryptocurrencies
simultaneously, rather than just one or a select portfolio of multiple. It allows traders to agnostically invest in the
entire crypto ecosystem. This is its primary function.
Website: https://www.baseprotocol.org/
Medium: https://medium.com/@BaseProtocol
Telegram: https://t.me/baseprotocol
Twitter: https://twitter.com/baseprotocol
Discord: https://discord.com/invite/JyQ4gmR
Participants:
Base — Nick — Co-founder
Base — Dylan — Co-founder
DuckDAO — Lukas — DuckDAO co-founder
DuckDAO — Limmy — DuckDAO community representative
Please note that the following summary has been edited for clarity.
Lukas | DuckDAO🐥
Welcome everyone to another DuckDAO AMA.
We are joined today by the founders of Base Protocol — our next incubator partnership project!
Thank you for joining us here today fellas — we have had a very high number of question submissions today. Rebase projects seem to be quite polarizing it seems.
Dylan
Hey everyone! This is Dylan, one of the founders of the BASE Protocol. We are super excited to be a tier one DuckDao incubator project, and we are looking forward to all the questions from the DUCKS!
Limmy
Let’s start with a question about yourselves. Can you please give us a short intro — what are your crypto/non-crypto backgrounds and experiences?
How big is the full Base protocol team? Who/What is Based McGee!? Is he/she like the Stig from Top Gear? :)
Dylan
To keep this brief — we’re entrepreneurs, business nerds, programmers, and friends.
Nick, has worked in tech startups since 2013, been involved in crypto since 2015, and began working on crypto projects directly in 2017. He also has a portfolio of Airbnbs which generate passive income so he’s able to focus on BASE full-time. Nick is the guy who writes all the copy for our papers, articles, and website. He’s basically the storyteller for BASE.
Dylan Senter is a lifelong entrepreneur who has been active in crypto since 2014, spoken on multiple panels at different crypto conferences, and consulted over 50 clients across ecommerce, blockchain, and technology projects. He currently runs an ecommerce store with $1m in annual sales. Dylan is our business and marketing guru!
Chris has been programming professionally for almost 10 years and has been doing blockchain development since the Ethereum wave of 2017. He’s known for his YouTube channel Learn with Coffee (17k+ subscribers) where he teaches programming across different stacks through in-depth video tutorials. Chris is our head developer.
And Based McGee…is exactly like the Stig from Top Gear. All we’ll say about McGee is this; there is no higher level of Ethereum development expertise. He is a global elite. McGee likes to keep a low profile, so he’s opted to stay anonymous. But don’t worry — you can get to know him through his contributions on the GitHub and you can reach him through the Telegram and Discord.
Limmy
Right so you’ve all known each other for a while and this won’t be your first time working together. I’ll just go ahead and assume that McGee is Andre Cronje for now lol
Lukas | DuckDAO🐥
I have tried to read the Whitepaper of yours and I found it difficult to understand. The only thing I got from it was that BASE is a Crypto market tracker (is it like the Bull token or Bear token), and there is a synthetic asset component.
What exactly are you guys building, and can you explain it in a way that a non-technical person like me can understand it?
Nick
Sure!
BASE is a token that represents all cryptocurrencies. By holding BASE, you have exposure to the performance of the whole cryptocurrency industry — all in one token.
This is achieved by pegging the price of BASE to the total market cap of all cryptocurrencies:
- If crypto market cap is $400B, BASE is $0.40.
- If crypto market cap is $700B, BASE is $0.70.
You might be wondering, how is this possible? How can you attach BASE price to crypto market cap?
This is achieved through the Base Protocol, which incorporates an elastic token supply. This means all BASE tokens across the world can be multiplied (expanded) or divided (contracted) to tune scarcity and influence price.
Using this protocol, we are able to create the world’s first tradeable cryptocurrency market index — one token that represents all tokens.
Lukas | DuckDAO🐥
Thank you that makes it more easy to understand for me 👌
Limmy
From my understanding the main Use-Case is the Crypto Index — and I quote — “which allows holders to speculate on the entire crypto industry simultaneously […]. This should be valuable for outsiders interested in crypto investing who don’t know which assets they “should” buy. It will also be useful for institutional investors…”.
IMHO the holders not only speculate on the general CMC but even more so on the demand (and therefore expansion via rebase) of the Base-token itself — which in turn might (and should) scare away crypto outsiders and institutional investors because it is way more speculative than buying e.g. BTC.
