Ethereum’s Blast Layer 2 network sees $1.5B outflow after launch
The Ethereum Layer 2 network Blast experienced a significant outflow of funds, with the total value locked (TVL) dropping by over 65% to $745.47 million within a day of its mainnet launch on February 29, 2024. The network, which had attracted substantial deposits totaling nearly $2.3 billion, saw users swiftly withdrawing their assets, leading to the sharp decline in TVL. Blast, developed by Tieshun Roquerre, the founder of NFT marketplace Blur, had promised up to 5% annual percentage yield on ether and stablecoins, drawing in a large community with the allure of high yields and potential airdrops. Despite the outflow, Blast continues to operate with over 1 million transactions and the introduction of new decentralized applications on its network.
The mainnet launch of Blast allowed users to finally access their funds, which had been locked on the platform for over three months. The network’s design, based on optimistic rollups, requires depositors to wait 14 days and pay Ethereum gas fees to transfer their deposits back to the mainnet. Some users opted for third-party bridge dapps that offer faster transfers for a fee. The initial user deposits had reached nearly $2.3 billion by the time of the launch, and despite the outflows, approximately $1.88 billion remains on the network, positioning Blast as a potential third-largest layer-2 network on Ethereum.
Blast’s launch has not been without issues, as phishing sites have targeted users following the mainnet rollout. Web 3 security firm Scam Sniffer reported losses exceeding $5 million in digital assets due to these fraudulent activities. One user lost $4.39 million in $ALI and $PUSH tokens, while another lost $717,817 worth of Aave BTC and Pandora tokens. Blast has urged its community to be vigilant against scammers and to rely only on official sources for accessing the network’s information.
The platform’s early access phase began in late November 2023, allowing users to earn yields and Blast Points, a reward system for asset bridging and referrals. Despite some claims that the platform’s model resembled a Ponzi scheme, Roquerre has defended the yield as sustainable, sourced from liquid staking protocol Lido and DeFi protocol MakerDAO. Blast raised $20 million in funding in November 2023, led by crypto-focused venture firms Paradigm and Standard Crypto, with plans to enable the redemption of Blast Points starting tentatively on May 24, 2024.