The latest Ethereum ‘layer 2’, Blast, has amassed over $570 million worth of crypto assets from over 64,000 wallets. Blast claims that it will generate returns through the staking and trading of real-world assets (RWAs). It advertises annual interest rates of 4% for ETH or 5% for stablecoins.
The catch? Investors cannot withdraw their deposited assets until February, when Blast says it will launch its bridge. Until then, Blast is handing out “Blast Points” for abandoning or referring new users. It says holders can redeem the Blast points for an airdrop sometime in May.
To generate these returns, the company has moved its deposits into third-party protocols, primarily on the Lido and Maker DAOs.
Yes, Blast has real assets, but it doesn’t even have a functional testnet. New users may only deposit (bridge) assets, access Blast’s “early access airdrop” and access a referral system with an invite code. Blast’s testnet won’t go live until January.
Blast removes a pyramid-shaped diagram from its website
Observers were skeptical. At worst, Blast comes across as a referral pyramid scheme. At best, you could easily wonder why users wouldn’t just bet directly with Lido or Maker, rather than going through extra steps to stick with Blast for a few months. Again, Blast won’t even have an operational bridge on the mainnet to accommodate its assets until (hopefully) February.
Wait, I Thought This Was a Meme, But This Is a Real Diagram of the Blast L2 Invite System
Bro, it’s a real pyramid scheme
pic.twitter.com/6eWlju3jiL
— Tytan.eth (@Tytaninc) November 21, 2023
“You get points when your invites get points and their invites get points,” read an archived diagram from Blast’s website in the shape of a pyramid rotated 90 degrees. Blast advertised up to 16% referral points for a member’s referrals and 8% for referrals from referrals.
Earning revenue from referrals is obviously the hallmark of a multi-level marketing program.
Blast’s Ethereum worth half a billion
Despite all these concerns, resources continue to flow into Blast. As of November 23, it had $225 million in invested assets, making it the seventh largest holder of sETH at the time.
Today, just five days later, the stETH position has doubled to $500 million. Incredibly, Blast’s holdings make it the third largest sETH holder in the world, surpassed only by Aave and Lido themselves.
Some have questioned the source of the Protocol’s assets. One skeptic questioned whether most deposits constituted meaningful new liquidity. He claimed that investors were likely to “simply moving money from one L2 or Ethereum Virtual Machine protocol to the next… We all know how this usually ends.”
Despite the skepticism and apparent lack of infrastructure or documentation, Blast caught Paradigm’s attention. Despite claims that Paradigm supports the project, Paradigm research head Dan Robinson clarified that it “does not endorse” many of Blast’s practices.
Read more: ChainArgos: Coinbase’s Layer 2 Solution Base Could Violate Federal Laws
The anonymous founder of Blast goes by @PacmanBlur and previously co-founded the NFT marketplace Blur. Other pseudonymous staffers include ‘CL’, ‘DegenSpartan’, Andrew Kang and ‘Santiago.’
There was some doubt that four of those five people even existed. Indeed, the crypto industry has a long history of developers using sockpuppet accounts. For example, once last year only two brothers controlled $7.5 billion of Solana’s total worth of $10.5 billion (TVL) by their legion of sock puppets.
In the case of Blast, some skeptics believe that one person appears to be driving most of the business on the multisig and escrow contract.
Blast has invested more than half a billion dollars in Ethereum and has not yet launched its testnet. Naturally, many investors are cautious. Even Coindesk published a story where Blast questions whether or not it is a pyramid scheme.
