At Standard Crypto, we believe one of the most interesting opportunities in crypto right now is defining the “winning” scaling layers for Ethereum. Liquidity wants to be fungible and frictionless, and it follows a power law distribution, which means the prize for the winners is massive.
While the L2 landscape is well on its way, we think there’s an opportunity for a new layer that specifically caters to the secular rise of sustainable onchain yields (e.g. staking or RWA). Modern Ethereum infrastructure was not built to handle yield-bearing assets. As a result, users end up taking on extra friction like having to wrap or deposit tokens in order to access the yield. A new layer offers the chance to rethink how these now natively yield-bearing assets interact with your wallet and dApps.
For these reasons and more, we are excited to introduce our investment in Blast — the first Ethereum L2 with native yield on ETH and stablecoins. It is being built by Pacman, founder of the popular NFT marketplace Blur.
Blast is a chance to rethink Layer 2 infrastructure with yield-bearing assets treated as first-class citizens — a fresh rebuild. If ETH was a natively-yielding rebasing token from the start, we think even basic building blocks (e.g. Uniswap pools) would have been designed differently. With Blast, that capital becomes efficient, earning almost an extra $100 million a year in interest based on current Uniswap TVL. The bridge becomes the event horizon; upon crossing, idle ETH and stables transform into natively-yielding versions. Wallets become savings accounts and dApp TVL brings revenue. Users can now directly and natively capture yield from their holdings instead of having to take an opt-in action. We are big believers in the power of defaults.
A risk-free rate is the reward you should expect for taking zero risk. The traditional example is Treasury Bills — an investor buys treasuries with cash, and upon maturation receives a yield that was riskless so long as the U.S. government does not default on its obligations. The Merge created this dynamic for Ethereum as well, as staking rewards are risk-free in the context of the system — if either Ethereum or the U.S. government fails, the underlying instrument will not be worth much anyway. Furthermore, the risk-free rate helps benchmark risk — if an individual does not match or beat the risk-free rate, they are losing money to inflation.
This introduces a sizable opportunity. Neither Ethereum nor the current crop of L2s were designed with widespread yield-bearing asset adoption in mind. Their ecosystems were designed and built at a time when the predominant onchain assets — ETH and stablecoins — did not bear native yield. Simply holding ETH gave you no native rewards before proof-of-stake was implemented in September 2022, and most stablecoins still don’t pass through treasury yields to users. Because of this path dependence, billions sit unyielding in ETH-paired AMM pools and NFT marketplaces alike.
TVL is an imperfect measuring stick, but it has gained adoption as a metric to understand a dApp protocol’s success and growth. Most successful dApps in categories like exchanges, lending, perps, and even social have accumulated billions in external user deposits. Natively rebasing ETH and stables unlocks new business models for developers, which will power the ecosystem beyond the incentivized stage. Imagine a perp DEX that charges zero trading fees, and monetizes using collateral in its liquidity pool.
Additionally, Blast itself can monetize by taking a cut of the yield. This means that Blast no longer requires sequencer fees for revenue, and can even potentially pass gas fees back to the dApps that generate them. This makes building on Blast very attractive, and removes the main reason for dApps to create their own chain by allowing them to internalize gas fees on a general purpose layer.
Blockchain adoption does not come directly from technological improvements, but rather from growing a high-quality ecosystem of builders and users. The market has observed this time and time again, with more performant chains turning into ghost towns if they fail to find product market fit and lack attractive destinations.
Pacman is one of the best executing entrepreneurs we’ve observed. His product velocity is prolific and he’s also demonstrated strong and creative incentive design ability. The broader market adoption of the Blur-invented “Season Points” gave developers greater flexibility in their incentivization mechanisms, allowing implicit rewards for explicit actions. And he cares deeply about the end user experience, obsessively hunting for and rapidly incorporating user feedback into his products. We think Pacman is a natural steward of an L2, and we’re excited to see his creativity applied to a domain with more degrees of freedom than he’s had to operate within previously.
When Pacman first approached us about building a layer 2 earlier this year, the impetus came from his explorations of suitable layers to deploy a Blur layer 2 dApp on — necessary for both low-value NFT trading in high gas environments and for an eventual NFT perp dex. As we talked more, and features like the native yield developed, we realized that though the L2 landscape is maturing rapidly, there’s still room at the top for another winner.
As a longtime crypto believer, as a degen, and as an investor at a crypto-native VC, I believe programmable money is the future and I’m just here to enjoyooor the ride. Those of us who are onchain regularly battle-test protocols so that the strong may survive — we are in the arena and trying stuff. Through network participation, by voting and signaling with our capital and attention, we shape the infrastructure we use. Natively rebasing tokens are the best way to pass through yield, and existing ecosystems aren’t designed around such mechanisms. This is the opportunity for Blast — a chance to build with the asset primitives of today in mind.
Follow the official Blast Twitter to stay up to date on information and announcements going forward!