On November 21, the founder of NFT marketplace Blur, Tieshun Roquerre (also known as Pacman on socials), announced the development launch of a Layer 2 solution for Ethereum scaling called Blast.
The project immediately made noise within the community. In less than a week, its total value locked (TVL) exceeded $550 million.
However, aside from the sweet sounding prospects for early entrants, Blast has some red flags. Let's take a look at the project, its criticisms, and the developers’ response to them.
Layer 2 networks, or just L2, is a collective term for Ethereum scaling solutions. Essentially, these are blockchains built on top of Ethereum to conduct part of the transactions, thus to take the load off the main blockchain. Such networks are less secure and less decentralised. The most famous ones are Optimism and Arbitrum.
What’s preceded the Blast development: briefly on Blur
Blur is one of the largest and youngest NFT marketplaces running on Ethereum. It was launched in October 2022, and quickly caught the attention of users with the promise of a BLUR token airdropping for early joining.
The main features of the marketplace are transaction speed, catchy interface, and aggregation of offers from other marketplaces. You can buy NFTs from OpenSea, LooksRare, etc. directly on the Blur site. It also offers a user-friendly analytics interface, which has resonated with a professional audience.
According to The Block, Blur shot to the top spot in terms of NFT trading volume on Ethereum and has steadily held it.
BLUR is a governance token that was launched in February 2023. Currently, the asset is trading at around $0.52 and ranks 76th among the cryptocurrencies, with a capitalization of $566 million.
On November 21, the second season of Blur Airdrop ended. The marketplace distributed 300 million tokens, the total value of which was about $146 million at that time. Despite the increased amount of circulating supply, the price almost doubled from $0.3256 to $0.6489 in three days. However, in the last five days, the price has fallen by almost 20%.
If you missed the airdrop but still want to become a part of the Blur community, especially while the prices are low, you can buy the token. Use the itez widget with its user-friendly interface to buy BLUR via bank card, SEPA, or Google Pay, and get the coins in less than five minutes.
Blast's intended purpose: NFT market increment and dApps liquidity usage
On November 21, Blur founder mentioned several reasons why he started developing Blast. They all have to do with the prospects for the NFT market on the one hand and the liquidity of decentralised applications (dApps) on the other.
Pacman considers two big opportunities for NFTs: reducing transaction costs and attracting institutional players with the help of "NFT perps" (similar to perpetual futures on crypto, they allow you to bet on the rise or fall in value, but in this case, NFT collections). Such solutions already exist but are not yet particularly popular.
As for dApps, he mentions the problem with an inefficient TVL. Total value locked reflects the value of all assets locked in smart-contracts while using any dApps. The thing is, they just stay there without generating yield, e.g. in the NFT marketplace Blur the TVL is $100 million, and nothing happens with that amount of money. His solution is to stake this unused liquidity and share profit with users.
As a result, he concludes that an L2 solution is needed to solve the above issues. As the creator of Blur, Pacman primarily focuses on how this will help his marketplace to "avoid asset depreciation, reduce NFT transaction costs, and launch NFT perps". Also, other developers will be able to run their dApps on this blockchain.
Along with this, Tieshun Roquerre announced the start of development of such an L2 solution called Blast with a new team.
What is Blast: backed by venture capital funds and influencers, allowing tokens staking and point farming
The Blast's website states that the team have raised $20 million from venture capital funds and various crypto influencers. It mentions, among others, the famous Paradigm fund that had also invested in Blur, as well as the popular influencers on X, including Andrew Kang, Hsaka, and Larry Cermak, CEO of The Block.
At the moment, there is only one activity available on Blast for regular users. After receiving a referral code from another participant (initially, the codes were given out by large influencers, but now they can be given out by any participant), everyone can lock their funds on a special smart contract until February 2024.
The following tokens can be staked: ETH, USDC, USDT, DAI, and stETH. The interest rate for stablecoins is 5% per annum. For ETH and stETH, it is 4% per annum. In addition to staking rewards, users also farm points, which can be exchanged for Blast tokens in the future.
