Base's Tokenization Initiative Sparks 95% Crash, Criticism

Coinbase’s Ethereum Layer 2 (L2) chain, Base, has come under scrutiny for its content-tokenization initiative following the rapid rise and fall of its first auto-converted ERC-20 token on Zora. On April 16, a simple post by Base titled “Base is for everyone” was automatically converted into an ERC-20 token. Within minutes, speculative trading drove the token’s market capitalization to over $17 million, only to see it collapse by approximately 95%, wiping out more than $15 million in value in a classic liquidity trap. The token later exhibited a remarkable recovery, rallying above $0.021 before slightly pulling back to around $0.011 against Wrapped Ethereum (WETH) at press time on Uniswap.

The rapid descent fueled harsh criticism, particularly on social media platforms, where users accused Base and its parent company Coinbase of irresponsibly endorsing what many perceived as a pump-and-dump scheme. On-chain analysis revealed that three wallets amassed significant positions ahead of Base’s official post and offloaded them shortly after, seizing roughly $666,000 in profits. Additionally, data from DEXScreener indicated that volume bots contributed to the token’s meteoric rise and equally rapid fall, intensifying losses for unwary retail investors.

In response to the criticism, Base issued a statement clarifying that it did not create or directly endorse the token, noting it was automatically minted by Zora’s protocol and explicitly disclaiming any official affiliation. The Zora token page itself warned purchasers that the token carried a high risk of loss and was intended solely for creative experimentation rather than investment returns. Despite these disclaimers, many community members lamented that Base’s public posts lacked sufficient upfront communication to protect traders from extreme volatility.

Critics, including AP Collective CEO Abhishek Pawa and Alon, co-founder of Pump.fun, argued that tokenizing social posts without clear guardrails could inflict real harm and erode confidence in emerging contentcoin models. Pawa described the rollout as “disastrous,” while Alon expressed concerns about the potential for market manipulation and the need for clearer guidelines. Jesse Pollak, a creator on Base, defended the initiative as a necessary step toward normalizing on-chain content creation, likening tokens to the content they represent in a novel marketing paradigm. Pollak highlighted that Base could retain 10 million of the one billion tokens as creator rewards but pledged never to sell them, with generated fees earmarked for developer grants.

In the wake of the incident, Base announced a second drop, “we coined our FarCon poster on zora,” before going ahead to drop the third, underscoring its commitment to the contentcoin vision. However, skeptics remain unconvinced, pointing out that novelty alone cannot justify exposing participants to unchecked market swings. The episode has sparked broader conversations about the responsibilities that influential Web3 projects hold when experimenting with token-based innovations. Social media sentiment analysis shows a prevailing tone of frustration, with many users calling for standardized disclaimers and real-time risk alerts. Some veteran crypto influencers proposed creating industry guidelines for contentcoin drops, advocating for transparency in token distribution and owner control.

Meanwhile, Base continues to update its community via social media threads, sharing lessons learned and operational metrics from the experiment. The Base team has emphasized that on-chain content tokenization is a long-term play aimed at fostering deeper engagement and revenue possibilities for creators. Critics, however, insist that experiments must be structured to minimize downside for retail participants, or risk alienating the very audience they seek to engage. As the dust settles, Base’s experiment remains a cautionary tale of how rapidly emergent tokens can enthrall and then devastate traders without proper oversight. Proponents argue that every public experiment generates invaluable data that will refine the future of on-chain content monetization. However, Base must balance its pioneering ambitions with the imperative to demonstrate responsible stewardship over token-based experiments. In coming weeks, industry bodies may propose voluntary best practices for on-chain token experiments to safeguard both innovation and investor interests.