BLIP - Buyback BLAST token with yield

[unbanksy]

Executive Summary

• Blast has a narrative problem. To solve this, focus on price.
• We propose to convert yield to BLAST token by using it for buybacks. Depositors retain the full value of their yield: instead of receiving ETH or USDB, they will receive instantly liquid BLAST tokens.
• This proposal results in $36M/year buy pressure on the BLAST token.
• This proposal will also make user acquisition & engagement campaigns more effective, bringing back users/builders & kickstarting another growth flywheel leading up to mobile app launch.

Motivation

Blast has a narrative problem. Despite having one of the best incentives & target markets (degens, memes, zoomers), Blast was unable to capitalize on the attention, and eventually lost the opportunity to Solana.

Night Owl

Price drives narratives. BLAST token has been down only since launch which has directly impacted its strongest lever: Gold incentives. When the price is down only, a negative reflexive cycle kicks in: Gold is valued less, user acquisition & engagement campaigns are less effective, builders leave, sentiment suffers. This is best demonstrated with Kaito’s sentiment analysis of Blast (notice the correlation between price and sentiment).

To change the narrative, we must solve for price. This proposal outlines how to bring speculation back to BLAST token, change the narrative & finally make Blast the L2 Ethereum deserves.

Proposal details

We propose to use yield from deposits to buy BLAST token & distribute it to depositors. Under this proposal, users retain the full value of their yield: instead of ETH/USDB yield, they receive yield as instantly liquid BLAST tokens with no lockup or staking requirements.

Example:

1. User bridges 1M USDC to Blast.
2. At 7.5%, this translates to 75K USDB/year or 0.0047 USDB/block in yield.
3. At current prices, the user will receive ~0.40 BLAST/block in yield, or 6.5M BLAST/year. Users can choose to keep it, or sell it; there are no vesting or staking requirements.

Currently, there is $1.2B in yield-bearing assets on Blast L2. With a conservative 3% annual yield, this generates $36M that can be used to buy BLAST on the open market every year, equating to ~$100,000/day in bids. At current prices, this bid will move price by +4.8% daily (assuming no change in liquidity and no selling). Note: this is a simplified, directional estimate. A more precise analysis would need to account for factors like slippage, available liquidity, MEV arbitrage opportunities, and other market dynamics.

Implementation

High-level, we believe that a new YieldContract can be deployed in reasonable time with the following considerations in mind:

• Simple - the implementation should prioritize simplicity, proving impact without adding too much complexity,
• Automated - the buybacks should be automated with no human involvement,
• Onchain - the buybacks should utilize all available DEX liquidity. As volume returns to Blast, market makers will fill in any missing on-chain liquidity to facilitate CEX → DEX arbitrage.
• MEV-resistant (or MEV-mitigated) - on-chain orders are subject to manipulation. To mitigate this, a randomized block-level TWAP can be utilized.

Summary

We propose to use yield from deposits to buy BLAST token & distribute to depositors. This translates to $36M/year in buy pressure, and +4.8% in daily price appreciation (with certain assumptions made).

We believe this approach has the potential to kickstart a growth flywheel: by making BLAST token a vehicle for speculation on future yield, Blast Gold becomes more valuable, making the user acquisition and engagement campaigns more effective. With this, new and existing builders now have stronger incentive levers to drive growth leading up to the mobile launch in Q1 2025.

[Thruster_Finance]

Thruster Finance contributors strongly support the proposed “BLIP - Buyback BLAST token with yield” initiative. Leveraging native yield to address Blast’s narrative and price challenges aligns with one of the core value proposition of Blast.

Price drives narrative, and the decline of BLAST’s token value has inhibited its strongest growth levers. Allocating 100% of yield to buyback BLAST ensures alignment between user incentives and Blast’s success. This approach avoids diluting value while maintaining liquidity for yield recipients, creating a win-win dynamic for both users and the ecosystem.

Additionally, this proposal helps to drive value to BLAST, making the value proposition of the token proportional to onchain liquidity. As TVL grows, this will allow for increased speculation, making the chain become more attractive to builders, reigniting the growth flywheel, and spurring speculative activity.

Moreover, integrating this approach before the mobile launch in Q1 2025 positions Blast as a leader in the mobile-first DeFi revolution. Thruster believes that this move not only restores community confidence but also sets Blast apart from competitors in the L2 landscape.

While we fully support the proposal, we recommend addressing the following for further refinement:

• Yield Distribution Transparency: Ensure clear communication and transparency regarding yield mechanics, so users can confidently access their rewards.
• Liquidity and Sell-off Scenarios: Proactively monitor and respond to liquidity fluctuations to maintain stability and minimize adverse effects from sell-offs.
• Community Engagement: Actively involve the community in tracking and celebrating the program’s progress, building momentum and sentiment in real-time.

