Learn more about Blast, the new Ethereum layer-2 network founded by Blur's Pacman, which already has over $600 million in total value locked after launching in less than a week.
TLDR
- Blast is a new Ethereum layer-2 blockchain launched by Pacman, founder of NFT marketplace Blur
- It has attracted over $611 million in deposits in just over a week through a "lockdrop" campaign
- Blast offers yield on assets bridged to it through staking and lending protocols like Lido and MakerDAO
- Users earn reward points for actions like referring friends which will be redeemed for a token airdrop in 2024
- Controversies surround Blast: No actual L2 chain yet, funds locked in a multisig contract; Campaign mechanics resemble a pyramid scheme; Reliance on Lido centralizes ETH staking; Investor Paradigm has also criticized the launch and marketing
- Remains to be seen if Blast can compete with other L2s when its mainnet launches in February 2024
On November 21, Crypto Twitter was flooded with referral links to a brand new Ethereum Layer-2 (L2) blockchain. Funded to the tune of $20 million by Paradigm and Standard Crypto among others, Blast’s launch took the crypto community by storm.
This was in part due to the L2 being founded by Pacman — the MIT dropout who launched NFT marketplace Blur, which overtook OpenSea in market share. However, the hype was largely due to what is essentially a “lockdrop” — users who bridge ETH over to Blast and complete other actions like referring new users earn reward points, which eventually are converted to a token airdrop.
In just over a week, Blast has already garnered a whopping $611 million in deposits, surpassing the total value locked (TVL) on Coinbase’s L2 Base, which launched earlier in August.
But this caused concerns within the crypto community — even from lead investor Paradigm. What exactly is Blast, and what are the controversies? Let’s dive into it in this article.
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What Is Blast?
Launched by Blur founder Pacman, Blast was designed with the belief that markets, and hence liquidity, will move towards places with the highest yield.
More specifically, Blast believes in leveraging the concept of risk-free yield, a term which also drew controversies, to attract users to its chain. In the traditional finance world, the risk-free rate refers to the yield derived from short-term treasury bills.
According to Pacman, this has come to refer to the staking yield derived from ETH staking. In fact, ETH staking has grown so significantly that it has since become the largest DeFi subsector, hoarding $26 billion in TVL across more than 120 protocols.
Blast takes this one step further, to bring the risk-free yield natively to the L2 level, granting to their users native yield on assets bridged onto the chain. Put simply, ETH held on Blast will automatically compound based on the ETH staking yield, currently 4%, directly to the user’s wallet.
Where Does the Yield Come From?
When users bridge ETH or WETH tokens onto the chain, these ETH tokens are staked on the Ethereum mainnet starting with the leading liquid staking protocol, Lido Finance. Through Lido’s rebasing mechanism, yield is passed to users on the L2. The current advertised yield for ETH deposited is 4%.
Stablecoins are also available, with USDC, USDT and DAI available as options. These stablecoins are deposited into tokenized treasury-bill products, starting with MakerDAO. In return, depositors receive Blast USD, USDB, and a 5% yield on their assets. USDB will be redeemable for USDC once it is bridged back to the Ethereum mainnet.
Of course, there’s just one thing: all deposits are locked for three months in a bridge contract until February 2024, when the Blast mainnet is expected to launch. Everyone knows that three months in crypto is an eternity though, which leads us to Blast’s airdrop and reward model.
Blast Rewards and Airdrop
Blast is currently in Early Access with new users requiring an invite link to begin depositing into Blast. However, fret not, several whales and influencers have already received “unlimited” invite links, which can be used more than once, making it trivial for new users to access the platform.
Once users connect their Twitter and Discord accounts, they will receive an initial set of points based on their wallet’s historical activity. Holders of the BLUR token as well as NFT traders on Blur will also be granted Blast points during Blur Season 3, which will last from November 2023 to May 2024. Finally, additional points will be granted based on the deposits made to the platform, with larger deposits yielding more points.
Users get one free spin to earn extra points and another if they make a tweet about Blast from their connected Twitter account. Based on their deposited amount, users will also earn additional spins, with every 1 ETH worth of deposits earning one spin per week.
Once users have onboarded, they will be granted invite links to let their friends enter the platform too. Each of your direct invites will earn you an additional 16% bonus points on the points they earn, and the direct invites of these direct invites will earn you an additional 8% in bonus points on points they earn.
Moreover, your direct invites form a squad, whereby the total deposits of your squad are combined towards a squad goal. At milestones such as 5 ETH, you will unlock more invite links as well as a chance to spin for improved luck. This luck percentage determines your chances of hitting a “Super Spin” in your regular spins, which grants 10x the normal rewards. In short, the bigger the whales you invite, the more points you are likely to receive.
The points received from deposits, spins and squad activity are expected to be redeemable in May 2024.
Controversies Surrounding Blast
However, since the launch of the Blast airdrop campaign, the project has drawn significant concerns for several of their decisions.
The first major criticism is the lack of an actual L2 chain. Although the Blast campaign markets the process as bridging onto Blast, there is no actual chain to bridge to and users are simply sending funds into a smart contract which is controlled by a 3/5 multi-signature wallet. This means that if three of the signers on the wallet are compromised, user deposits on Blast’s smart contracts could technically be drained away. Alternatively, simple collusion could also achieve the same effect.
Moreover, although there are five signers on the multisig, four of the five were actually funded by the same wallet, leading many to suspect them being owned by the same person or entity. If they were indeed controlled by a single entity, this makes it easy for a malicious actor to compromise the multisig via a single point of failure through phishing.
Source: @1kbeetlejuice (link)
A third criticism of the campaign was how closely it resembled a pyramid scheme, with many lamenting the state of the industry along with the project. Some defended it however, believing that it was no different from most other projects, with the benefit that at least they were upfront about the degenerate nature of the campaign.
Another point of contention arose due to the Blast team solely relying on Lido Finance for the ETH staking yield. The move would further increase the centralization surrounding Lido’s share of ETH staking, which has already been discussed multiple times earlier in the year as a risk for the network as a whole.
In fact, Paradigm also later came forward to make a statement echoing the disagreement with the way Blast was launched and marketed, specifically the locked deposits and the launch of a ‘bridge’ contract before the L2 existed.
Conclusion
With the markets heating up and investors chasing the next hot narrative, Blast is continuing to attract attention, and funds, from the crypto community. Furthermore, the layer-2 space is becoming increasingly competitive, with numerous layer-2 mainnet launches from Consensys, Coinbase, BNB Chain, ZkSync and more.
With the current success of Blur’s vampire attack on OpenSea, could Pacman execute the same playbook with Blast on leading L2s Arbitrum and Optimism? Time will tell when the layer-2 network launches in February 2024.
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