Wannabe L2 Blast arrives on the scene promising high ETH returns – in 3 months

A new layer 2 combination of Ethereum, announced Monday, has already attracted $27 million in total value (TVL), but there’s a twist: it doesn’t exist yet.

The promised network, Blast, was supposed to launch in February 2024 as an optimistic update, but backers immediately started asking for deposits into a smart contract “bridge.”

In the space of half a day, the contract has collected enough ether (ETH) and dai (DAI) to place it at number 16 in L2Beat’s TVL rankings, ahead of established names such as derivatives DEX Aevo and Arbitrum Nova.

The announcement touts Blast as “the only Ethereum L2 with a native return for ETH and stablecoins,” meaning it leverages Ethereum staking proceeds by sending all ETH to Lido and uses DAI to leverage the growing returns on U.S. government bonds from MakerDAO can be used via the Dai Savings Rate (DSR). ), currently 5%.

Blast’s development team, led by pseudonymous Blur co-founder Pacman, raised $20 million from venture capital firms Paradigm and Standard Crypto, along with a motley crew of angel investors and crypto influencers.

Initial reactions focused on the one-way nature of the ‘bridge’: once you’ve crossed, you can’t leave until Blast has actually launched and recording has been made possible.

Normally, a bridge allows assets to flow in both directions. This contract is apparently managed by a wallet with five keys and multiple signatures. However, of the five addresses, one contains no ether and has no transaction history, and the other four were recently funded by a single address.

This casts doubt on the independence of the signatory cohort.

Blockworks has contacted Pacman, Paradigm and Standard Crypto for clarification.

The use of Lido has drawn the ire of members of the Ethereum community concerned about the centralization risk of staking providers, including Dankrad Feist, who called it “a very bad idea” on X.

“ETH and liquid staking derivatives are different assets with different risk profiles (and rewards), and users should have a choice as to which one to use,” he said.

It shouldn’t be a surprise since Paradigm is an investor in both Lido and Blur.

Critics also question the use of a multi-level marketing-style referral campaign, which awards points of unknown value to incentivize sending invitations to potential new users.

The site explicitly promises an airdrop based on Early Access participation. The points earned are expected to be redeemable in May 2024.

Points systems are increasingly used as a growth bootstrapping mechanism by protocol developers (including Pacman’s earlier marketing of Blur) and are widely seen as a precursor to an airdrop or anything else of value.