The world of decentralized finance (DeFi) is evolving rapidly, with Layer 2 (L2) scaling solutions emerging as a major driver of innovation. Among them, Blast Layer 2 stands out as a promising platform that aims to revolutionize DeFi by offering unique features such as original yields for ETH and stablecoins, along with a robust ecosystem for developers and users. This article Unich Analyst will delve into the intricacies of Blast, exploring its core functions, how it works, and its potential impact on the DeFi ecosystem.

Blast Overview

Layer-2 Concept and Blockchain Scalability Issues

Layer-1 (L1) blockchains like Ethereum process all transactions directly on the mainnet. This leads to congestion and high costs as the number of transactions increases. The layer-2 solution acts as a second layer built on the L1 blockchain, allowing transactions to be processed off-chain, and only the final result is sent to L1. This approach reduces the load on the L1 network, increasing transaction speed and reducing costs.

Blast: Optimistic Rollup-Based L2 Solution

Blast is an Optimistic rollup, similar to Blast and Optimism, designed to address the limitations of the main Ethereum network (Layer 1), such as high transaction fees and limited scalability. By bundling multiple transactions together and executing them concurrently, Blast significantly increases throughput, resulting in faster transaction speeds and lower costs. This approach is consistent with the general trend of L2 solutions that aim to optimize Ethereum’s performance without compromising its security.

Blast’s Key Differentiating Features

While Blast shares commonalities with other L2 solutions, its differentiating features lie in its innovative approach to generating native returns for ETH and stablecoins. This unique value proposition sets Blast apart from the competition and positions it as an attractive platform for users looking to maximize the earning potential of their assets.

Native Returns: A Revolutionary Approach to Asset Management

Blast’s native return mechanism is the key driver of its appeal. The platform offers 4% returns on staked ETH and 5% on stablecoins, automatically rebalancing these balances to reflect the rewards generated. This automatic rebalancing process eliminates the need for manual claims or constant monitoring, providing users with an easy and seamless way to grow their assets.

ETH Yield: Taking Advantage of Staking Rewards

Blast leverages Ethereum’s Shanghai update, which allows for withdrawals of staked ETH and accumulated rewards. This update is crucial to Blast’s auto-recapture mechanism, which is designed to provide a passive yield-generating experience for ETH holders. ETH yields on Blast are generated by integrating with Ethereum’s staking ecosystem, primarily through partnerships with popular liquidity staking protocols such as Lido Finance. 

How the auto-recapture feature works:

• Staking ETH: Users transfer their ETH or WETH to the Blast network.
• Staking on Ethereum: Blast’s smart contracts automatically stake these transferred ETH on the main Ethereum network, primarily through the leading liquidity staking protocol, Lido Finance.
• Generating yields: When staked ETH generates yield (a reward for securing the Ethereum network), Blast collects these rewards.
• Automatic distribution: Through smart contracts, earned rewards are automatically distributed back to users’ ETH balances on Blast’s L2 platform.
• Passive growth: This mechanism passively increases users’ ETH balances on Blast, reflecting the value created by staking on Ethereum.

Stablecoin Yield: Using T-Bills

Blast’s stablecoin yield mechanism leverages tokenized treasury bond products, such as MakerDAO’s Dai Savings Rate (DSR), to generate yield. Users deposit their stablecoins (USDC, USDT, DAI) into Blast and receive Blast USD (USDB) in return. This USDB then participates in T-bill protocols, generating interest that is distributed to users, increasing the value of their USDB holdings.

How it works:

• Stablecoin deposit: Users deposit supported stablecoins such as USDC, USDT, or DAI into the Blast network.
• USDB issuance: These stablecoin deposits are exchanged for USDB, Blast’s native stablecoin.
• Investing in yield generating protocols: USDB is then invested in yield-generating protocols within the DeFi ecosystem. Notable examples include MakerDAO’s Dai Savings Rate (DSR) contract or other protocols that provide yield for lending or staking assets.
• Yield generation: Investments generate yield, reflecting the yield from DeFi protocols.
• Automatic distribution: These yields are automatically distributed to USDB holders, increasing the value of their assets on the platform.

How Blast Works

Two-Layer Architecture

Blast uses a two-layer architecture:

• Execution Layer: This is where the execution of transactions and the calculation of Blast’s state takes place. All operations such as interacting with smart contracts and transferring tokens are handled here.
• Verification Layer: Responsible for verifying the validity of state updates from the Execution layer. Instead of re-executing the entire transaction, this layer only checks the mathematical proof to ensure correctness.

