Is Blast a speculative opportunity or a sure win?

Have you been seeing a lot of bullish tweets about Blast lately? In my opinion, Blast is a speculative opportunity, but not a sure bet.

The reasons are as follows: Blast is overly dependent on Maker and Lido; staking rewards will decrease in the future, and Lido may be further affected; the L2 native yield generation method can easily be imitated by the current L2 market leaders.

Over-reliance on Maker and Lido

Blast was developed by Pacman and supported by Paradigm, with the goal of creating native yields for L2. When we deposit tokens into L2, we are actually hosting the corresponding tokens in the smart contract on L1 that corresponds to L2. These are idle tokens and are not used to earn yield. Blast recommends converting ETH and stored stablecoins into stETH and DAI respectively, earning yield from staking rewards and vaults.

Sounds more capital efficient? I expect some short-term hype around leverage and yield activity with FOMO, but in the long term, Blast will be a single point of failure due to its exclusive partnerships with Lido and Maker.

As Matty pointed out, too many validator sets will lead to centralization rather than decentralization, because each additional validator set means one more signature to be aggregated per epoch. As the number of validators increases, operators will need more advanced hardware to support greater bandwidth and faster internet speeds for verification.

Staking rewards will decrease in the future

At least we know this is not the direction Ethereum is heading. There will eventually be a series of initiatives to promote the development of decentralized LSD, such as Frax Finance’s frxETH v2 and Rocket Pool, while at the same time, staking rewards are likely to reach a cap when the number of validators exceeds a certain limit.

Native revenue is easily imitated by the top L2

In addition, general L2 has a tendency to converge, and the downward trend of Base is proof of this. Especially after the implementation of EIP-4844, L2 may see a flywheel effect that L1 has never achieved: the cost of publishing data will be reduced by at least 10 times, and the maximum variable cost borne by L2 users will disappear, leaving only a fixed sorting transaction cost.

What does this mean? There will be economies of scale! More users active on the network can share the fees, which attracts more users, which attracts more dapps, etc. So a larger L2 in terms of TVL will have an advantage in this regard for new users.

Therefore, I’m really not sure how much traction a new L2 will have in generating native yields when this traction can be easily emulated by current market leader L2s like Arbitrum and Optimism.