Macauley Peterson

A new Ethereum layer-2 rollup, announced Monday, has already attracted $27 million in total value locked (TVL), but there’s a twist: It doesn’t yet exist.



The promised network, Blast, would launch as an optimistic rollup in February 2024, but its backers immediately began soliciting deposits into a smart contract “bridge.”



In the span of half a day, the contract has amassed enough ether (<a href="https://blockworks.co/price/eth">ETH</a>) and dai (<a href="https://blockworks.co/price/dai">DAI</a>) to put it at number 16 in rollup tracker L2Beat’s TVL <a href="https://l2beat.com/scaling/summary">rankings</a>, ahead of established names such as <a href="https://blockworks.co/news/ribbon-finance-governance-approves-aevo-brand-merger">derivatives DEX Aevo</a> and <a href="https://blockworks.co/news/offchain-arbitrum-developers">Arbitrum Nova</a>.



The <a href="https://x.com/Blast_L2/status/1726747087906464024?s=20">announcement</a> touts Blast as “the only Ethereum L2 with native yield for ETH and stablecoins,” meaning it taps into Ethereum staking yield by directing all ETH to <a href="https://blockworks.co/tag/lido">Lido</a> and uses DAI to tap <a href="https://blockworks.co/tag/makerdao">MakerDAO&#8217;s</a> growing US Treasury bill yield through its <a href="https://blockworks.co/news/dai-savings-rate-us">Dai Savings Rate</a> (DSR), currently at 5%.



Blast’s development team, led by pseudonymous <a href="https://blockworks.co/tag/blur">Blur</a> co-founder Pacman, raised $20 million from venture capital firms Paradigm and Standard Crypto, joined by a motley crew of <a href="https://x.com/Blast_L2/status/1726747123952263195?s=20">angel investors</a> and crypto influencers.



Early reaction has focused on the one-way nature of the “bridge” — once you cross you can’t exit until after Blast actually launches and withdrawals are enabled.



Normally, a bridge allows assets to flow both ways. This contract is <a href="https://app.safe.global/settings/setup?safe=eth:0x67CA7Ca75b69711cfd48B44eC3F64E469BaF608C">apparently controlled</a> by a five-key multi-signature wallet. However, of the five addresses, one contains no ether and has no transaction history, and the other four were recently funded by <a href="https://etherscan.io/address/0x62abcf00d56057edcbcd8122dc06ab6a1fa643dd">a single address</a>.



That calls into question the independence of the signing cohort.



According to Pacman, there&#8217;s no need to worry.



&#8220;The Blast Early Access bridge contract does use a multisig, and each signer is a unique contributor to Blast,&#8221; he told Blockworks. &#8220;This is the same security model that other L2s like Optimism, Polygon, and Arbitrum utilize — these L2s are all upgradeable via multisig as well.&#8221;



Blockworks also contacted Paradigm and Standard Crypto for comment.



L2Beat designated the project &#8220;<a href="https://l2beat.com/scaling/summary#upcoming">upcoming</a>&#8221; rather than &#8220;active&#8221; as a result of its current implementation.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Following the recent rise of <a href="https://twitter.com/Blast_L2?ref_src=twsrc%5Etfw">@Blast_L2</a>, we&#39;ve decided to add it to our upcoming projects on our website, despite its whopping $87M TVL. We wanted to explain our decision. To the best of our knowledge, Blast is an upcoming rollup set to launch in Q1 2024 (according to their… <a href="https://t.co/8AG2e0gpAU">pic.twitter.com/8AG2e0gpAU</a>&mdash; L2BEAT 💗 (@l2beat) <a href="https://twitter.com/l2beat/status/1727268906090279209?ref_src=twsrc%5Etfw">November 22, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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The use of Lido has drawn the ire of Ethereum community members concerned with centralization risk in staking providers, including Dankrad Feist, who <a href="https://x.com/dankrad/status/1726912734388765067?s=20">called it</a> “a very bad idea” on X.



“ETH and liquid staking derivatives are different assets with different risk profiles (and rewards), and users should have a choice about which one they want to use,” he said.



It should come as no surprise, given that Paradigm is an <a href="https://blockworks.co/news/lido-centralization-debate-ethereum">investor</a> in both Lido and Blur.



Critics also question the use of a multi-level-marketing style referral campaign, which doles out points, of unknown value, to incentivize sending invitations to prospective new users.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Sounds like a textbook ponzi. I’m in. <a href="https://t.co/aDzWD5zrDO">pic.twitter.com/aDzWD5zrDO</a>&mdash; NoSleepJon 💤⏩ (@nosleepjon) <a href="https://twitter.com/nosleepjon/status/1726756844809384403?ref_src=twsrc%5Etfw">November 21, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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The site explicitly promises an airdrop based on early access participation. Points earned are <a href="https://x.com/Blast_L2/status/1726747138217144780?s=20">expected</a> to be redeemable in May 2024.



Points systems have increasingly been used as a <a href="https://blockworks.co/news/ether-fan-nfts-incentivize-stakers">growth bootstrapping</a> mechanism by protocol developers — including Pacman’s <a href="https://blockworks.co/news/blur-airdrop-nft-trading">prior marketing of Blur</a> — and are widely seen as a precursor to an airdrop or something else of value.