What would be your counter to this argument?
Nick
Great question, I’m glad you asked. The most important thing to understand on this topic is this concept:
The Formative Period vs. the Final State
BASE will act as a crypto index once it has achieved a stable price peg to the crypto market cap.
However, this price peg will NOT be stable in the beginning. That is because new adoption for BASE will cause bullish disruption on the price peg.
This is the “Formative Period” dynamic. In this formative period, as new users buy and adopt BASE, the growth rate for BASE will probably exceed the growth rate of crypto market cap. This means that for early adopters, BASE is more speculative than it is stable. During the formative period, holders are speculating more on BASE adoption than they are on the crypto market peg.
However, once BASE reaches an adequate threshold of visibility and adoption slows down, we can expect its market price to stabilize on the peg. Once this is achieved, holders will be able to use BASE to speculate on crypto market cap, and not so much on BASE itself. This is the “Final State.”
To answer your question of if this might “scare away” crypto outsiders — the truth is that it might (at first). It will mostly be crypto insiders trading it during the formative period. But as we get closer to the final state, price stabilizes on the peg. Once this happens, it won’t be as “scary” to crypto outsiders. If you look at our roadmap, you’ll notice we talk about proposing BASE to traditional investment institutions in Q3 2021. We have this projected so far in the future because we anticipate it will take some time to achieve an adequate history of price peg stability, enough that outsiders can trust the resilience of the peg.
In the formative period, buying BASE is a bet on future adoption of BASE.
In the final state, buying BASE is a bet on future adoption of the crypto industry.
Limmy
Just a quick follow up question here — have you modelled the formative period and final state timeframes during the project’s development cycle?
Nick
It’s not something that we or any rebase project can predict with accuracy. It would be irresponsible for us to set an expectation for it — it’s just something we have to watch play out!
Limmy
Thanks Nick, that’s fair enough :)
Lukas | DuckDAO🐥
If investors want exposure to a crypto index token, why would they choose base over INDEX or a simple cryptomarket exposure fund product? — this one could alternatively be worded “why not just hold our own optimized bag of cryptocurrencies to track the market, minus the rebase function?”
Dylan
Firstly, there is currently no crypto index fund product which covers the entire cryptocurrency industry. That’s because it’s very challenging to create such a product through traditional means, as it would be almost impossible to manage portfolio ownership of 5,000+ assets. How would the portfolio manager weigh ownership of each asset as market cap dominance changes? How would they account for newly entering/exiting assets? Who would take on all the associated transaction and custodial fees? There are also various legal limitations that restrict the formation of such an instrument in many countries — and even if it could be formed, it would be a highly centralized product.
Secondly, to this point: “why not just hold our own optimized bag of cryptocurrencies to track the market, minus the rebase function?”
What you and someone else consider an “optimized bag of cryptocurrencies” will often differ. But what we all agree on is that the overall industry will perform well in the future. What you’re asking is almost like asking “why hold the S&P500 when we could just hold our own optimized bag of stocks?”
You certainly could. But without a doubt, people value highly diversified, agnostic index investment tools. In fact, BASE doesn’t really compete with an “optimized bag” portfolio. It’s more of a complementary tool that can be used to diversify these bags.
Lukas | DuckDAO🐥
Thank you dylan, that make sense.👍
Limmy
Do you consider any of the current rebase projects as direct competitors? What makes you guys stand out from the crowd?
Nick
This is a good question — and the answer to it is a resounding NO.
Rebase projects use the same elastic supply framework, but apply that framework to different use cases.
The easiest way to illustrate this is by comparing BASE to AMPL. Pioneered by Ampleforth, AMPL is the first and most popular rebase project in the market today.
AMPL is a rebase token whose price is pegged to US CPI. In simple terms, AMPL is pegged to $1.
BASE uses the same rebase technology as AMPL, but rather than pegging to $1, BASE pegs to the total market cap of all cryptocurrencies.
The tech is the same, but the use case is completely different. To answer your question about what makes us “stand out” :
By pioneering rebase technology, AMPL basically invented the wheel. But…they put it on a wagon. BASE takes the wheel they invented and puts it on a sports car. Rebasing is awesome and we have the utmost respect for AMPL as a pioneer in the space. However, we do believe that a crypto market index is much more interesting than a $1 peg. Especially for the crypto audience. And while there are many $1 peg competitors, there are literally no total crypto index competitors in the space. BASE is a truly novel offering.
