Ethereum’s new ‘layer 2’, Blast, has accumulated over $570 million worth of crypto assets from over 64,000 wallets. Blast claims that it will generate returns by staking and trading real-world assets (RWA). It announces annual interest rates of 4% for ETH or 5% for stablecoins.
The capture? Investors will not be able to withdraw their deposited assets until February, when Blast says he will launch his bridge. Until then, Blast hands out ‘blast points’ for betting or referring new users. It says holders can redeem Blast points for an airdrop sometime in May.
Meanwhile, to generate these returns, it has staked its deposits in third-party protocols, primarily the Lido and Maker DAOs.
Yes, Blast has real assets, but it doesn’t even have a functional testnet. New users can only deposit (bridge) assets, access Blast’s “early access airdrop”, and access a referral system with an invitation code. The Blast testnet will not go live until January.
Blast removes pyramid diagram from its website
Observers were skeptical. At worst, Blast looks like a referral pyramid scheme. At best, it would be easy to wonder why users wouldn’t gamble directly with Lido or Maker, instead of taking extra steps to lock Blast for a few months. Once again, Blast doesn’t even have a working bridge on the mainnet to withdraw assets until (hopefully) February.
Wait, I thought this was a meme, but this is an actual diagram of the Blast L2 invite system.
Bro, it’s a real pyramid scheme 😂 pic.twitter.com/6eWlju3jiL
– Tytan.eth (@Tytaninc) November 21, 2023
“You get points when your guests get points and their guests get points,” reads an archived diagram on Blast’s website in the shape of a pyramid rotated 90 degrees. Blast advertised up to 16% referral points for a member’s referrals and 8% for a member’s referrals.
Earning income from referrals is, of course, the hallmark of a multi-level marketing scheme.
The 500 million Ethereum staked by Blast
Despite all these concerns, assets continue to pour into Blast. As of November 23, he had $225 million in assets at stake, making him the seventh-largest holder of stETH at the time.
Today, just five days later, his position in stETH has doubled to $500 million. Incredibly, Blast’s holdings make him the third-largest stETH holder in the world, surpassed only by Aave and Lido itself.
Some have questioned the origin of the protocol’s assets. One skeptic doubted that most of the deposits were significantly new liquidity. He stated that investors probably “simply moving funds from one L2 protocol or Ethereum virtual machine to the next… We all know how this usually ends.”
Despite skepticism and an apparent lack of infrastructure or documentation, Blast attracted Paradigm’s attention. Despite claims that Paradigm endorses the project, Paradigm head of research Dan Robinson clarified that he “does not endorse” many of Blast’s practices.
Read More: ChainArgos: Coinbase’s Layer 2 Solution Base Could Be Violating Federal Laws
The anonymous founder of Blast goes by the name @PacmanBlur and previously co-founded the NFT marketplace Blur. Other pseudonymous staff members include ‘CL’, ‘DegenSpartan’, Andrew Kang and ‘Santiago’.
There was some doubt that four of those five people existed. In fact, the crypto industry has a long history of developers using sockpuppet accounts. Once last year, for example, Just two brothers controlled $7.5 billion of Solana’s total value locked (TVL) of $10.5 billion. through his legion of puppets.
In the case of Blast, some skeptics believe that a single person appears to be driving most of the activity in its multi-signature contract and escrow.
Blast has over $500 million worth of Ethereum staked and has yet to launch its testnet. Naturally, many investors are cautious. Even Coindesk has published a story about Blast questioning whether or not it is a pyramid scheme.
