Why builders should bet on crypto’s silent phase

This article summarizes an episode of Y combinator’s video series featuring Jesse Pollak, VP of engineering of Coinbase and also founder of Base.

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Crypto has yet to hit the mainstream, which is exactly what makes it such a good opportunity for builders. That’s the view from Jesse Pollak, founder of Base, an Ethereum-based network developed by Coinbase.

Pollak observes the industry is moving from building infrastructure to creating new applications. This pivot creates opportunities for different kinds of financial products while also building the foundation for the economy that artificial intelligence will need.

Crypto’s true opportunity is its current lack of mainstream appeal

Unlike past technology waves that captured public attention, crypto has emerged while the public remains cautious or unaware, meaning its largest market opportunities are still untapped.

Unlike AI, crypto has not yet had a mainstream “magic moment”
Pollak disagrees with the idea that crypto is having a “ChatGPT moment”. “If you ask a friend or family member, I don’t think they’d say, ‘oh yeah, I have had a magic moment with crypto.’ I think instead they might be fearful. They might not actually know what crypto is doing on a day-to-day basis. And the thing that’s powerful about that is, that’s the best time for us to be building.” 

The industry is pivoting from building infrastructure to creating applications
Pollak argues that crypto has entered a “golden age” where the focus has changed. “We finally have the tools and now it’s about entrepreneurs coming in and saying how do we use these tools to make 10x impact for businesses, or to build new consumer experiences that were previously completely impossible.”

The industry has moved from dial-up to broadband

This shift from infrastructure to applications is a direct result of a change in the technology’s economics. The biggest factor has been reduction in transaction costs, which has opened the door for business models that were previously unviable.

Previous economic barriers to building on-chain have been eliminated
Pollak explains that five years ago, a US$5 transaction could cost US$5 in fees, making consumer applications unworkable . “Those costs have come massively down… now you can build those applications and instead of it costing US$5 to do something, it costs five-tenths of a cent or five-hundredths of a cent. And that opens up the aperture of what’s possible.”

This cost reduction is analogous to the internet’s shift to broadband
Pollak notes, “and we think about this as the broadband moment for crypto where when we were in dialup of the internet you couldn’t have the applications that exist today and then gradually we scaled the throughput scaled the bandwidth and that led to these new breakout experiences that really powered the growth of the internet.”

Localized digital currencies will empower regional economies

This low-cost infrastructure has made dollar-backed digital currencies, known as stablecoins, a popular application outside the United States. While providing global access to a stable asset is an advance, Pollak notes it also creates economic tensions for local markets fearing “dollarization”.

Dollar stablecoins offered a significant improvement for global users
Pollak argues, “previously prior to stablecoins if you were an entrepreneur outside of the US… you actually didn’t really have a way to access dollars… you were cut out of accessing the dollar system that actually did work pretty well. And so I think the first big unlock that stablecoins has done is basically said ‘okay now everyone in the world can access dollars.'”

However, reliance on the dollar creates fear of economic displacement
Pollak continues, “as I’ve talked to regulators and businesses in countries around the world, so many of them have excitement about dollar stablecoins because they solve an immediate need… At the same time… there is an intuitive feeling of, ‘oh man, we have our own local economy and we don’t want that economy to be dollarized, right?'”

The solution to “dollarization” is already emerging from local entrepreneurs
Pollak observes that entrepreneurs in many countries are now creating stablecoins for their own currencies, giving examples such as a “Brazilian Real currency” and a “Nigerian Naira currency”.

AI agents require a new type of financial infrastructure

Crypto will serve as the trust layer for an AI-driven world