Blast: A New Era of Layer2 Earnings

Blast conducted an airdrop of $Blast tokens to the community on the evening of June 26, marking the end of a major airdrop event. In terms of investment institutions, community enthusiasm, and TVL, Blast is undoubtedly the only top project this year that can stand shoulder to shoulder with ZKsync. Layer 2 has entered a new phase, and in light of this large-scale and somewhat controversial airdrop event, the future development direction of Blast and the Layer 2 ecosystem is worth discussing.

1. Project Background

Environment-driven Innovation

In traditional Layer 2 ecosystems, users earn ecosystem tokens as rewards through staking, while project parties utilize the staked funds for transaction verification and other operations. Since Layer 2 is built on Layer 1, the staked funds are subject to dual system risks; therefore, Layer 2 projects typically offer staking rates higher than those of Layer 1 as compensation. For example, the annual interest rate for Matic on the Polygon network can reach 8%-14%, while the annual interest rate for ETH on the ETH network generally ranges from 4%-7%. To further enhance capital returns in Layer 2, Blast has emerged.

Basic Information

Blast is an Ethereum Layer 2 network based on Optimistic Rollups, launched by PacMan, the founder of Blur. Unlike other Layer 2 solutions that focus on scaling, speeding up, and reducing gas fees, Blast aims to address the shortcomings of Layer 1 while providing greater economic benefits. It is the first Layer 2 to offer fixed income from staking ETH and stablecoins, and this yield-focused narrative may guide the construction of Layer 2 back to the financial attributes of Web3.

Development History

• November 2023: Project launch, secured $20 million in seed round financing
• November 2023: Announce a unique yield model, offering 4% ETH and 5% stablecoin yield
• February 2024: Mainnet Launch
• May 2024: Airdrop plan postponed to June 26, increasing airdrop allocation.
• June 26, 2024: Official airdrop release

market growth

Blast Chain is highly favored in the market, with a TVL of $1.6B as of the time of writing, ranking 6th in TVL and 11th among Protocols. The locked assets account for 1.71% of all locked assets on the chain.

2. Token Economics

token functionality

$Blast token has basic functions such as ecological governance, airdrop incentives, and staking rewards, similar to other Layer 2 tokens. However, in terms of ecological governance, the Blast ecosystem has more complete governance rules and regulations.

Token Distribution

The total supply of Blast tokens is 10 billion, distributed as follows:

• Community: 50%, linear unlocking over 3 years
• Core contributors: 25.5%, 25% unlocked after one year, 75% subsequently unlocked linearly over 3 years.
• Investors: 16.5%, 25% unlock after one year, 75% linear unlock over the following 3 years
• Blast Foundation: 8%, linear unlock over 4 years

Phase 1 Airdrop

• Blast Points holders share 7% of the total supply
• Blast Goal token holders share 7% of the total supply.
• The Blur Foundation receives 3% of the total supply for distribution to the Blur community.

The airdrop for the top 0.1% wallets will be released linearly over 6 months to alleviate the selling pressure during the token release.

3. Narrative Characteristics

Perfect compatibility with EVM

Blast adopts a free choice of "whether to enable Auto-Rebasing" to achieve perfect EVM compatibility, reducing project migration costs and accelerating the speed of ecosystem construction.

A perfect solution for multi-eating in one fish.

Blast utilizes an Auto-Rebasing mechanism to directly update users' native ETH balances without the need for intermediary tokens like WETH or STETH, allowing for automatic profit acquisition. Meanwhile, USDB can be exchanged for DAI when bridging back to Ethereum through MakerDAO's T-Bill protocol. Essentially, this automates the staking of locked tokens in DeFi platforms such as Lido and MakerDAO, continuously converting them into native token yields, thereby enabling compound interest operations while avoiding high gas fees.

4. Ecological Construction

The Blast ecosystem encompasses multiple sectors such as SocialFi, GameFi, DeFi, and NFTs, forming a diversified ecosystem.

DEX Leader Thruster

Thruster is a yield-focused DEX, with a current TVL of $438m. It inherits the AMM model of conventional DeFi, offering both simple and complex UI modes, and utilizes the Blast chain to automate staking yields to enhance liquidity and trading efficiency. The unique no-loss lottery, Thruster Treasure pool, has attracted a large number of active users.

Leverage Lending Leader Juice Finance

Juice Finance is the largest leveraged lending platform on the Blast chain, with a TVL of $394m. It offers lending and yield farming features, optimizing user returns through the integration of the Blast native rebased token and gas refund mechanism. Users can use WETH as collateral to borrow up to 3 times the amount of USDB and deploy it in other yield strategies.

Capital effect enhances platform Zest

Zest utilizes the native ETH yield of the Blast chain to enhance capital efficiency. After users stake ETH, they can obtain zUSD and Leveraged ETH, with the yield of ETH inherited by zUSD and the volatility borne by Leveraged ETH, providing users with a solution that offers higher returns and lower risks.

SocialFi leader Fantasy

Fantasy is a project that combines elements of social finance and trading card games. Users can earn a 4% native yield in Blast chain and 1.5% ETH from card trading volume by holding cards. Currently, the total transaction volume of NFTs has reached $93.11M, with 36.7K participants, making it the 5th ranked SocialFi on the Blast chain.

5. Future Development and Risk Opinions

Future Development Trends

Blast, as the first project focused on Layer 2 economic benefits, may become a symbolic project. Its high-yield characteristics may continue to attract funds from other chains until the yields balance out. The Blast chain provides fertile ground for DeFi development, with the potential to accelerate the growth of DeFi projects built on it.

Risk Analysis of Concealment

Blast achieves automatic acquisition of Layer 1 staking rewards through Auto-Rebasing, essentially an automated way to have one’s cake and eat it too. From a technical perspective, this optimizes capital efficiency; however, from a risk perspective, staking through Lido and MakerDAO increases systemic risk across the entire chain. At the same time, whether automatic staking behavior undermines users' rights to manage their funds is also worth considering.

Overall, the high returns of Blast come with an increase in systemic risk, but for small capital investors, the growth in returns still far outweighs the growth in risks. The return characteristics of Blast may be adopted by other Layer 2 solutions and are worth continued attention.