Limmy
Ah I see. So basically, for rebasing projects the use case is the key. Perhaps the launch of Base will see a rebase phase of the crypto market, much like we saw with the DeFi boom.
Nick
Exactly, use case is key 👍🏻
Lukas | DuckDAO🐥
We’ve had a large number of questions around how the rebase functionality will work, so we’ll start this section of the AMA with a general one that will hopefully answer them all in at least some way.
How does rebasing work? If I held, say, 1% of the supply of tokens on a given day, can you walk us through a sample scenario that briefly touches on each of the following key factors: Market cap, demand, supply, rebasing events. etc
Nick
Alright, let’s do this with the simplest possible scenario.
Let’s say:
- Total Crypto Market Cap: $400B
- BASE Market Price: $0.40
- Lance BASE Balance: 100 BASE
- Lance $ Balance: $40
At this point in time, BASE is in a state of equilibrium. It is a perfect peg to crypto market cap.
Now, let’s say several people buy up BASE because they’re hearing about it all over Twitter from these crazy Duck folks. They buy it up so much that the price increase:
- Total Crypto Market Cap: $400B
- BASE Market Price: $0.50
- Lance BASE Balance: 100 BASE
- Lance $ Balance: $50
Now, BASE is in a state of disruption, because it is not pegged to crypto market cap. So, to drive BASE price down, a REBASE will occur. In this case, the rebase will expand supply, which will depreciate the token and drive its price down. This expansion affects ALL balances across the network, including Lance’s:
- Total Crypto Market Cap: $400B
- BASE Market Price: $0.40
- Lance BASE Balance: 125 BASE
- Lance $ Balance: $50
The rebase drives the market price of BASE down, but multiplies his supply. So, although the price of Lance’s BASE breaks back to where it started, his BASE balance went up by 25%. So Lance still profits.
You must track BASE performance through market cap, NOT price. Market cap is a function of:
supply x price = market cap
For most assets, supply is fixed, so price changes.
For BASE, price is fixed, but SUPPLY CHANGES.
Although performance is not reflected in the price graph for BASE, it is reflected in the market cap graph just like any other asset! This is just one, very simple example to illustrate the goal of rebasing and the effect it has.
Lukas | DuckDAO🐥
Thank you Nick and I’m sure that will help some people to understand it even better.
Nick
Of course 👏🏻 Loving the questions so far guys!
Limmy
I’m sure that you guys are getting VERY good at answering that question by now haha
It can be difficult to fully understand how Base and other rebase projects work. What do you think are the most common misconceptions?
Dylan
I love this question!
The most common misconception is that BASE price is perfectly pegged to the total crypto market cap, so BASE can only grow as fast or slow as the total crypto market. This is our goal in the end, yes.
But early on, new adoption can disrupt this peg so BASE grows at a much faster rate than crypto market cap. This would be highly rewarding for the earliest adopters. Once adoption slows down, BASE price will stabilize on the peg. This is when BASE performance will slow down and correlate more to the pace of the crypto market.
Limmy
Cheers Dylan — back over to you Lukas
Lukas | DuckDAO🐥
I have a little bigger question now, so be prepared.
Adding a market index to a portfolio to track the performance of an entire market is an easily understandable shortcut to a diversified portfolio for the average investor. Rebasing tokens, however, seem to be widely misunderstood. I have noticed many questions about the basic functionality, or how and when an investor can profit. Pegged rebasing tokens create an additional wrinkle by adding a moving target.
Regardless, the only way to profit via rebasing deltas (as opposed to hodling for the overall growth in market cap) seems to be in the slim moment of lag after a rebase, which is the domain of bots and dedicated traders. Further, there is a cynical, zero-sum side to this which harms the novice investor, by causing them to purchase a token at an inflated price that is not representative of true market value — the period of disequilibrium before price correction has resolved to return equilibrium between MC and price at the new token supply. For every winner there is a loser in this process, the buyer for every seller, and a new investor could be harmed.
Do you think that the complications of a rebasing token are a significant barrier to entry for a new investor, especially one only wishing to track the growth of crypto market cap in their portfolio, and if so, do you have any plans to address it?
