In-depth analysis of Blur's revenue-generating L2 network Blast: on-chain native interest rates, NFT sustainable contracts, and more

Founder Pacman of the NFT exchange Blur announced yesterday the establishment of a new universal Layer2 network called Blast, providing a revenue channel for idle funds within the Blur exchange, with plans to build their own NFT sustainable contract exchange on top of it.

Update: Blast exposed as not really L2: Is Blast L2 all fake? Developer reveals exit scam risk

Blur Launches Self-developed L2: Blast

Blur founder Pacman announced yesterday the establishment of a new team and company for Layer2, launching the OP Stack-based L2 network - Blast.

Why Launch Blast: Capital Efficiency

Considering that the funds used for placing orders in the Blur Pool basically have no other use besides waiting for trades to be executed or earning reward points, the capital utilization rate within Blur Pool is relatively low compared to ETH staking services like Lido, which currently yield around 3% returns.

Pacman believes that both U.S. Treasury bonds and ETH staking are forms of risk-free interest rates, and the assets within the Blur protocol losing out on these returns would lead to depreciation.

Aside from Blur, most DAPPs and Layer2 solutions face similar issues.

Why Launch Blast: NFT Sustainable Contracts

On the other hand, the trading volume of sustainable NFT contracts in the current market is six times that of spot trading. Pacman believes that efforts should be made to reduce transaction costs to meet the demand for NFT sustainable contracts in the market.

Layer2 Blast Provides On-chain Native Interest Rates

Given the aforementioned unresolved issues, Pacman believes that Layer2 can effectively address these two major problems, hence the launch of the Blast network.

Aside from the advantage of low transaction fees typical of Layer2, Blast's most prominent feature is that assets on the network can enjoy native interest rates:

• Blast will use user deposits into the Layer2 network for Ethereum network consensus staking, earning staking returns and automatically returning them to users;
• Stablecoin assets can also enjoy U.S. Treasury bond interest rates, including USDT, DAI, etc. Blast will purchase RWA through protocols like Maker to earn base interest rates, similarly automatically returning them to users.

More detailed execution details are not yet public, but compared to other L2 networks such as Arbitrum or Optimism which do not provide users with risk-free base interest rate investment channels, Blast is more attractive to users with higher demand for capital utilization.

Layer2 Is Also a Liquidity Layer

Blast will serve as a universal Layer2, utilizing a unique native interest rate mechanism to attract other developers to join the ecosystem and support applications of other protocols. Pacman mentioned that Blur will launch its own NFT sustainable contract exchange on Blast in the future, providing competitive services.

Blast ultimately has the potential to benefit the Blur ecosystem in return.

Development of Blast

Pacman announced that $40 million has been raised for the Blur ecosystem, with half of the funds allocated to Blast development. Investors include Paradigm, Standard Crypto, as well as angel investors like Lido advisor Hasu and The Block's Larry.

How to Participate

Currently, only whitelisted users can join Blast and start earning network-native returns. The current returns on ETH assets in the network are 4%, while stablecoins yield around 5%. Blast's TVL is approximately $20 million.

Furthermore, Blast is using the popular point system from Blur to attract market attention. Users participating in the experience can earn Blast points, which can be used to claim future airdrop rewards.

In addition to invited users, general users can now register on the official website and join the community for a chance to receive airdrop rewards.

Layer2 Competition Enters a Fierce Battle

Whether centralized exchanges, tech companies, or on-chain protocols, all have recently entered the battlefield to build their own Layer2 solutions, offering various incentives to attract users to their ecosystems.

Besides interest rates, Blast still needs time to explore the market. Moreover, the value of future tokens cannot be evaluated at the moment, so the actual utility of Blast still requires careful assessment. Finally, security issues, such as repurposing network assets for investment in other protocols, require attention to potential security risks, prompting a reevaluation of whether it still fits the definition of Layer2.

Nevertheless, with zero-risk profits as a selling point to attract users and developers, coupled with the past point system to increase market participation, leveraging the advantage of the existing brand effect, Blur's impact on the market remains to be seen and warrants continuous observation.

This article is not investment advice.