Opinion: Blast is concerning. But we can expect more projects like it

Written by Mel Gelderman

Posted on November 29th, 2023

Mel Gelderman weighs in on the latest Ethereum project to capture the token community’s mindshare, Blast. He says that while Blast concerns him, it could inspire other similar projects.

Every few months, a new Ethereum project comes along and causes a buzz in the token community. Over the summer it was friend.tech, but now we’re heading into winter there’s a new one on the block, Blast. Blast blasted off last week with an announcement of a $20 million raise co-led by Paradigm. So far, the project has received $600 million in deposits and a lot of flak. I’m not surprised.

How Blast works 👀

Whenever a project promises yield, it’s important to understand where it comes from. In this case, it deposits ETH into Lido and MakerDAO and then automatically rebalances user wallets. This is what it’s calling “native yield.” This will assert Lido’s dominance over Ethereum staking, which is a problem for decentralisation. Blast has also won criticism for its reward structure and marketing as users earn “points” when they invite new users. Some have said it resembles a Pyramid scheme. The website promised “substantial” rewards, which could mean a token airdrop. Finally, Blast is calling itself a Layer 2 project, but it does not yet have a chain. In reality, people are locking their funds in a wallet until February, and only three people control it. This is a serious security risk, and it’s a big deal when $600 million is at stake!

Critics have slammed Blast for its messaging, which claims the project offers “substantial” rewards compared to other Layer 2s like Optimism and Arbitrum (Source: Blast)

Amid the debates, the project’s founder Tieshun Roquerre, better known as “Pacman,” has come out and defended his baby, saying the yields are “not unsustainable.” He also said callouts of the invite mechanism are unwarranted. Interestingly, Paradigm’s Dan Robinson appeared to take shots at Blast in a later post, hinting that his firm was unhappy with the launch. Paradigm is a smart team, but Robinson’s post took me by surprise given the raise.

Will it succeed? 🤔

So what happens next? 

I think Blast could succeed, if only temporarily, because the idea of “free money” is enticing. Pacman also created Blur, which successfully took market share from OpenSea. However, it had a flawed points mechanism that negatively impacted the NFT market. I hope we don’t see a repeat here. I expect many more Layer 2s to launch, which is good for Ethereum. But let’s see if they adopt “native yield.” 

As a final note, I’ll add that tokens are already volatile, and chasing yield introduces an extra layer of risk. So proceed with caution if you’re tempted.

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