Dylan
Awesome question by the way! 👌🏻
Nick Is writing a response now
Nick
Your point about the zero-sum factor and how it can be harmful for the novice investor is a fair one. The truth is, there is no perfect answer for that. You’re right: a novice investor who “buys the top” of a bullishly disrupted BASE, following a rebase, where a price correction immediately follows…assuming this novice didn’t know what rebasing was — they may have just suffered a rather unfortunate loss. However, losses are a potential consequence of trading anything.
The truth is, any market actor should educate themselves on what they buy before they buy it. Whether that’s BASE, Bitcoin, gold, or food. Their decisions and their mistakes are out of our control. All we can hope is that if this happens, it encourages the investor to do their research and learn more about the asset they’ve bought.
What is in our control is educating the community on rebasing to the best of our ability. We don’t think existing rebasing tokens have done a perfect job at this, and we hope to. We have a lot of great ideas in mind. A solid dashboard (see our current site), telegram rebase alert bots, an ELI5 Youtube video series, better documentation, etc.
Limmy
The member who submitted that question is pretty well known for the quality :)
Lukas | DuckDAO🐥
He is and I think Nick answered it really well👍. Thank you!
Limmy
Critics would argue that crypto market cap is an inherently flawed metric as it focuses solely on price rather than value. What are your views on this and do you think this impacts BASE’s value proposition?
Dylan
Economists agree that price is the best reflection of value for any goods, services, or assets. Price IS the metric for value — in stock markets, commodities markets, crypto markets, etc. People may disagree on the value of a given asset, but the market price for that asset is the best, truest, and only metric to go off of. For critics who disagree with this, I would say don’t buy BASE. But I would also say they probably shouldn’t buy anything with a price at all, ever. 😅
To answer your question, we don’t think price is a flawed metric.
Limmy
There is a joke in there somewhere about economists agreeing haha. I’m not one myself so I am not inclined to disagree 😅
Lukas | DuckDAO🐥
I understand there is a cascade function where you can stake your tokens and get rewarded for how much/long you stake. When there is rebase happening, does the supply in your staking amount change proportionately too? What about any base tokens I use to provide liquidity into uniswap? What about vested private sale tokens?
Do all those balances change as well?
Nick
We get this question a lot, so I’ll be clear:
When a rebase happens, the supply changes everywhere.
Everywhere.
Your wallet balance, the amount you’re staking in Uniswap, the amount you’re staking in the Cascade, all vested tokens, everything.
👍
Lukas | DuckDAO🐥
got it ! onto Limmy
Limmy
This will be my first rebase project. Will I need Eth in my address for the rebase to work properly? Does every rebase deduct eth?
Nick
As long as you have BASE, the rebase will work properly! What other tokens you do or don’t have in your wallet won’t affect rebases.
Limmy
👍
Lukas | DuckDAO🐥
What value does rebasing add to an index token beyond the simple ability to speculate on token price during short windows between rebases?
Nick
Hmm. Let me use an analogy to explain one:
This is like asking “what value does gas add to a car beyond the simple ability to fill your tank between trips?”
Gas does not add value to a car — it is what makes it possible for the car to be a car.
Rebasing doesn’t “add value” to this crypto index token. It is exactly what makes it possible. Without this rebasing protocol, it would be unbearably difficult to create a crypto industry index. Logistically, legally, and financially. The rebasing innovation is what makes BASE possible!
Lukas | DuckDAO🐥
That makes it so unique and it’s awesome that you could utilize it for your project 😊
Limmy
So there’ve been a few rebase tokens now and people tend to game the rebase function. This can lead to unhealthy trading practices. How do you plan to combat this? Will the rebase be static daily or completely random?
Dylan
Not entirely sure what you mean by “game.” If you’re talking about arbitrage — I wouldn’t say this is a problem. We actually want to see as many people playing the arbitrage game as possible. This is what makes the price peg stable!
And the rebase will start out on a regular, 24 hour frequency. One rebase per day at most.
The community will be able to vote on changes to parameters like this through BASE governance proposals. While we start with a 24 hour rebase frequency, the community may vote to go down to every 12 hours, 4 hours, or even a random frequency.
Limmy
I assume that in the context of this question, “gaming” the rebase function refers to whales and/or bots trying to push the price in a direction that would favor them (or just trying to be the first ones to jump on the arb opportunity) just before the rebase occurs. I believe this is why a lot of people are proponents of random rebases.
