BLIP - Strategic TVL Reallocation for Enhanced Yield Generation

[DeLord]

BLIP - Strategic TVL Reallocation for Enhanced Yield Generation

Proposal Type

This proposal falls under the “USDB-backing composition” and “Yield distribution allocation” categories set forth in Section 4 of the Blast Foundation’s Governance Bylaws.

Executive Summary

This BLIP proposes a strategic reallocation of a portion of Blast Network’s Total Value Locked (TVL) to Hyperliquid’s HLP Vault and implementation of delta-neutral trading strategies via Liminal Finance. This initiative aims to diversify yield sources, enhance returns for Blast users, and demonstrate the network’s commitment to innovative financial strategies beyond its current offerings. By leveraging external protocols with proven track records of generating sustainable yields, Blast can supplement its native yield mechanisms and provide additional value to users who have faithfully maintained their liquidity within the ecosystem.

Motivation

As we approach the two-year mark of Blast’s journey, it’s becoming increasingly apparent that our promise of “native yield” and “real yield” requires supplementation with actual, competitive yield sources. While our tokenomics have certainly created an interesting economic experiment, the reality is that many users who expected substantial returns have instead received what could charitably be described as “participation trophies” in the form of our token emissions.

The Blast ecosystem was built on the promise of revolutionizing DeFi yield generation, yet our dApp ecosystem remains somewhat… let’s call it “developing” (much like how parents describe their child’s finger painting as “artistic”). Meanwhile, other protocols have demonstrated remarkable innovation in yield generation strategies that we could benefit from.

Rather than continuing to pretend our current yield mechanisms are sufficient, this proposal acknowledges that sometimes the best way to help your users is to admit when others are doing something better and leverage their expertise. By bridging a portion of our TVL to Hyperliquid’s HLP Vault and implementing delta-neutral strategies via Liminal Finance, we can access genuinely competitive yields while our own ecosystem continues its gradual maturation process.

This proposal isn’t just about generating better returns—it’s about demonstrating that Blast governance can make pragmatic decisions that prioritize user value over ecosystem pride. After all, the best captains know when to seek a more favorable current rather than stubbornly maintaining course through stagnant waters.

Proposal Details

This proposal outlines a comprehensive strategy to enhance yield generation for Blast Network users through strategic partnerships and TVL reallocation:

1. TVL Reallocation to Hyperliquid HLP Vault:

We propose bridging a significant portion of Blast Network’s TVL to Hyperliquid’s Hyperliquidity Provider (HLP) Vault. The HLP Vault democratizes market making strategies typically reserved for privileged parties on other exchanges, allowing the community to provide liquidity and share in the profits. Unlike our current yield mechanisms which rely heavily on token emissions with questionable long-term value, the HLP Vault generates yield through actual market making activities and receives a portion of trading fees.

Current HLP Vault statistics:

• Total TVL: $350,465,192 (as of May 2025)

• Past Month Return: 15% APR

• Historical Performance: Consistent positive returns with transparent on-chain tracking

2. Delta-Neutral Trading Implementation via Liminal Finance:

In addition to the HLP Vault allocation, we propose implementing delta-neutral trading strategies through Liminal Finance. Liminal automates advanced trading strategies to generate sustainable returns without exposure to market direction. This approach would allow Blast to offer users genuine yield that doesn’t depend on perpetual token inflation or the continued faith in our ecosystem’s growth trajectory.

Liminal Finance currently manages over $5.1 million in TVL with a proven track record of generating consistent returns through delta-neutral strategies.

3. Asset Diversification and Yield Potential:

The implementation would focus on key assets now supported on Hyperliquid, including BTC, ETH, USDe, SOL, and even the illustrious Fartcoin. This diversification reduces risk while maximizing yield potential across multiple assets.

Current APY rates that could be accessed:

• HYPE: 16.77% APY

• BTC: 8.12% APY

• ETH: 5.42% APY

• USDe: 6.86% APY

• FART: 27.21% APY (yes, really)

• SOL: 5.7% APY

These rates significantly outperform Blast’s current yield offerings, which have been primarily dependent on token emissions rather than sustainable yield-generating activities. For comparison, our current “real yield” has been diluted to the point where users might get better returns from a traditional savings account—if those still existed.

