Blast, a novel Layer 2 (L2) solution for Ethereum, is making waves in the crypto space. Although still in its Early Access phase, Blast has achieved an impressive Total Value Locked (TVL) of $620 million, surpassing Base and closely trailing industry heavyweights like Solana and Avalanche. This rapid growth prompts questions about what sets Blast apart and raises concerns about the project’s viability.
Ethereum relies on Layer 2 solutions, known as “L2s,” to scale transactions beyond the limitations of its main chain. Popular L2s, such as Arbitrum, Optimism, and Base, use rollups to process transactions on a secondary layer tethered to the main chain.
Enter Blast, the Optimistic Rollup that went live on November 21st. Within just over a week, Blast achieved a TVL of $620 million, positioning itself competitively among established blockchains. While still trailing Arbitrum and Optimism, Blast outpaces Base from Coinbase, highlighting its potential.
Blast attributes its success to a unique feature: native interest payments on Ether and stablecoins. In a Twitter announcement, Blast emphasized that it is the sole L2 offering such interest payments.
The concept revolves around providing returns for assets, particularly risk-free interest rates. Blast contends that Ethereum has its version of risk-free interest through ETH staking, offering 3-4% returns. Other L2s like Arbitrum and Polygon, however, provide a 0% base interest rate, causing assets to depreciate over time.
To combat this, Blast introduces “yields.” Users staking Ether on Blast automatically earn interest, while stablecoins like USDC, USDT, and DAI gain interest through on-chain T-Bill protocols like MakerDAO. This approach aims to prevent the depreciation of assets due to Ethereum’s inflation.
Blast’s model has proven successful, attracting 66,790 users who collectively deposited around $620 million during the Early Access phase. Despite the invitation-only access, Blast has quickly become a prominent player in the L2 landscape.
However, concerns have emerged, primarily centered around Blast’s co-founder, known as “PacMan,” a 24-year-old developer with a history of successful ventures. Some critics label Blast as an “unregulated hedge fund,” questioning its acceptance of funds from U.S. citizens with pyramid scheme-like incentives.
Trusting this 24 y. o. guy (PacMan, real name Tieshun Roquerre) with almost $500M now in an unregulated hedge fund (aka Blast) taking funds from US people with pyramid-like incentive schemes.
You are crazy people, even after yesterday’s manipulative twitter thread. Today we… pic.twitter.com/WJGyNMJcu9
— Lukas Kozak (@lukas_kozak_) November 25, 2023
Even Paradigm, Blast’s investor, expresses skepticism, citing concerns over Blast’s messaging and execution. The decision to launch the bridge to Blast before the rollup goes live, coupled with a three-month withdrawal restriction, has raised eyebrows.
There are a lot of components of Blast that I’m excited about and would be interested in engaging with people on. That said, we at Paradigm think the announcement this week crossed lines in both messaging and execution. For example, we don’t agree with the decision to launch the…
— Dan Robinson (@danrobinson) November 26, 2023
While Blast is not yet live, the ability to use the bridge prompts caution. Transferring assets to PacMan and his co-founders for interest payments resembles an “unregulated hedge fund” model, sparking debates about best practices within the crypto community. Despite the skepticism, the demand for L2 solutions with base interest rates may become an inevitable trend in the medium term.