Nick
That makes sense, and I understand where people are coming from with this. But the funny thing is, if BASE ever got to a point where bots were acting on arbitrage, that would be a really good thing. It would mean there’s a high volume of stabilizing pressures keeping the peg in place. In other words, trust me, if we got to a point where bots were engaged, it means BASE truly became very successful. Yes, it would mean less arbitrage opportunities for human actors — but it would mean an incredibly resilient peg.
Limmy
Huh interesting — I’ve never thought of bots as being a positive part of the ecosystem.
Lukas | DuckDAO🐥
Where does the data on total market cap come from? Do you track the coins individually, or are they provided by a third party?
Dylan
Great question! Pulled this from our whitepaper, make sure to check it out at baseprotocol.org
For the Base Protocol to achieve its price peg, it requires one key data point: the total market cap of all cryptocurrencies (cmc). At launch, 11 off-chain cryptocurrency data APIs will be polled at regular intervals for market cap information by a quorum of Chainlink oracles operated by the Base Protocol team (soon to be operated by Chainlink). The Chainlink oracles calculate the median value of cmc across those 11 providers. The median is used rather than the average so as to better protect against extreme outlier values reported by any of these APIs, whether erroneously or maliciously.
For an inaccurate value to find its way on-chain, at least 6 of the 11 providers would have to be compromised or conspire together to defraud the network. At present, we consider this an acceptable mitigation against a highly unlikely scenario. Nevertheless, the more decentralized the Base Protocol’s oracle network is, the more resilient it will be against fraud and single point of failure risks; as such, the team plans to onboard third-party node operators in the future.
Regardless of how the data is sourced, there will frequently be a small discrepancy between the cmc used for BASE and the data that appears on any individual cryptocurrency data aggregator. To allay concerns, users will be able to consult the BASE dashboard surfacing all of the underlying data used to calculate the median market cap, and by extension, expansions and contractions to the BASE token supply.
Limmy
When you refer to the total market cap, are you literally talking about every single coin or will you only focus on say, the top 100 cryptocurrencies with the highest market cap?
Nick
We mean literally every single cryptocurrency.
Think about this:
Were you holding Bitcoin in 2009? Were you holding Ethereum in 2015? Chainlink in 2017? How many amazing crypto journeys have you missed out on because you didn’t have exposure to the projects and it was too late by the time you heard about them?
By holding BASE — in essence, the entire crypto industry — you guarantee that you won’t completely miss exposure on these projects.
This is why it is so powerful that BASE captures total market cap of projects, rather than just the top 100.
We also like that users will be able to quickly estimate BASE target price by just looking at the total crypto market cap; if you see that the industry market cap is $350B, you know BASE should be trading around ~$0.35. If BASE just tracked top 100 or 50, this simplicity and elegance is lost.
Lukas | DuckDAO🐥
Is there anything beyond the familiarity of crypto MC as a rebase peg that makes BASE more appealing to a trader than, say, pegging to a tech sector or precious metals index? In essence, a peg should create a speculative delta for arbitrage in addition to the general rebase principal of exploiting disequilibrium and measuring profit as a percent ownership of the total market cap, that can be exploited due to differences in information and ability to act on a small enough time scale.
Are there any additional uses for the token to add value?
Dylan
There is not a strong need to create a rebase token for tech or metals indices because they already exist in traditional centralized institutions. However, a crypto industry index does not exist. BASE is the first of its kind, and is specifically made possible through rebasing. This is an “apples and oranges” comparison.
The statement you made is an accurate illustration of how rebasing utilizes game-theory and arbitrage incentives to create a price peg.
Although this does create profit opportunities for fast acting traders, we don’t consider this a “use that adds value.” It is just the plumbing that makes the system work.
The token adds value because through its protocol, it is able to function as the world’s first crypto industry index. This is its use.
Limmy
We’ve seen a lot of rebase projects since the rise of Ampleforth and they pegged themselves to different currencies, what happens if we go in a bear market like the previous one which lasted over two years, won’t our tokens lose value even more than a regular token since we not only getting a lower token price but less tokens as well because of the rebases?
Nick
So, I don’t want to set an expectation for how BASE will perform in the future. Please understand that the following statement is not a prediction, just a theory:
BASE follows the price action of total crypto market cap. In the case of a bear market, a trader would be happier that they held BASE than to hold some portfolio of altcoins, because they would absorb less loss. It is possible that in the case of a bear market, many traders would transition out of their altcoin positions into a BASE position.