Optimistic Rollup: Best Assumption & Challenge Mechanism

Blast operates on Optimistic Rollup technology. This mechanism is based on two principles:

• Best Assumption: All transactions sent to Blast are assumed to be valid. This allows the Execution layer to process transactions at high speed without waiting for confirmation from Ethereum.
• Fraud Challenge: To ensure security, anyone can “challenge” a transaction that they believe is fraudulent. Blast then uses a special process to re-verify the transaction on Ethereum. If fraud is detected, the fraudulent validator is penalized, and the challenger is rewarded.

State Proof Mechanism: The Foundation for Optimistic Rollups

In order for the Verifier layer to check the correctness of updates from the Execution layer, Blast uses a state-proof mechanism. Whenever the state of Blast changes, the Execution layer generates a short mathematical proof that proves the validity of the change. This proof is then sent to the Verifier layer on Ethereum for verification.

Blast’s On-Chain Data Explorer and Tracker

Blastscan 

• Built specifically for Blast, providing detailed and up-to-date data about the Blast network. User-friendly interface, easy to use, and packed with analytics features.
• Search transactions and check status.
• Check Blast wallet balance.
• View smart contract details.
• Explore blocks on the blockchain.
• View statistics and events on the Blast network.

Blockscout

• Pros: Open-source blockchain explorer, supports multiple blockchains, including Blast. Provides a user-friendly interface and rich data analytics features.
• Cons: Data may not be updated as quickly as Blastscan.

DeFi Data Tracking Tools

• Pros: Tools like DeFiLlama, Zapper.fi, and Debank provide detailed data on DeFi protocols on Blast, including total value locked (TVL), trading volume, and yield.
• Cons: Typically focused on DeFi and may not provide insights into other aspects of the Blast network.

Blast Token Information

• Token Name: Blast 
• Ticker: Blast
• Blockchain: Blast
• Token Contract: 0xb1a5700fA2358173Fe465e6eA4Ff52E36e88E2ad
• Token Type: Utility, Governance
• Max Supply: 100,000,000,000 Blast
• Circulating Supply: Updating

Token allocation 

• Community: 50% 
• Core Contributor: 25.5% 
• Investors: 16.5% 
• Blast Foundation: 8% 

Blast applications

Blast currently has 2 main usecases 

• Participate in Blast network governance
• Rewards for projects developing on Blast

With these 2 usecases, ARB still does not have great potential to push the price up in the future

The Team behind Blast 

Blast Network is led by a team of experienced blockchain developers. Notably, the team behind Blast is also responsible for developing Blur, a popular NFT marketplace on Ethereum. This association demonstrates the team’s commitment to innovation and user-centric solutions, further solidifying their vision of a dynamic and growing NFT ecosystem.

Investors 

Blast Network has attracted $20 million in funding from prominent investors such as Paradigm and Standard Crypto, bolstering its financial strength and demonstrating confidence in its potential. These investments are also a testament to the project’s commitment to growth and innovation, ensuring a solid foundation for future endeavors.

The Future of Blast 

Blast Network’s ambition is to revolutionize the DeFi ecosystem by providing a more efficient and user-friendly experience, especially in the area of ​​yield generation. Its native yield mechanism, built on the integration of Ethereum’s Shanghai update, presents an attractive proposition for users looking to maximize their passive income potential.

Challenges and Considerations

While Blast is promising, there are challenges and considerations:

• Market volatility: DeFi yields are affected by market volatility. It is important to consider the risks associated with potential fluctuations in yield rates, especially in volatile market conditions.
• Security considerations: Smart contracts are constantly evolving, and it is important to assess the security of the smart contracts that underpin Blast’s mechanisms.
• Liquidity and Redemption: The liquidity and redemption capabilities of USDB, Blast’s stablecoin, should be carefully assessed, especially in adverse market scenarios.

Conclusion

Blast’s commitment to providing native returns, combined with its innovative approach to integrating DeFi and Ethereum’s Shanghai update, has positioned it as a potential game-changer in the L2 space. Its focus on community-driven governance through the Blast DAO and strategic initiatives such as airdrops and competitions demonstrate its dedication to building a vibrant and user-centric ecosystem. While challenges remain, Blast’s potential to reshape the Ethereum and DeFi ecosystem is undeniable, making it a platform to watch as it continues to grow. That’s all the notable information about Blast that Unich Analyst has compiled, thanks for reading.