Coinbase in hot water over $12 million ‘content coin’—but exec tells haters to lean in

By / / Business / 4 minutes of reading

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U.S. crypto exchange Coinbase launched a memecoin. Or rather, its subsidiary issued a “content coin.” Or maybe it just posted “on-chain” content? The distinctions are slippery but, however one defines Coinbase’s actions, the response from the crypto industry has been withering—and put the publicly traded company on the defensive.

The controversy began on Wednesday when the social media team for Base, Coinbase’s blockchain, posted a picture that read, “Base is for everyone,” on Zora, an NFT platform that has pivoted to memecoins. When Base posted the image, Zora created a linked cryptocurrency, which soon rocketed to a market capitalization above $14 million before crashing to $1 million. It’s since rebounded to more than $12 million as of Friday evening, according to Dexscreener.

Crypto industry commentators alleged that the token launch was a “pump-and-dump” scheme, or when influencers push—or ”pump”—up a cryptocurrency’s price only to sell—or ”dump”—the token for profit. “Base will never sell these tokens, and ​​these are not official network tokens for Base, Coinbase, or any other related product,” Coinbase said in a statement. So what exactly happened—did Coinbase actually launch a memecoin? And why are folks so angry? Here’s a guide to the controversy:

What is Zora?

Founded in 2020, Zora was originally conceived as an NFT platform where users could turn images into non-fungible tokens others could buy and sell. But, as the NFT market dried up, Zora pivoted to memecoins, or cryptocurrencies that have no utility and have been traditionally based on online jokes.

Memecoins have become all the rage in crypto, so the pivot, which occurred in late February, made sense. “Zora is a social network where every post is a memecoin,” Dee Goens, the cofounder and COO of the startup, told Fortune in a statement.

The company issues its memecoins on Base, a layer-two blockchain built on top of Ethereum that Coinbase has promoted and developed. So, Jesse Pollak, a member of the Coinbase executive team who heads the company’s Base division, began to experiment with the platform.

He made a series of posts on Zora over the past six weeks that generated their own cryptocurrencies, including a picture of granola and an AI-generated image of a baby. “I totally agreed with that change,” Pollak told Fortune, in reference to Zora’s transition from NFTs to memecoins, “because it lets creators monetize better and lets them go viral faster.”

What’s a ‘content coin?’

On Wednesday, the corporate account for Base, not just Pollak, experimented with Zora and effectively launched its own memecoin, or what Pollak called a “content coin.” The term, he said, refers to cryptocurrencies associated with online media whose price can be interpreted as a reflection of a post’s popularity.

“It’s not just creators who are individuals who deserve to benefit from these technologies,” he said. “It’s also brands.”

Traders soon bought up the “content coin” from Base. “People just thought it was a memecoin, and if there’s an official memecoin launched by Coinbase, or Base, under that big brand, that everyone knows and loves, that is going to be the sole focus,” Alon Cohen, the cofounder of the memecoin launchpad Pump.fun, told Fortune.

However, traders were mistaken that the memecoin would be Coinbase’s “sole focus.” Base made another post on Zora that generated another cryptocurrency, which prompted the original token’s price to plummet. 

After reeling from one memecoin debacle after another, some in crypto’s very online community felt a sense of deja vu. “When they launched the second coin, people felt quote, unquote rugged, and that’s what was reflected in the chart,” said Cohen, referring to “rug pulls,” or when scammers hype up a crypto project only to disappear after cashing out victims’ money. 

What now?

The token’s price, however, recovered, and Pollak said the outrage was misplaced. Coinbase didn’t profit off the token launch, has no plans to sell its memecoin holdings, and is just experimenting with new technology. “This is just for creativity,” he said.

Cohen, whose company Pump.fun has become the standard bearer for memecoins, said he didn’t believe Coinbase and Pollak were acting maliciously. “They just didn’t understand the market as well as they should have, and what they should have done,” he concluded.

Despite the backlash, Pollak remains undaunted. He believes “content coins” are the future for online media. And on Friday, he continued to post on Zora. His most recent “memecoin”—or “content coin”—was connected with a screenshot of one of his recent X posts. “Base is for everyone,” it read. “Even the haters.”

This story was originally featured on Fortune.com



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