Thruster wholeheartedly supports this initiative and looks forward to its implementation and the positive impact it will undoubtedly bring to the Blast ecosystem. To help promote this initiative, Thruster will also drive further incentives to BLAST liquidity, ensuring deep liquidity and creating an ideal yield venue for liquidity providers and traders alike.

[fullyallocated]

Thanks for putting this proposal together.

Blast has always been a chain where the value proposition of being on the chain is dependent on the price, because the incentives are driven by $BLAST token price.

I think this proposal puts us in the right direction, and using the native yield could be a powerful driver in boosting incentives while still preserving liquid value of native yield returned to asset holders (USDB + WETH).

Very reminiscent of the Fenix Finance proposal (BLIP - Expanding The Native Yield Infrastructure) but I think simplifies some of the aspects of their proposal (minus rotating underlying reserves backing USDB) which I think makes adoption/execution a lot easier for Blast team to manage implementation with minimal changes.

I support this proposal, hope it goes through.

Edit:

Just wanted to echo Thruster’s sentiment here, I think its important that we clarify implementation of how the buyback execution is done, esp. in regards to minimizing slippage/prevent frontrunning on the buybacks.

[Telaga]

Telaga from Fenix Finance.

A long story short, this one is a beautiful banger. A simple and effective means to kickstart a wave of activity on Blast.

Perhaps one thing under appreciated is the scale of the Blast Gold incentive programme. At current prices, ~$60M of BLAST will be awarded to on-chain users over season 2 ending in June 2025.

As Gold is a major driver of activity and liquidity on Blast, this proposal will create a driving force for on-chain usage that is led by BLAST appreciation. This flywheel effect will get better and better.

The scale of possible BLAST appreciation here I think opens to the door for Blast to come back in a big way.

This is great news for all the protocols on Blast that have continued to build in anticipation for the full-stack upgrade, and it’s not unreasonable to think that this can lead to a new “Gold Rush” similar to what we saw before the Blast TGE. For this reason, we believe that Blast should take advantage of a positive wave to re-establish itself as the culture hub of ETH L2s.

1. Open up a new Big Bang competition for new protocols to come onboard and compete for Gold.

2. Perhaps with less of a focus on mobile. Mobile UX is hard (we think it’s a great idea), and I think most protocols on Blast are working on this but it shouldn’t be the only thing that should qualify new protocols to win the big bang.

I also agree with the comments from Thruster regarding ensuring that the buybacks are done well and liquidity management. But for us, we want to see this used as an opportunity to bring back the fun and excitement that made Blast so fun in the first place.

Looking forward to see the communities response and a big congrats to the Baseline team!

[gwr]

So big finance is for it. Shocker.
What about regular users. Without regular users, there is no big finance.
That said, I think it’s totally moot. It wont change my opinion of Blast in any sense. I will still farm the same amount of Gold. I will still keep the same amount of TVL in ETH native, etc.

Alas… remember when NFT teams used to buy back their floor. LMAO
Shit didnt work then, it wont work now.
Demand = demand. Nothing else, not buy-backs. Not burns. Nothing.
/tedtalk (again)

[Shino]

It ain´t the same tho.

Statistically speaking, at least 10% of people would never sell their blast given through emissions, i don´t say this from faith but as data.

At least 10% of people forgot to do the x24 multiplers in season 1.
At least 10% of people forgot to claim s1 airdrop within a month, hence forfeiting their airdrop.
At least 10% of people forgot to sign TOS for HL even after being reminded 100 times, hence forfeiting their airdrop

And the longer the timeframe, the higher the % of $blast that wouldn´t be sold, exponential effect.

Honestly the number would be way bigger than 10% but i prefer being conservative.

[jenn]

I like the speculation this brings to the BLAST token itself. Generally in favor of this proposal!

Echoing Thruster, would like to understand more details regarding the mechanics.

Would the foundation own the YieldContract or will that be something Baseline holds the keys to?

Are there concerns RE the sell pressure from emissions? Wondering if it would make sense to have a fee switch go live shortly after if this is approved.

Price goes up - helps narrative, but also just thinking we need to make sure there is buy in and staying power.

Edit: Another quick follow up Q, would all yield default to buying back blast? Would there be a switch to turn this on/off? Just starting to think about protocols like wasabi where vault yield takes into account native yield + protocol yield.

[Tonybearbrick]

One of the best proposals so far. Thanks for this and hope it will pass

[Gapsky3117]

Im also for the buyback proposal

[thegoldeneel]

In favor. This kind of BLIP is exactly what Blast needs (both the token and the L2).

[isko]

This one is probably viable but only if the buybacks can be executed very frequently (every block?) otherwize the bots will wait for a daily green candle and eat the margin. Randomizing won’t help much here.