You don’t “lose” any extra value when BASE falls. Yes, in a bear market, you may see price fall + tokens divide. However, it is all just a function of market cap. You can just look at the market cap performance for BASE and compare it to other projects. In some cases, it may perform worse than others in a bear market. In some cases, similar. And in many cases, it would actually be logical that BASE performs better — remember, it can be used as a hedge.
Lukas | DuckDAO🐥
Has the smart contract been audited? Assuming that it will be key for the rebasing calculatings, this is a key concern.
Additionally, is there any safety mechanism to prevent overminting (to prevent any foul play/hacks)?
Nick
Nothing has been audited yet, because all the contracts aren’t fully written yet. They have to be completely finished for the audit process to begin. We are in conversations with several auditors right now — just vetting for the best option to move forward with.
On your question about overminting:
The contract’s minting is tied to the market cap data which is fed from our Chainlink oracles. It’s not possible to just specify an arbitrary amount to mint/destroy.
The only way to spoof the mint would be for at least 6 of our 11 data providers to be compromised or conspire together to defraud the network. We’re aggregating from multiple sources to specifically mitigate this risk. To put it simply, the only way foul play would materialize would be for six popular price tracking sites to team up and plot against BASE, which would undermine all of their credibility. Or, for six data sources to all get hacked at the same time, which we believe is a highly unlikely scenario.
The mint is secure. ☑️
Limmy
Nick
Hahahahaha 😂
Lukas | DuckDAO🐥
hahaha
Limmy
What are the ways for Base Protocol to generate revenue in the long run? What is the progress of business development and what are some of your commercial partnerships?
Dylan
At every positive rebase, 10% of the rebase amount is minted in excess. So if there is a 20% supply expansion, an extra 2% will be minted. 4/5 of that extra mint goes to the BASE Cascade rewards pool, and the other 1/5 is issued to the BASE dev pool.
These issuances only occur on positive rebases, which is an indication that BASE is succeeding in adoption. Correspondent to this success, the BASE dev pool is capitalized. Eventually, when adoption slows down and the BASE price peg stabilizes, rebases become less frequent, and so do these dev pool issuances.
This works logically because BASE stability indicates successful functionality — at which point foundation issuances are less necessary. Foundation issuances are only administered when new adoption occurs and diminish as the protocol reaches its final state.
These rebase issuances are an algorithmic, sustainable, and transparent way to equitably support the development team.
Your question on business development is a bit broad. In short, there have been a lot of developments. In terms of partnerships, we have some BIG things in the works and certain contracts which have already been signed that we can’t yet disclose. You guys will have to stay posted!
Limmy
Nice and up-front. Gotta feed those developers somehow haha
Lukas | DuckDAO🐥
One of the use cases for base protocol is collateral assets — does that mean that the team will be looking to list the token on lending/borrowing platforms like cream, compound etc.?
Nick
Great question! Answer is YES. Big time.
This is really interesting, because we’ve noticed so many other DeFi projects spinning themselves up as collateral assets on these platforms. In our opinion, the value these projects create as collateral assets is underwhelming. However, BASE as a collateral asset is HUGE. I’m just going to explain it here, copied from our website:
Say a trader borrows 100 BASE to buy an altcoin, and that altcoin plummets alongside a bearish trend in crypto markets. When the trader pays their 100 BASE back to the lender, he notices the value of that BASE also dropped — correspondent to the crypto market. This means that when he pays the loan back, he only absorbs the loss he took that was in excess of the overall loss in the market. In this way, BASE can be used as a strategic hedging instrument for crypto-focused portfolios trading on leverage.
We’re planning to engage with all the likes of Aave, Cream, Compound, etc. Anywhere that we can spin BASE up as a collateral asset. We think BASE will be one of the most attractive offerings for this use case on these platforms. Guys, I can’t stress it enough. This is going to be very powerful in the crypto lending space.
Lukas | DuckDAO🐥
Thank you Nick!
Limmy
And now we get to the inevitable scaling question!
Lately gas-prices on the ETH-network have skyrocketed to some pretty ridiculous points. Could a similar situation lead to problems with the base-protocol or do you have mechanisms in place, to prevent this problem?
