fter months of anticipation, the Ethereum scaling network Blast officially launched its long-awaited mainnet on February 29th. However, in the days following, a massive exodus of funds occurred as nearly $400 million worth of Ether (ETH) was withdrawn from the network. Let's take a deeper look at what transpired.
Billions Locked Prior to Launch
In the lead-up to its mainnet debut, Blast had successfully accumulated over $2.3 billion worth of deposits across 181,000 users. This was due in large part to the attractive yield offerings it provided, with depositors earning an annual yield of 4-5% on their staked ETH and stablecoins. Another draw was the promise of a future "Blast points" airdrop where users would receive tokens proportional to the amount of time their funds were deposited.
Eager to capitalize on these perks, many speculative traders engaged in "points farming" by bridging large amounts of capital over to Blast from other networks such as Ethereum in hopes of maximizing their future airdrop rewards. Such enthusiasm propelled Blast to having billions locked in a very short period of time, an impressive feat for any early-stage network.
Massive Withdrawals Occur Post-Launch
However, as the title suggests, things took a turn following the long-awaited mainnet launch. Data from aggregator DeFi Llama showed Blast's total value locked (TVL) collapsed from its $2.3 billion peak, falling to just $520 million in a matter of days as nearly $1.8 billion worth of assets were withdrawn.
During this timeframe, around 479,000 ETH (worth approximately $400 million based on prices at the time) was removed from the network. Stablecoins like USDC, USDT and DAI also saw withdrawals in the tens of millions. The sharp decline highlights how many token holders and traders opted to move their funds elsewhere once the mainnet unlocked deposited capital.
Profit-Taking and Lost Momentum?
A key factor likely driving the withdrawals was profit-taking. The price of Ethereum had risen substantially over the months that funds were locked on Blast, going from around $2,000 to nearly $3,500. For speculative traders who bridged over large amounts of ETH specifically to farm points, it made financial sense to withdraw their more valuable asset rather than leave it staked on Blast.
In addition, once the mainnet launched, the novelty and hype around Blast's yield offerings faded, removing a major incentive for deposits. Traders may have lost patience waiting for the promised airdrop as well. The network similarly lost momentum after facing criticisms around its bridge design prior to launch and the subsequent "rug pull" of a gambling dApp that disappeared with $1.25 million in funds.
What's Next for Blast?
Even with nearly 80% of its TVL exiting in a matter of days, Blast retains over half a billion dollars staked on the network. Developers building applications on Blast are also set to receive 50% of the upcoming token airdrop to further support the ecosystem.
Going forward, Blast will need to cultivate more compelling usage for its scaling capacity and deliver on product promises like the airdrop to retain longer-term users and deposits. Leveraging partnerships with protocols integrating its technology could boost activity levels. With ample funding and a dedicated team, there is potential for Blast to recover and still emerge as a notable Ethereum scaling option. However, the network now faces an uphill battle to regain lost momentum and trust following its choppy start.