We’ve seen similar situation on FTX futures and people exploited these buybacks hard.

[Zora]

@unbanksy

This translates to $36M/year in buy pressure, and +4.8% in daily price appreciation (with certain assumptions made).

My full take on this proposal:

Zora

[unbanksy]

@gwr we’re in agreement that regular users are the priority. I see this proposal as setting a strong foundation to acquire new users and reactivate churned users:

1. With a narrative reset, the timeline is no longer doomposting about Blast. Users are talking about what’s possible rather than what went wrong. New users (who are suspicious by default) will see the potential, and thus take a chance on Blast. Existing users who’ve been shafted by S1 airdrop may now reconsider, and give it another try.
2. Gold becomes more valuable. Gold convert to BLAST token. Users who are evaluating Abstract, Base and other chains are making a calculated decision to farm Blast based on the future value of their airdrop. If the token is worthless, more Gold will be needed to re-activate those users.
3. Builders drive users to their dapp. With Gold being more valuable, the same amount of Gold that builders get will now be better at incentivizing new user acquisition (or retention if they already have users).

I agree with you that this alone won’t retain users long-term (especially as rewards period comes to an end). This is why there needs to be a parallel strategy of retention executed by Blast team and builders on Blast. Users may come for the Gold but they will only stay if the dapp is making them money, the community is vibing, etc.

But the first step is fixing the price & bringing back speculation to BLAST token. This is what this proposal aims to do.

[unbanksy]

@jenn thanks. Great questions.

Regarding ownership: I believe the Foundation should own the YieldContract. Baseline is happy to offer advice on liquidity & tokenomics to optimize implementation

Regarding sell pressure: we want to be careful adding fee switches as that has backfired in the past (see Tribe Direct Incentives). I’m thinking that, rather than penalizing, Blast should create strong reason to hold the token. The upcoming mobile app launch is a compelling reason. Mobile dapps launching soon are another. Also, if there is sell pressure on the BLAST bought from yield, it will simply undo the initial buy so price will stay relatively the same (minus slippage, fees).

Regarding staying power: 100%. I see this proposal as working to acquire new users and re-activate churned users. But if there are no quality builders or dapps to use on Blast, those users will eventually churn and we’re back at square one. This proposal only works if there’s parallel effort to strengthen the ecosystem - building on the mobile narrative, and supporting great builders as they build toward pmf.

Regarding yield: there will probably be exceptions. I initially posted this to start a conversation and gauge sentiment. If there’s support for this proposal, we can do a deeper analysis with various stakeholder to identify what’s realistic. This proposal only works if all builders on Blast are onboard.

[Xaxio.eth]

Fantastic to see the Blast community so involved and positive.

Voting soon

IT’S TIME TO BUYBACK!

[unbanksy]

I’ve noticed 3 types of objections emerging to this proposal:

1. This proposal doesn’t address user engagement
2. TVL will leave
3. Selling pressure

I address each in this thread: x.com

Happy to continue the conversation here or on Twitter.

[nft_tipster]

I’m not a fan of this idea especially if it’s not optional. People depositing ETH want yield in ETH/stable. If they wanted yield in Blast they would buy Blast.

What chain really needs is an innovation and good apps which can go mainstream like Fantasy. Usually when you start to think about ways to pump the price it means that product is no good. Foundation needs to work on better Gold distribution. So much gold was wasted on terrible projects like Munchables and every distribution there are very low level apps which don’t even improve while getting a big chunk of gold.

[Ulysses]

Except you can always convert Blast to ETH or USDB with minimal friction. As it stands the chain is struggling. We’re aware that the chain needs innovation and good apps, but it’s hard to attract builders as well as users if there’s little appeal to the chain itself. Adding these buybacks can unequivocally begin that process of appealing to builders/users.

Unfortunately, the distribution of gold here is moot if, as you say, there isn’t enough innovation. I would also implore you to explore more of the blast ecosystem. I can name a couple of brilliant projects and platforms off the top of my head, though that isn’t to say the ecosystem couldn’t use, or doesn’t need, more.

[nft_tipster]

It requires active management.

I agree there are a few good apps (for example Wasabi or Cambria) but there are also some very low quality which shouldn’t be getting gold anymore. Process needs to get better. Also Blur allocated 6mil gold for Blast farming while nothing was done for NFTs on Blast and most of volume left is wash trading.

Reason chain is struggling is because Pacman decided to go for TGE while having nothing to show for next 5 months with 1y long season. He also let down loyal supporters with vesting, Blur allocation, terrible communication etc.

Edit: seems Cambria migrated, not a surprise.

[Artem]

I don’t know if this is a very good idea considering that the users who want to get yield on ETH and stablecoins will constantly have to sell BLAST for those assets. Doesn’t seem like a very good user experience.