Blast is a new Ethereum layer 2 network that has made waves after introducing the concept of native yield. Unlike other layer 2 solutions, Blast users can earn yield paid in crypto simply by having certain tokens in their wallets.
Read on to learn about Blast, how it works, and what it is bringing to Ethereum.
What Is Blast on Ethereum?
Blast is an EVM-compatible Ethereum layer 2 platform that offers native yield for ether and stablecoins. It operates as an optimistic rollup solution to tackle scalability issues on Ethereum by increasing the network’s capacity for more transactions at lower costs.
Blast’s testnet went live in January 2024, and its mainnet launched in February. The platform, founded by Tieshun Pacman Roquerre (the creator of NFT marketplace Blur), has surpassed $1 billion in total value locked at the time of writing.
The project is different from other Ethereum layer 2 solutions as it offers native yields for both ETH and stablecoins.
How Does Blast Work?
Blast yield income for decentralized finance (DeFi) users comes from the concept of Ethereum staking. Ethereum staking is a process on the Ethereum network whereby users can temporarily lock tokens to validate transactions.
Traditionally, managing staking requires individual attention from users. However, Blast simplifies this process by handling staking on behalf of its users within its ecosystem, making it an L2 platform with native yield.
When assets are bridged to the Ethereum mainchain within Blast’s network, they are automatically staked, initiating the interest-earning process. Blast’s smart contracts facilitate the collection of this interest, which is automatically redistributed to users in the form of ether (ETH) and stablecoins.
How Does Blast Offer Yield?
Blast offers a 4% interest rate for ETH and a 5% interest rate for stablecoins like USDT, USDC, and DAI deposited on the network. These interest rates are compounded, meaning they apply to the balance over time rather than the initial deposit.
The native yield feature is powered by rebasing tokens and is based on the Risk-free Interest Rate (RFR) yield structure.
The 4% yield on Ethereum is sourced through liquid staking on the Ethereum network. After the merge, the proof-of-stake (PoS) on the Ethereum network offers a 4% APR on staked ETH. Blast utilizes this feature through partnerships with platforms like Lido, leveraging staked user assets for yield generation.
Similarly, stablecoins bridged to Blast are routed to T-bill protocols, such as MakerDAO, where they generate yields. Blast channels them to MakerDAO’s T-bill protocol, and users receive USDB on Blast. USDB accumulates stablecoin profits over time at a 5% APR, and users can redeem the asset for USDC when they bridge back from Blast.
What Does Blast Bring to the Ethereum Ecosystem?
Blast’s main aim is to enhance transaction efficiency on the Ethereum network. The layer 2 solution operates on Ethereum but doesn’t rely on the full processing power of the main chain. The move ensures that transactions remain reliable and decentralized while enhancing scalability.
The L2 also tackles asset depreciation by providing users with a “risk-free” interest rate, regardless of the coin’s value. By providing both ETH and T-Bill yields, Blast ensures users receive benefits similar to those on the mainchain but adds optimistic rollup services and other layer 2 network scaling solutions.
Compared to Ethereum’s core network, which can only process roughly 15 transactions per second, Blast can process thousands of transactions per second by grouping them together. Thus, transactions can be confirmed more quickly, resulting in a more responsive and seamless user experience.
The Blast Airdrop
To participate in the airdrop, users need to obtain an invitation link from their peers through a referral. Users can then register on the airdrop page to claim their sign-up reward. Registered participants can unlock additional rewards by bridging assets to the platform or inviting other users.
Notably, airdrop points are granted based on the value of assets bridged and the number of users successfully referred.
While the bridge to Blast is operational, participants in the airdrop campaign can only redeem their accumulated airdrop points beginning May 2024. Part of the airdrop is designated for Season 3 of Blur participants.
Furthermore, part of the airdrop is set aside for developers, particularly winners of the Big Bang contest and mainnet dApps. Developers can reallocate their airdrop points to users, thus enhancing liquidity and expanding the user base.
Challenges and Controversies Associated With Blast
The crypto community has raised some questions regarding the project’s operations and the validity of its promises.
Blast’s holding contract for deposited assets is safeguarded by a multi-signature mechanism involving five participants. At least three of these participants must consent to approve any withdrawal request. However, the identities of these five participants remain undisclosed, as the project founder operates under a Twitter pseudonym. Furthermore, the criterion for signature approval remains unclear.
Furthermore, questions have been raised regarding the rebase structure and the native yield arrangement. While Blast developers and project partners have strongly supported the project, comments on the rebase token design suggest differing opinions on its feasibility and efficiency.
The network’s security has also recently become an issue. Munchables, a GameFi platform operating on Blast, disclosed recently that it experienced a security breach resulting in a loss of $62 million. Additionally, an associated vault on Juice Finance avoided a $25 million loss due to a typographical error.
However, unlike other hacks, the hacker lacked leverage due to Blast’s multiple centralized components, which eliminated any chance for the attacker to attempt to launder the stolen funds. Eventually, the attacker relinquished control of the private keys.
Conclusion
Blast has gained traction, achieving a total value lock (TVL) exceeding $1 billion. The network aims to transform the crypto and gaming industries by providing a layer 2 solution with native yield.
However, the project is still in its early stages and has much to prove, including liquidity efficiency and native yield arrangement over time.
