The $BASE token will likely be a combination of $AERO and $ZORA tokenomics. $BASE holders will vote escrow the token to direct the network fees as liquidity incentives to pools that use $BASE as quote currency. This solves 2 big problems: 1) The growth of the L2 networks remained tied to ETH rather than the L2 tokens 2) Coinbase can sit back and grow the economy of Base and decentralize it without needing to rent seek ------------------------------------------------------------ The crypto bros have long midcurved the value accrual narrative of L1 assets by arguing that the main driver is transaction fees. This is just pure midcurvery and has an inherent mathematical dilemma built into it. ETH and SOL have a monetary premium and are tied to the growth of their networks because they are the quote currency on their ecosystems. The quote currency is the second currency in a trading pair — i.e. how most AMM pools are $TOKEN/$ETH pools on EVM chains. As tokens are launched on these chains, ETH and SOL need to be locked up in AMMs against these tokens in order to create trading liquidity for those tokens. This is a sizable amount of tokens — much larger than transaction fees. The flywheel is that as the economies of these chains grow, the tokens grow in number and size so they will require more ETH and SOL against them in AMM pools to grow their liquidity. Onchain, the medium of exchange is the quote currency. Users can pay and get paid in any asset that they like, as long as there is a path for swapping these two tokens for each other. These paths are through the quote currencies. The store of value and unit of accounts are downstream of medium of exchange. So, an asset is ‘money’ to the extent of its liquidity against other assets that you interact with. ------------------------------------------------------------ Until recently, this was not a well understood dynamic. The Virtuals team broke this into zeitgeist and then Zora ended up building their tokenomics around it too. Zora pairs the posts against creator coins and the creator coins against $ZORA putting a demand on $ZORA as the posts and creators grow. ------------------------------------------------------------ The main challenge that the L2 tokens face is that ETH is still the quote currency on these L2s. So as the economy on these chains grows, it doesn’t tie back into the L2 token. If the Base team is interested in tying the growth of the Base economy directly to the $BASE token they know to look for ways to incentivize the use of $BASE as the quote currency. Network fees could be directed as liquidity rewards to the pools that choose to use $BASE their quote currency. This incentivization of the pools can be directed by $BASE holders. Although the Aerodrome implementation of the vote escrow model is the most successful one, the most vivid example of the sort of demand that this model can create for the tokens is the Curve Wars when so many DeFi protocols were fighting for liquidity incentives on their pools by buying and locking up their own CRVs. ------------------------------------------------------------ Implementing this system means that Coinbase can decentralize Base and not have to worry about rent seeking the network. As likely the largest $BASE holders they will be a direct beneficiary of the growth of the onchain economy on Base. Coinbase has a similar incentive structure with the other significant token on Base, $USDC. As more $USDC comes to Base for payment personal finance use cases Coinbase will collect the yield on the underlying treasury bills via an agreement with Circle. It’s important to note that $USDC is the preferred quote currency for RWAs.