DeFi: Blast’s gamified financial engineering gets $2.6B TVL
DeFi: Blast’s gamified financial engineering gets $2.6B TVL
While there were risks, they did not stop Blast from becoming the third-largest L2 by TVL.
Today we highlight the following:
PROTOCOLS: Layer-2 Blast goes live, allaying fears and reshaping Web3 business models
CURATED UPDATES: Financial Institutions and Adoption; DeFi and Digital Assets; Blockchain Protocols; NFTs, DAOs and the Metaverse
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PROTOCOLS: Layer-2 Blast goes live, allaying fears and reshaping Web3 business models
Controversial Layer-2 (L2) Blast launched at the end of February, meeting its nosebleed 3-month deadline and comforting those who took on the high risk of locking their ETH away until the Blast mainnet launch. To recap, Blast first came to the scene in November 2023. It featured a highly gamified airdrop that incentivized users to join a “squad” via an invite link, and to lock their ETH in a smart contract controlled by a multisig. In other words, asking people to send money into a black box for unspecified returns.
Here is how the incentive worked. The more people you invited using your unique invite link, the higher your “luck” would be for the upcoming Blast airdrop — something in between a referral scheme and a pyramid one. Adding to the draw, Blast is the first L2 to offer users automatic yield on stablecoins and ETH bridged over to their L2. It offers 4% yield on ETH and 5% for stablecoins, including USDC, DAI and USDT — all without having to manually stake the tokens. This is possible because both cash and ETH have risk-free returns today, from treasuries to staking. You can find a full recap in our November 2023 post here.
While there were risks for users preemptively locking their tokens up, that did not stop Blast from amassing $2.6B in total value locked (TVL) in just a few months, establishing it as the third-largest L2 by TVL. This is a considerable jump from its $600MM TVL when we last covered it a week after its launch.
Even more wild is that the TVL does not include its native token (because it is yet to launch). The fourth and fifth largest L2s Manta ($2.1B TVL) and Starknet ($1.6B TVL) enjoy native token values accounting for $760MM and $1.4B of their TVL respectively, meaning they count their own equity-like assets.
In other words, the native token has somewhere between a material and massive impact on TVL. We expect another sizable jump for Blast when it launches its token this summer. Still, it has a long way to go to catch the leading L2s Optimism ($8.8B TVL) and Arbitrum ($15.3B). That said, TVL for a layer 2 network is not quite the same as for an application, in the way a funded brokerage account is not the same thing as an investment in a fund.
Emerging L2s vie for a killer dapp to attract users and liquidity, like GMX did for Arbitrum. GMX accounted for a third of TVL on Arbitrum just a year ago. Ideally, L2s want a new, differentiated project, on top or instead of DeFi staples like Uniswap.
New dapps are able to create their own token, which can be used to incentivize new user onboarding, as well as adding TVL. Blast’s strategy for attracting the best dapps is to give 100% of gas revenues to developers. One early success story is Orbit, a lending/borrowing protocol, with $200MM in TVL since its launch a week ago.
Overall, Blast, while questionable in its approach — even receiving criticism at launch from its lead investor Paradigm — has extended the playbook for Web3 protocols. First, hype your gamified airdrop and onboarding mechanisms to drive adoption. Next, add differentiated value that users actually benefit from — Blast did this by providing automatic native yield before any other L2. Lastly, take profits in your token instead of through gas, and use gas fee revenue instead to attract top talent and dapps. You will end up with more viral pull for both users and developers. Note that this is all financial engineering and requires almost nothing from the perspective of deeper technology.
While we will be waiting until at least May for a Blast token, decentralized bridging protocol Wormhole is likely to be the next big airdrop. Wormhole enables asset and data transfer across 30 different blockchains. It allows dApps to interact across chains, unifying and enhancing accessibility across the DeFi landscape.
Estimates predict the airdrop of Wormhole’s W token could be worth up to $2.7B, based on OTC trades on Bybit valuing the token at $2.49. The fully diluted value of W is now at $20.5B, a significant increase over its last valuation of $2.5B in November 2023.
The next big test for Blast is whether its airdrop can match the likes of Wormhole, or, perhaps more fittingly, Starknet’s recent $2B airdrop.
👑 Related Coverage 👑
Curated Updates
Here are the rest of the updates hitting our radar.
Financial Institutions and Adoption
⭐ Baanx raises $20 million Series A led by Ledger and Tezos - The Block
DWF Labs Invests $10M in TokenFi for AI-Push, TOKEN Crosses All-Time High - CoinDesk
Bakkt approved for $150M securities sale to stem its cash bleed - Coin Telegraph
Institutional crypto investment poised to increase this year, study finds - The Block
Institutional crypto platform Utila raises $11.5 million in seed funding - The Block
DeFi and Digital Assets
⭐ Backpack Raises $17 Million Strategic Series A Round Led by Placeholder VC - Finance Magnates
Solana Weekly DeFi Trading Sets All-Time High Above $11 Billion - Decrypt
Blockchain Protocols
⭐ Taiko raises $37M to build web3 infrastructure for a censorship-free internet - TechCrunch
Bitcoin layer-2 Stacks partners with eight companies ahead of its Nakamoto upgrade - Crypto Briefing
NFTs, DAOs and the Metaverse
⭐ Bitcoin Ordinals flip Ethereum in weekly sales, Coachella launching NFTs: Nifty Newsletter - Coin Telegraph
Rare CryptoPunk NFT sells for US$16 mln, signaling market revival - Yahoo Finance
Coinbase Is Giving Out Free Cards and Currency for Ethereum NFT Game 'Parallel' - Decrypt
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