The exchange rate of points to future Blast tokens and the tokenomics are still unknown. According to the roadmap, the blockchain launch will be in January; funds in staking will be unlocked for withdrawal in February; an airdrop of Blast tokens (an exchange of points for tokens in this case) will start in May.
Why the Blast network hit $550M TVL with no product
In pursuit of airdrops, users started actively blocking their funds. Here are the current stats:
📈 TVL stands at approximately $568 million;
👥 Funds have come from over 64,000 different addresses;
💰 The largest single transfer is 15,000 stETH (approximately $31 million).
The distribution of funds by token on Blast can be seen on Dune or in the screenshot below. Remarkably, more than 80% is accounted for ETH and stETH. This imposes additional risks for users: there is a possibility that ETH will fall in value by the time funds are unlocked in February.
The network effect is paying off: users are actively promoting their referral links, which give bonuses when farming points. However, with the growing hype and recognition, Blast has also received criticism within the community.
What's wrong with Blast
Some members of the industry have made threads on X with technical analyses of Blast. We have made a compilation of the main claims based on tweets from analytics platform L2BEAT, Polygon engineer Jarrod Watts, founder of blockchain security firm SlowMist, and Paradigm Venture Fund researcher Dan Robinson.
1️⃣ Blast is believed to be a Ponzi scheme without bridge, blockchain, and testnet version
Ponzi is a financial scheme that lures market players and pays out profits to earlier investors at the expense of later ones. Even a spokesperson from Paradigm Fund, which invested in Blast, said that the foundation does not share this approach, when funds are raised and locked until a working product is available.
2️⃣ Blast is accused being a centralised project governed by Paradigm Fund
Blast is a fairly centralised agent that collects liquidity, stakes it elsewhere, promises people unlocked funds, a portion of the taking rewards, and points for which a token is promised in the future. Basically, to get rewards, people entrust funds to 3-5 strangers who promise income in a few months.
3️⃣ Blast smart contract is considered modifiable, which carries security risks
At the moment, people are blocking their funds on a "contract guarded by a 3/5 MultiSig". It is necessary for upgrades and bug fixes. However, at any time, owners can transfer users' funds to their address or change the logic of the smart contract.
"3/5 MultiSig" means that the smart contract is managed from five addresses, but to make any changes to it or to make a transaction, you need the consent of three of the five owners.
Moreover, the owners of the smart contract are publicly unknown. The developers promise that this smart contract will become a bridge to transfer funds from Ethereum to Blast later.
This all caused a lot of negativity on socials, with users waiting for answers.
Blast responds to criticism
On November 24, Pacman responded to some of the FUD that has arisen around Blast on his X.
1️⃣ The founder refuted accusations that Blast is a Ponzi scheme. The returns are taken thanks to the LIDO and MakerDAO protocols. A smart contract on which users block funds restake tokens on these protocols, thereby receiving and sharing the yields.
He also said that there is nothing wrong with the referral system, because it encourages those who came early and additionally rewards those who benefit the ecosystem and build communities. Moreover, these rewards are not paid out in funds contributed by new members.
2️⃣ Pacman stated that Paradigm is not responsible for the launch of Blast. The fund only provides advisory support and does not influence the actions of the developers. There may be disagreements, but the team has the final say.
3️⃣ The same day, Blast reassured the community about multisignature security. The developers confirmed that similar solutions are used in other L2s, the modifiability of the smart contracts is okay and allows troubleshooting. They promised to switch the hardware wallet provider of one of the multisignature addresses to mitigate the risks this week.
Is it worth participating in Blast in the chase for tokens
On the one hand, these statements from Blast answer some of the claims from the community; on the other hand, they never revealed anything about the team or the people behind Blast.
Profitability of participation is difficult to calculate. However, usually the higher the risk, the greater the return. In any case, be careful when investing in such projects and use those funds that are not critical to losing.
🧐 What do you think about the future of Blast? Is it a scam or not? Share your opinion on our socials!
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This article is not an investment recommendation. The financial transactions mentioned in the article are not a guide to action. Itez is not responsible for possible risks. The user should independently conduct an analysis on the basis of which it will be possible to draw conclusions and make decisions about making any operations with cryptocurrency.