Blast Attracts Widespread Criticism Despite Surging TVL – Crypto News

Blast, the forthcoming Layer 2 network from a pseudonymous developer behind the Blur NFT marketplace, is attracting condemnation from across the web3 community as its total value locked skyrockets.

Blast announced the launch of a one-way bridge contract allowing users to deposit assets on Nov. 20 and has since attracted a whopping $488M worth of ETH and stablecoins from users, according to Debank.

Although depositors cannot withdraw their assets until the network goes live in February, Blast provides yield to users in the form of ETH staking rewards derived from Lido and stablecoin interest provided by MakerDAO. Users also reward native rewards in the form of “Blast Points,” which cannot be redeemed until next May.

Blast also uses referral codes, a mainstay of affiliate and multi-level marketing (MLM) schemes, offering additional Blast Points to users that onboard others to the network. Its contract has attracted deposits from around 53,000 users so far.

“Liquidity flows to where it can get the highest yield,” Blast tweeted. “Blast is an EVM-compatible, optimistic rollup that raises the baseline yield for users and developers without changing the experience crypto-natives expect.”

Blast’s success follows the meteoric rise of Blur, which emerged as the leading NFT marketplace after using native token incentives to siphon liquidity away from OpenSea.

However, Blast’s launch campaign is attracting widespread condemnation from across the web3 community, with Lido critics and decentralization devotees decrying the volume of assets pouring into Blast.

Blast drives up Lido’s dominance

Blast has deposited roughly 205,200 ETH ($427M) to Lido, the largest liquid staking (LST) protocol.

Lido has faced strong criticism for refusing to self-limit its sizable dominance over the supply of staked Ether, with researchers warning that a single entity controlling more than one-third of staked Ether could undermine the Ethereum network’s decentralization. The campaign appeared to be working, with Lido’s dominance falling from nearly 32.5% in early September to 31.5% one week ago as rival LST providers enjoyed an uptick in adoption.

However, Blast’s hefty deposits are again driving up Lido’s dominance, with the protocol currently boasting a staked Ether dominance of 32.09%, according to Dune Analytics.

“If Blast keeps up the trajectory of the past few days, then Lido will blow through 1/3 of all ETH staked NEXT WEEK,” tweeted Evan Van Ness of Starbloom Ventures and the Week In Ethereum newsletter.

Security concerns

Other analysts are slamming Blast depositors for blindly trusting that the anonymous entities behind the three-of-five multisig account responsible for making changes to Blast’s smart contracts won’t abscond with their funds.

Jarrod Watts of Polygon emphasized that Blast currently comprises nothing more than a smart contract that accepts funds from users and deposits the assets into protocols like Lido and MakerDAO. “Blast is not an L2,” Watts tweeted. “There’s no testnet, no transactions, no bridge, no rollup, and no sending of transaction data to Ethereum.”

Watts warned that Blast’s multisig signers all comprise relatively new wallets controlled by unknown entities. After rifling through the project’s code, he identified the “enableTransition” function, concluding that the function could be used to drain all funds from the contract without requiring an upgrade to the code.

“By sending money to the Blast contract, you’re basically trusting 3-5 strangers to stake your funds for you,” Watts continued. “You won’t be able to withdraw that money at any point in time unless those 3-5 people decide to do the right thing in the future… This is actually insane to me.”

Watts is not alone in offering a damning critique of Blast’s current architecture.

“This is orders of magnitude worse than even TradFi by all measurable means,” tweeted 0xMert, the CEO of Helius Labs. “It requires blind trust in humans for the promise of ‘substantial’ incentives while influencers literally engage in MLM.”

“Blast is proving regulators’ point,” said Orlando Cosme, founder of Lexproof. “An on-chain hedge fund controlled by a 3/5 anon multisig isn’t DeFi. It’s ‘trust me, bro’.”

Blast responded to some of the criticism via tweet, defending its use of an upgradable contract. Blast said upgradable contracts allow developers to quickly respond to contract bugs and exploits, arguing that timelocks on upgrades or immutable smart contracts offer less security when responding to said disasters.

Blast added that each of its multisig signers utilize different hardware wallets, are geographically separated, and use cold storage to secure user assets. The project also noted that upgradable contracts protected by multisigs are a popular design among web3 developers, including rival Layer 2s Arbitrum, Optimism, and Polygon.

Watts acknowledged that multisig accounts are used by many other popular L2s to facilitate contract upgrades and bug fixes. However, he stressed that said projects’ signers are known individuals trusted by the web3 community, and that the scope of their multisigs’ permissions will scale back over time as the respective networks’ technology matures.