The crypto space was abuzz on November 21st with people sharing referral links to a freshly released Ethereum-based Layer-2 blockchain. The project had been lavishly funded to the tune of $20 million from Paradigm and Standard Crypto, among others, creating a stir in the crypto sphere when Blast's launch occurred.

Part of the reason for the success of L2 was the launch of the NFT marketplace Blur by Pacman, the MIT dropout, which eventually outdid OpenSea in market share. The hype was largely due to a "lockdrop" – users who link ETH to Blast and complete other tasks such as referring new users are rewarded with points which are eventually converted into a token airdrop.

In a matter of days, Blast has managed to attract an incredible $611 million in deposits, more than the amount of Total Value Locked (TVL) that Coinbase's L2 Base had raised since its launch at the start of August.

The crypto community was alarmed by the launch of Layer 2 Blast, with lead investor Paradigm voicing their concerns. This article will explore what Blast is and the controversies surrounding it.

What is Blast Technology?

Blast is a type of technology that is used for a variety of purposes. It is a powerful tool that can be employed to achieve a wide range of goals, from cutting materials to launching rockets. Primarily, it is utilized for industrial applications, such as cutting, drilling, and welding. It is also used for blasting, which is a process that involves manipulating small particles with high-pressure air, water, or other fluids to achieve a desired result. The technology is also used for cleaning, decontaminating, and sterilizing surfaces.

Pacman, creator of Blur, developed Blast with the idea that the most rewarding places will be the ones that will acquire the most market liquidity.

The term risk-free yield has caused a stir in order to draw people to its chain. In the realm of conventional finance, this type of yield is derived from short-term investments that are considered to be without risk.

Blast trusts in taking advantage of the idea of a concept which was also the subject of heated debate, to draw people to its chain. In the classic money related field, the risk-free rate is the yield gotten from short-term Treasury Bills.

Pacman has indicated that the concept of staking has come to denote the yield acquired from ETH staking. This area has experienced such tremendous growth that it has developed into the most prominent subsector of DeFi, holding a total value locked of $26 billion in over 120 protocols.

Blast goes a step further by offering a secure yield to their customers on the second layer of the chain. In other words, those who store ETH on Blast will get a 4% return on their ETH investment, paid directly to their wallets.

What Generates Yield?

By bridging ETH or WETH tokens to the chain, users are able to stake the tokens on the Ethereum mainnet with the help of the leading liquid staking protocol Lido Finance. Rebasing is then utilized to provide users with a yield of 4% on the L2.

For those seeking stability, stablecoins such as USDC, USDT, and DAI can be deposited into tokenized treasury-bill products, with MakerDAO (MakerDAO) being the first. By doing so, depositors will receive Blast USD, USDB, and a 5% yield on their assets. USDB is redeemable for USDC once the bridge back to the Ethereum mainnet is complete.

It goes without saying that all funds placed in the bridge contract are secured for a period of three months, up until the Blast mainnet is expected to come into operation in February 2024. Nevertheless, crypto time passes slowly, and this is exactly why Blast has an airdrop and reward system in place.

A Reward System and Distribution of Funds via Air Drop

It is necessary to get an invite link to gain access to Blast, which is in its Early Access stage; however, many people of influence, known as whales, have been given unlimited invite links that can be used multiple times, making it easy for new people to join.

Upon linking their Twitter and Discord accounts, users will receive an initial Blast points allocation, based on the activity of their wallet. Additionally, holders of the BLUR token and those trading in NFTs on Blur during Blur Season 3 (November 2023 to May 2024) will be granted additional points. Moreover, additional points will be allocated in relation to the deposits made into the platform, with larger deposits earning more points.

Users can earn additional points by taking advantage of one free spin. Furthermore, if they tweet about Blast from their connected Twitter account, they are rewarded with an additional spin. The amount of spins they receive also depends on the amount of ETH they have deposited - for every 1 ETH deposited, they are eligible to receive one spin per week.

Once registered, users will receive invite links to share with their friends to join the platform. For each of your direct referrals, you will gain an extra 16% in bonus points on their earned points. Additionally, the referrals of your direct referrals will earn you an extra 8% in bonus points on their own earned points.

By forming a squad with your direct invites, the deposits of the team are put together to reach a squad goal. When 5 ETH is reached, you will be given more invite links and an opportunity to spin with better luck. This luck percentage decides the odds of triggering a "Super Spin" in regular spins, which will give ten times the usual rewards. To sum up, the more significant whales you invite, the more points you are likely to gain.

It is anticipated that points generated from deposits, spins, and squad activity can be exchanged for rewards in May of 2024.

Issues and Disagreements Related to Blast

Controversy has been created concerning Blast due to differing opinions on the matter.

Since the Blast airdrop campaign was initiated, several of the project's choices have caused significant worries.

Criticism of Blast is directed at the absence of a true L2 chain. Marketed as a bridge to Blast, the system does not feature a bridge, rather users are merely sending funds to a smart contract managed by a 3/5 multi-signature wallet. This leaves users vulnerable as if three of the signers are compromised, their deposits on Blast's smart contract could be taken away. Additionally, it is possible for people to collude and achieve the same goal.

Additionally, four of the five signers on the multisig were funded by the same wallet, causing speculation that they are all owned by a single individual or organization. This would make it easy for a malicious actor to gain control over the multisig through a single point of vulnerability with phishing.

The campaign was heavily criticized for its likeness to a pyramid scheme and numerous people denounced the industry's current state in addition to the project. However, others defended it, arguing that it was no more degenerate than numerous other projects and that the campaign was at least honest about its nature.

Questions were brought up about the Blast team's sole dependence on Lido Finance for the ETH staking yield. This decision would amplify the centralization of Lido's ETH staking, a point of concern that has been addressed earlier in the year as a potential vulnerability for the entire network.

Paradigm subsequently released a statement expressing their disapproval of the methods used for Blast's launch, especially the locked deposits and the creation of a 'bridge' contract prior to the development of the L2.

In conclusion,the markets appear to be heating up, causing investors to look for the next big narrative, and because of this, Blast is gaining attention and monetary support from the crypto community. Additionally, the layer-2 space is becoming more and more competitive with the launch of many mainnets from Consensys, Coinbase, BNB Chain, ZkSync and more.

It remains to be seen if Pacman can pull off a similar feat to Blur's vampire attack on OpenSea with Blast on leading layer-2 networks Arbitrum and Optimism. The answer may come in February 2024 when the L2 network is scheduled to launch.