4. Professional Execution Partnership:

To ensure this initiative doesn’t follow the same execution path as some of our previous endeavors (which, to put it delicately, didn’t quite meet expectations), we recommend engaging experienced teams with proven track records in delta-neutral strategy implementation. This would help avoid the unfortunate pattern of promising the moon and delivering a slightly larger rock.

Liminal Finance has demonstrated expertise in this area, with their platform showing over $25,318 in protocol P&L and a consistent upward trajectory in their performance metrics.

I would like to point out that Liminal is a young protocol. But they are not retarded and have gud tecnologee.

5. Transparent Reporting Framework:

Unlike some of our previous initiatives where performance metrics seemed to exist in a quantum state of both “excellent” and “unmeasurable” simultaneously, this proposal includes a framework for transparent reporting on yield generation, with regular updates to the community on performance metrics.

Both Hyperliquid and Liminal provide comprehensive dashboards with real-time performance data, allowing for unprecedented transparency compared to our current “trust us, it’s working” approach.

Comprehensive Yield Analysis & Strategic Options

Current Market Validation

Based on extensive market research conducted as of May 2025, the yield opportunities outlined in this proposal have been validated with current market data:

Market Performance Updates:

• HYPE token: Currently trading at ~$36.72 (significant appreciation since launch)

• FART token: Strong momentum at $1.36 with $1.36B market cap

• Hyperliquid HLP vault: Record-high open interest of $712M demonstrating robust performance

• Liminal Finance: Growing platform with $5.1M+ TVL and proven delta-neutral execution

High-Yielding HLP Vault Options

Option 1: Maximum Yield Strategy

Asset Allocation for Aggressive Growth:

• FART: 40% allocation (27.21% APY)

• HYPE: 35% allocation (16.77% APY)

• BTC: 15% allocation (8.12% APY)

• ETH: 10% allocation (5.42% APY)

Weighted Average APY: 18.63%

Risk Assessment:

• High volatility exposure due to FART allocation

• Potential for significant gains during meme token cycles

• Requires active monitoring and rebalancing

• Suitable for risk-tolerant users seeking maximum returns

Option 2: Balanced High-Yield Strategy

Asset Allocation for Optimized Risk-Return:

• HYPE: 50% allocation (16.77% APY)

• USDe: 25% allocation (6.86% APY)

• BTC: 15% allocation (8.12% APY)

• FART: 10% allocation (27.21% APY)

Weighted Average APY: 12.86%

Risk Assessment:

• Moderate risk profile with HYPE as primary driver

• Stable base with USDe and BTC allocations

• Limited meme exposure through small FART allocation

• Suitable for users seeking growth with moderate risk tolerance

Delta-Neutral Strategy Analysis

HYPE Delta-Neutral Strategy

Strategy Overview:

• Utilizes HYPE’s high volatility for delta-neutral positioning

• Combines long HYPE exposure with short HYPE perpetuals

• Captures funding rate differentials and volatility premiums

Expected Performance:

• Base Yield: 12-18% APY

• Volatility Premium: 2-5% additional return

• Total Expected Return: 14-23% APY

Implementation Structure:

Position Composition:

- Long HYPE (spot): 50% allocation

- Short HYPE perps: 50% allocation

- Delta target: 0 (±0.15 tolerance)

- Rebalancing: Daily or when delta exceeds threshold

FART Delta-Neutral Strategy

Strategy Overview:

• Exploits FART’s extreme volatility (27.21% APY base)

• Higher risk but potentially higher returns through volatility capture

• Requires sophisticated risk management due to meme token nature

Expected Performance:

• Base Yield: 18-25% APY

• Volatility Premium: 5-12% additional return

• Total Expected Return: 23-37% APY

Implementation Considerations:

Position Composition:

- Long FART (spot): 40% allocation

- Short FART perps: 40% allocation

- Cash buffer: 20% for extreme volatility

- Delta target: 0 (±0.10 tolerance for tighter control)

- Rebalancing: Multiple times daily during high volatility

Blended Yield Scenarios

Scenario 1: Conservative Approach (Risk Score: 3/10)

Allocation Strategy:

• HLP Vault (Conservative): 60%

• ETH: 30%, BTC: 20%, USDe: 30%, SOL: 20%

• Delta-Neutral HYPE: 30%

• Cash Reserve: 10%

Expected Returns:

HLP Component: 6.52% APY

Delta-Neutral Component: 14% APY (conservative estimate)

Blended Yield: 8.11% APY

Suitable for: Risk-averse institutional investors

Scenario 2: Moderate Approach (Risk Score: 6/10)