Nick
Haha! Here’s something we’ve written before on this topic:
We’ve spoken with the Chainlink team about this issue, since it affects the entire DeFi ecosystem, and they’re serving a huge segment of this market who are also dealing with these conditions. As far as BASE is concerned, the only direct way that gas prices impact our protocol’s overall reliability is via the Chainlink integration. Chainlink makes many transactions each day for each price feed, including our own market cap feed. These updates need to be mined on-chain in a timely manner to ensure that the price feed is up to date and reliable. There is always a chance that these feeds will slow down if congestion skyrockets. This is just the nature of Ethereum. However, the Chainlink team has spent several quarters creating defenses against conditions like these and finding various ways of ensuring that their nodes will be able to reliably submit updates to all of their feeds, including our new market cap feed, regardless of conditions on the network. Our take on it is that Chainlink is the market leader (by a long shot) in producing feeds like these, and have proven themselves during a number of scenarios that have been challenging for other projects. We’re partnered with the best.
Other than the market cap feed updates, the BASE protocol relies on one other transaction, which is the daily rebase transaction. Because of the simplicity and inexpensiveness of this transaction, we can assure you that it will be mined in a timely manner relative to the rest of the activity on the network, no matter how congested it is. There are two lines of defense here:
- Most of the time, the cost of this transaction accrues to us, because we’ll be the ones executing it. And we will spare no expense in ensuring that it is executed in a timely manner during each rebase period.
- If the community sees that we haven’t spent enough in transaction fees to have the rebase transaction mined as quickly as they would like during congestion, they are also able to execute it themselves for an even higher gas price. It’s truly a decentralized system.
Limmy
I’ll have a question about the technical specifics of how in the world it’s possible to have a daily rebase transaction that is inexpensive but I’ll pester you with that later
Unless it’s an easy one to answer and you can throw in now? :)
(Sorry to the community member here for hijacking your question)
Nick
Yes, of course :)
In short, the rebase transaction is one big transaction that distributes to several wallets. Not multiple individual transactions. The costs for this are very well minimized in the McGee token contracts. Completely scalable.
The more frequent transactions are the data update transactions on the oracle side — and that’s what we addressed in the answer above 👍🏻
Limmy
Ok thanks. I shall pretend I understand this fully.
Nick
🤣😅
Lukas | DuckDAO🐥
What kind of partnerships with different projects/platforms/protocols can we expect from Base in the future? Could you give us some examples of how other projects can leverage base protocol?
Dylan
We’ll be actively pursuing all partnerships where we see clear value / synergies. In the DeFi space, that means a lot of partnerships. Other projects can leverage the Base Protocol in numerous ways.
My favorite is BASE as a collateral asset. Refer to the Use Cases section of the website to learn more about this. It’s very likely that many platforms will want to offer BASE as a collateral asset.
Another idea is for exchanges to use BASE as a price basis for trading pairs. If a trader is speculating on an altcoin (x), he will often track price in terms of x/BTC rather than x/USD. This price reference illustrates how the altcoin performs relative to BTC rather than USD, which is the more important data for many crypto traders. If the trader instead uses x/BASE as their price basis, it would illustrate how x performs relative to the overall crypto market, rather than just BTC. The x/BASE price reference should present a valuable alternative to the popular x/BTC price reference.
There are certainly other examples — some we’ve thought about and others we probably haven’t yet imagined. There are a lot of opportunities for projects to build interesting products on top of BASE. These are just two examples, which fall outside the core use case as an index for general investors. The possibilities seem endless.
Limmy
Did you do any market research in terms of surveying potential users and what is their willingness and interest to use your products? Also, if I understand correctly your market is mostly inexperienced traders, who at the moment have quite a lot of possibilities to follow different investing strategies with services like Iconomi.
How do you intend to address that market and persuade people to start using your product?
Nick
Honestly, no. We didn’t have a formal “research” period. When this idea came to mind, we knew we couldn’t waste any time. We immediately knew that this could create huge value for the cryptocurrency space. We did some deep research to see if there were competitors, but found none. So we just got to work — full-time, little sleep, and back-to-back meetings with our friends in the industry.
Over all these meetings, we found some things to be true:
- It’s hard to find a hole in the idea.
- There are no known competitors.
- Everyone understands and loves the concept.
- People already want to buy this token.
This was enough “market research” for us to commit.