Updated Nov. 21, 2024 at 12:15 pm ET with comment from Pacman and Nov. 22 at 5:57 am ET with additional context.



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Wannabe L2 Blast bursts onto scene promising high ETH yield — in 3 months

Ben Strack

A continued shift to DeFi-focused offerings could be a boon for crypto exchanges looking to diversify revenue streams and attract new users, industry executives say.&nbsp;



With another exchange-launched layer-2 network reportedly in the works, such chains, and other decentralized products, look poised to become more prevalent for centralized crypto giants.



<a href="https://blockworks.co/news/coinbase-l2-base-mainnet#">Coinbase launched Base</a> — an Ethereum layer-2 network built with Optimism’s OP stack — in August. The publicly traded company’s third quarter subscription and services revenue, which is generated from stablecoins, custodial fees, blockchain rewards and interest income, exceeded its transaction revenue for the second straight quarter.&nbsp;



Bitwise crypto equities specialist Alyssa Choo previously told Blockworks that Coinbase is <a href="https://blockworks.co/news/coinbase-q3-earnings-analysis">setting up its future as a “crypto super app,”</a> adding that monetizing Base is on the company’s radar.&nbsp;



Crypto exchange Kraken is mulling a similar layer-2 launch, CoinDesk <a href="https://www.coindesk.com/tech/2023/11/07/kraken-said-to-seek-partner-to-help-build-it-a-layer-2-blockchain-network/">reported</a> Tuesday.&nbsp;



“We’re always looking to identify and solve for new industry challenges and opportunities,” a Kraken spokesperson told Blockworks in an email. “We don’t have anything further to share at this time.”



Andy Bromberg, CEO of crypto wallet Beam, noted that <a href="https://blockworks.co/tag/layer-2-2">layer-2</a> networks have the potential to generate substantial profits for exchanges via grants and transaction revenue.&nbsp;



“If they believe in their ability to leverage this user base for long-term adoption and usage, launching a network becomes a logical step for them,” he said.&nbsp;



Coinbase did not specify the fees garnered from on-chain transactions in its third quarter shareholder <a href="https://s27.q4cdn.com/397450999/files/doc_financials/2023/q3/Shareholder-Letter-Q3-2023.pdf">letter</a>. But the company said layer-2s “can be likened to the transition from dial-up Internet to broadband.” Coinbase’s Onchain Summer <a href="https://www.coinbase.com/blog/celebrate-onchain-summer-with-coinbase">event</a> in August saw about 10 million NFTs minted across more than a million transacting wallets on Base, amounting to $500 million in assets on the platform.



Dan Reecer, head of operations at Wormhole Foundation, said looking to replicate such success would be appealing to Kraken.



“This additional revenue stream could further strengthen Kraken&#8217;s financial position and support its long-term growth plans especially as it likely eyes an [initial public offering] in the future,” Reecer said.&nbsp;



Kraken is among the crypto firms doubling down on “the full vision of crypto,” Bromberg said, noting that decentralized products expand a company’s reach beyond just custodial services, for example.



Kraken <a href="https://blockworks.co/news/kraken-acquires-staking-platform-staked">acquired staking platform Staked</a> in 2021 to offer a non-custodial alternative to its staking service — but <a href="https://blockworks.co/news/kraken-settles-sec-crypto-staking-program">ended on-chain staking for US clients</a> as part of a settlement with the US Securities and Exchange Commission. The exchange <a href="https://blockworks.co/news/kraken-nft-marketplace-launches">launched an NFT marketplace</a> in June.



Binance CEO Changpeng Zhao said in 2022 that while centralized exchanges offer a gateway to people entering the crypto space, <a href="https://blockworks.co/news/binances-cz-believes-in-a-decentralized-future#">DeFi is set to become more prevalent</a> in the coming years. The comments came less than two months before the collapse of FTX, which further shook confidence in centralized entities.&nbsp;



Binance offers BNB Chain, an ecosystem of layer-1 and layer-2 scaling solutions. It <a href="https://blockworks.co/news/binance-web3-wallet-custody">unveiled a Web3 wallet</a> Wednesday built to simplify user interaction with DeFi applications by integrating multiple blockchains.



CoinScan vice president Evan Steinhilb said Kraken could benefit from funneling its clients into the DeFi and self-custody realms via its own products, rather than directing them to competing offerings.&nbsp;&nbsp;



“Furthermore, offering a proprietary layer-2 enables a plethora of marketing angles and will likely expose many DeFi fanatics to Kraken just as they explore a new [layer-2] — as has been the case with Coinbase’s Base chain,” he said.



Read more: <a href="https://blockworks.co/news/coinbase-base-home-degens">The ‘crypto degen crowd’ has settled in on Coinbase layer-2, Base</a>



Layer-2 network offerings are surely making their way to become “table stakes” for big exchanges, Steinhilb said.&nbsp;



“I’m sure once there’s more regulatory certainty around tokens we’ll see more exchanges take the route that Binance and <a href="http://crypto.com/">Crypto.com</a> have taken,” he explained. “But in the meantime it’s more likely to look like Coinbase’s Base network.”&nbsp;



Still, Reecer said some exchanges may not wish to launch and maintain their own layer-2 networks.&nbsp;



He added: “It will come down to their team size and resourcing, as well as their value alignment with decentralized technology.”



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