Allocation Strategy:

• HLP Vault (Balanced): 50%

• HYPE: 40%, BTC: 25%, ETH: 20%, USDe: 15%

• Delta-Neutral HYPE: 35%

• Delta-Neutral FART: 10%

• Cash Reserve: 5%

Expected Returns:

HLP Component: 11.78% APY

Delta-Neutral HYPE: 17% APY (moderate estimate)

Delta-Neutral FART: 30% APY (moderate estimate)

Blended Yield: 14.84% APY

Suitable for: Growth-oriented users with moderate risk tolerance

Scenario 3: Aggressive Approach (Risk Score: 8/10)

Allocation Strategy:

• HLP Vault (High-Yield): 40%

• FART: 50%, HYPE: 30%, BTC: 20%

• Delta-Neutral HYPE: 30%

• Delta-Neutral FART: 25%

• Cash Reserve: 5%

Expected Returns:

HLP Component: 20.23% APY

Delta-Neutral HYPE: 20% APY (aggressive estimate)

Delta-Neutral FART: 35% APY (aggressive estimate)

Blended Yield: 22.84% APY

Suitable for: High-risk tolerance users seeking maximum returns

Economic Impact Projections

For $100M TVL Allocation

Scenario 1 (Conservative): 8.11% APY

• Annual Yield Generated: $8.11M

• Monthly Distribution: $676K

• Risk-Adjusted ROI: Strong for institutional adoption

Scenario 2 (Moderate): 14.84% APY

• Annual Yield Generated: $14.84M

• Monthly Distribution: $1.24M

• Risk-Adjusted ROI: Excellent balance of risk/return

Scenario 3 (Aggressive): 22.84% APY

• Annual Yield Generated: $22.84M

• Monthly Distribution: $1.90M

• Risk-Adjusted ROI: High returns with proportional risk

Comparison to Current Blast Performance

Current Blast Yield Mechanisms:

• Estimated APY: 1-3% (primarily token emissions)

• Sustainability: Questionable due to token inflation dependency

• User Satisfaction: Declining based on community feedback

Proposed Strategy Improvements:

• Yield Enhancement: 2.7x to 22.8x increase over current mechanisms

• Sustainability: Real yield generation vs. token inflation

• Risk Management: Professional execution and transparent reporting

• User Choice: Multiple risk profiles to accommodate diverse preferences

Risk Management Framework

Position-Level Risk Controls

1. Liquidation Protection: Maintain 20%+ margin buffer

2. Correlation Monitoring: Daily analysis between assets

3. Volatility Limits: Maximum 30% allocation to volatile assets (FART)

Portfolio-Level Risk Management

1. Maximum Drawdown: Target <15% in any 30-day period

2. Diversification: No single strategy >40% of total allocation

3. Liquidity Requirements: 5-10% cash buffer for operations

Platform-Level Security

1. Smart Contract Audits: Regular security assessments

2. Insurance Coverage: Evaluate protocol insurance options

3. Regulatory Compliance: Monitor regulatory developments

Strategic Recommendations

Recommended Initial Implementation:

Begin with Scenario 2 (Moderate Blend) targeting 14.84% APY:

• Provides excellent risk-adjusted returns

• Balances growth potential with risk management

• Suitable for broad user adoption

• Allows for gradual scaling based on performance

Success Factors:

• Professional execution through proven platforms (Liminal Finance)

• Transparent reporting and regular rebalancing

• Strong risk management protocols

• Community feedback integration

• Phased implementation approach

Implementation

The implementation of this proposal would proceed in the following phases:

1. Phase 1: Initial Bridge and Setup (Weeks 1-2)

• Establish secure bridging infrastructure between Blast Network and Hyperliquid

• Create dedicated smart contracts for managing the bridged assets

• Set up monitoring and reporting systems for transparency

• Engage with Liminal Finance to configure delta-neutral strategies

• Use my invite code for Hyperliquid and Liminal

2. Phase 2: Gradual TVL Migration (Weeks 3-6)

• Begin with a conservative 10% TVL allocation to test systems

• Gradually increase allocation based on performance and security validation

• Implement automated yield distribution mechanisms back to Blast users

3. Phase 3: Strategy Optimization (Weeks 7-12)

• Fine-tune asset allocation across different strategies based on performance

• Optimize delta-neutral parameters for maximum sustainable yield

• Expand to additional assets as they become available on Hyperliquid

4. Phase 4: Full Integration (Weeks 13+)

• Complete integration with Blast’s user interface for seamless experience

• Implement one-click options for users to opt in/out of enhanced yield strategies

• Develop educational resources to help users understand the new yield sources that are actually real

This phased approach ensures we can validate each step before proceeding, unlike some of our previous launches where we seemed to operate on the “deploy first, debug in production” philosophy that has become something of a Blast trademark.

