Blast L2: Some Thoughts and Considerations

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Another week, another L2 announcement. The @Blast_L2 announcement has come to surprise very few on CT as the narrative of yield maximization, RWA, and L2s all come together on one protocol. Here are some of my immediate thoughts on the announcement.

Dependencies are such an important thing to consider when launching a network. You cannot treat the mechanics of your chain the same way you treat a regular DeFi protocol. DeFi protocols are relatively siloed on chain (until others built on top of it, but that's by choice).

Blast will be automatically staking ETH and stablecoins that are bridged to the rollup. If the ETH staking is done natively and not using LSDs, then the risk that poses is reduced, as the security of the whole rollup is not reliant on other protocols.

It’s important to note that the staked ETH in this case is not used for security purposes like ETH restaking is used in the @eigenlayer. The problem this staking poses however is bridge liquidity for people who want to bridge out of the rollup.

If the bridged ETH is not managed properly and too much of it is locked up on staking nodes, there may not be enough liquidity to bridge the ETH back to Mainnet. This may not be an existential risk to the rollup, but can definitely cause hiccups in moments of high stress.

Not all rollups are built equal and with the same level of design consciousness. I have not done enough research to have my own opinion on the team, but if @0xSisyphus is right, this is concerning. twitter.com/0xSisyphus/status/1726761523257700476?t=klbzUlrwYbBo8uTZX8Glkg&s=19

Furthermore, it raises the question of who is managing the ETH staking nodes and who is deciding the amounts of bridged ETH being staked. This whole process is very complex and requires lots of foresight to prevent major catastrophes from happening.

Blast is also staking all stablecoins being bridged to the rollup. This, in my opinion is the riskiest of all they are doing. When bridging USDC, USDT, DAI and other stablecoins to the rollup, they will be staked in protocols to earn yield.

Users bridging in all these stablecoins will be receiving USDB on the rollup, one stablecoin to represent the basket of the bridged stables that were staked. Just like the ETH on this rollup, user balances of USDB will be rebasing based on the yield earned.

This means that the peg for USDB will be dependent on the security of all these different stablecoins staked on different protocols on Mainnet. If something happens to any of the protocols of which these stablecoins are being staked in, the peg for USDB is at risk.

To me, this project is a reminder that we’re able to do so many creative things with digital assets that are impossible to do in tradfi. However, it also serves a stark reminder that just because we CAN do something, does not necessarily mean we should.

If you want to read the bull case for @Blast_L2, @TaikiMaeda2 wrote a good thread breaking down why he believes it makes sense. Worth the read and a good explainer of what Blast is trying to be. twitter.com/TaikiMaeda2/status/1726953388053794962?t=TFSEeQ59ZzHIWws3th7Y1w&s=19

Here’s the official announcement from @Blast_L2 twitter.com/blast_l2/status/1726747087906464024?s=61

These are my thoughts right after reading the announcement. I quickly wrote this on my iPad in a hotel room, so apologies for the brevity. If there are any corrections or clarifications required, I’ll add them to the replies to this thread.

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