On your second question:
The market for BASE is actually a pretty even split between three demos:
- Experienced crypto traders who want to hedge.
- Institutional investors who want to diversify.
- Inexperienced people interested in crypto investing.
Inexperienced traders are just one of BASE’s addressable demos, and probably won’t be the first users. Experienced crypto traders are the primary focus.
Services you mentioned like Iconomi allow traders to copy the trading strategy of different tailored portfolios. This is valuable, however, doesn’t necessarily compete with BASE.
It’s like the stock market; sure, some investors want to invest in tailored portfolios. But the highly diversified S&P500 is and always will be a valuable tool for investors. Large-scale diversification is important because it takes out the guesswork. As an inexperienced trader, why try to figure out which crypto portfolio is the best one to invest in while updating/transitioning from one to the next? When you can easily buy BASE, and speculate on the whole industry?
To address the market of new crypto investors looking to invest through platforms like Iconomi, I can say this: we have plans to create a dedicated BASE broker site in the future. Like Coinbase, but instead of offering major blue chip cryptos, it offers just BASE, which users can buy with fiat. For a product with the mainstream potential that BASE has, this can drive large-scale adoption.
Limmy
Ok thank you very much Nick. This brings us to the end of our curated community question list!
We’ll now open the chat for those that have any further questions they wish to ask Nick, Dylan and Chris. Thank you guys so far for the very strong answers to our community questions.
Please take your pick out of any questions that are submitted and we’ll finish up once you’ve answered them or you run out of time.
To our community:
Please keep the questions concise and don’t throw a wall of text at the team — I’ll close it up again when we get a good number to choose from.
🐥
1. Please elaborate on your use cases apart from the perfect and ideal hedge option Base is going to offer to the crypto investors. If there is one innovation Base is gonna offer to disrupt the existing platforms and gain traction, what would that be?
2.From an investor’s point of view, how are we going to negate and mitigate what happened to Ampleforth after the initial moon and all of a sudden the price discovery mechanism was found way ahead of its time and we saw Red because of the lack of in depth understanding?
Nick
Check out the Use Cases section of the website!
Lots of plans for gaining traction. Through DuckDAO, we’re engaging in partnerships with several key influencers in crypto.
I can’t talk about strategies to mitigate bear action, because I can’t speak on future price performance as a founder. However, what I can say is this: AMPL experienced a big price correction after its bull run. I think this correction was just a true reflection of how much the crypto community values another $1 peg.
I believe the crypto community should value a crypto index more than they do a $1 peg. Informally, I don’t think BASE will behave the way AMPL did.
🐥
What [DeFi ecosystem] problems are you focusing on solving? What do you want to change?
Nick
We are creating an easy, simple way for people to invest in the whole cryptocurrency ecosystem with one token.
🐥
[What] is Base’s vision is to become the primary channel of investment for new/existing cryptocurrency traders and institutional investors?
Dylan
This will mainly be done through partnerships and institutional outreach on our end. BASE makes it so anyone can simply buy into the cryptp industry, which we think will be appealing even to traditional investment platforms.
Nick
The product itself will be an attractive offering for this organically. Additionally, we plan on creating the BASE broker site in the future. Basically a Coinbase but exclusively for buying BASE with fiat.
🐥
Investors seem to only care about the price of the token instead of the real value of the project, how does your team attract newcomers and keep members long-term with the project? What is the real value of $BASE?
Nick
We’ll always be actively engaging with the community as we are now! The value of BASE is that it allows holders to speculate on the whole crypto market with one token, taking out the guesswork of buying the “right” projects.
🐥
How will base protocol remain the top platform and keep pace ahead of competitors?
Nick
First mover’s advantage is huge here. Fortunately, no competitors exist yet. We’re on pace to make a big, longstanding name for BASE.
🐥
Marketing is the leading factor that helps the project thrive. So what is your strategy to attract customers and developers to Base in the long term?
Nick
Fortunately, we’ve got awesome influencers partnerships through DuckDAO. We’re going to have a really solid launch of exposure in this first quarter, no doubt!
🎉❤️👍🏻 Thank you everyone for attending the first Base Protocol AMA hosted by DuckDAO! You’re all awesome and we can’t wait for you to see what we have in store.
Limmy
Thanks again guys — this has been quite an epic session
Lukas | DuckDAO🐥
This was an awesome AMA, thank you for taking the time.
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