Associated Costs

The total anticipated costs to implement this BLIP include:

1. Development and Integration: $150,000-$200,000 for smart contract development, security audits, and UI integration. This might seem expensive compared to our usual approach of “launching and hoping for the best,” but professional development tends to cost actual money. If you use my referral codes, I promise to rebate you a small portion of Circle United States Freedom Dollars.

2. Operational Costs: $15,000-$25,000 monthly for ongoing management, monitoring, and optimization of the strategies. Yes, maintaining financial infrastructure requires continuous investment—who knew?

3. Bridge Security: $100,000-$150,000 for comprehensive security audits of the bridging mechanism. This is significantly more than we’ve typically allocated for security, but perhaps that explains a few things.

4. Professional Strategy Management: $50,000-$75,000 quarterly for expert management of delta-neutral strategies. Unlike previous initiatives where we seemed to believe expertise would materialize through sheer enthusiasm, this proposal acknowledges that professional services require compensation.

These costs would be offset by the enhanced yield generated through the strategies. Based on our comprehensive yield analysis and current performance metrics from Hyperliquid and Liminal Finance, we could expect:

Conservative Scenario (8.11% APY):

• Annual yield on $100M TVL allocation: $8.11M

• Net yield after costs (~$1.5M annually): $6.61M

• ROI on implementation costs: 1,653% over first year

Moderate Scenario (14.84% APY) - Recommended:

• Annual yield on $100M TVL allocation: $14.84M

• Net yield after costs (~$1.5M annually): $13.34M

• ROI on implementation costs: 3,335% over first year

Aggressive Scenario (22.84% APY):

• Annual yield on $100M TVL allocation: $22.84M

• Net yield after costs (~$1.5M annually): $21.34M

• ROI on implementation costs: 5,335% over first year

Even our most conservative scenario delivers 2.7x improvement over current Blast yields, while our recommended moderate approach provides nearly 5x improvement. This significantly outperforms our existing yield mechanisms, which have primarily consisted of distributing tokens that somehow manage to decrease in value faster than they’re emitted.

Expected Benefits

1. Enhanced User Returns: Users would gain access to genuinely competitive yields rather than the current “down only” token emissions they’ve become accustomed to.

2. Ecosystem Credibility: By partnering with established protocols that actually deliver on their promises, we could begin to repair some of the credibility damage from our previous “overpromise, underdeliver” approach.

3. Risk Diversification: The delta-neutral strategies would provide yield that isn’t dependent on market direction, reducing the overall risk profile for users.

4. Competitive Positioning: This initiative would position Blast as a forward-thinking network that prioritizes user value over ecosystem maximalism—a refreshing change in the current landscape.

5. Sustainable Growth: By generating actual returns rather than relying on token emissions and hype cycles, we could establish a foundation for sustainable long-term growth.

Prior Proposals

There have been no prior proposals specifically addressing the reallocation of TVL to external protocols for yield enhancement. This represents a novel approach to addressing the yield challenges that have become increasingly apparent in our ecosystem.

However, this proposal does build upon community discussions regarding the need for more sustainable and competitive yield mechanisms beyond our current token-emission-heavy approach.

References

1. Hyperliquid HLP Vault: Hyperliquid

2. Hyperliquidity Provider (HLP): https:// medium[dot]com/@hyperliquid/hyperliquidity-provider-hlp-democratizing-market-making-bb114b1dff0f

3. HLP Update - 3 Months In: https:// medium[dot]com/@hyperliquid/hlp-update-3-months-in-42327abe3e57

4. Liminal Finance Documentation: https://docs.liminal.money/

5. Liminal Finance Statistics: https:// liminal.money/stats

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Note: This proposal is submitted with equal parts sincerity and self-awareness. While the tone may be playful, the underlying issues and potential solutions are very real. Sometimes it takes a bit of humor to address serious challenges, and Blast’s yield generation mechanisms certainly qualify as a challenge worth addressing. I’ve been fisted long enough.

Yours Truly,

DeLord