Blasting L2 & Infrastructure

Weekly Recap

After last week’s surge, funding and deal count fell to robust levels despite the short holiday week. Funding totaled $98 million in 13 deals announced, with the majority again raised by infrastructure. Companies tackling privacy, data, and wallet or L1 scalability improvements continue to get funded as investors remain confident that multiple winners can emerge from already competitive verticals. Our deal of the week, Blast, is another example of a start-up getting funded in a highly competitive category (L2s). Yet teams are getting bolder in their go-to-market tactics, with Blast gaining over $200 million in TVL days after launching through innovative incentive structures. Metaverse & Gaming was the second most active category, with three deals closed. Gaming tokens have been some of the best performers in the liquid market’s recent uptick, and this bullishness has also extended to private markets. Given extended development timelines for gaming projects, many projects that raised in the last bull market are just getting to production-ready releases. The mainstream success of a blockchain-based game will likely catalyze further investment into the space.

Funding by Category

Funding by Deal Stage

Deal of The Week

Ethereum Layer 2 Blast, founded by Blur’s Tieshun Roquerre (Pacman), recently became accessible in early access following a successful $20 million funding round led by Paradigm and Standard Crypto, among others. Blast is touted to provide native Layer 2 yield for ether and stablecoins, having already attracted over ~$200 million in bridged assets in less than a week. However, there are concerns about its initial no-withdrawal policy and the structure of its referral program. The funding will support Blast’s further development as it prepares for a mainnet launch anticipated later this year.

Why is this the Deal of the Week?

Blast, aiming to pioneer Ethereum Layer 2 yield generation, announced its launch, supported by investments from notable crypto figures like Flashbots’ Hasu, Delegate’s Foobar, and eGirl Capital members. Roquerre, who revealed his identity in February, has ambitious plans for Blast and Blur, including additional investment to enhance the Blur ecosystem with Layer 2 apps for NFTs.

Blast intends to distribute tokens to its community and developers through an airdrop, allocating equally to both groups based on accumulated points. The developer airdrop is set for January 2024, coinciding with the testnet launch, while the community airdrop is planned for May.

Blast’s model offers a baseline interest rate of 0% on existing Layer 2s. Still, with its native yield, it promises automatic balance compounding, offering 4% for ether and 5% for stablecoins, along with “Blast Points.” It also provides stablecoin yields through on-chain T-Bill protocols like MakerDAO, returning the yield in USDC, and Blast’s auto-rebasing stablecoin.

Despite its growth, Blast faces criticism for its model and the delayed withdrawal option until its mainnet launch in February. The bridge to Blast is controlled by a multisig wallet managed by five individuals, raising legal and security concerns. Roquerre has yet to respond to these criticisms. Given Blur’s success in the NFT market, usurping former leader Opensea to command a majority market share, the team has shown it is capable of disruptive tactics that will lead to more competition in the L2 space.

Selected Deals 

Saga Protocol, a layer-1 blockchain project focused on delivering infinite scalability and near-zero fees, recently closed a $5 million strategic funding round ahead of its mainnet launch anticipated for this year. The round was led by Electric Capital and included IDEO CoLab Ventures amongst other crypto-focused investors enthused about Saga’s vision. The founders intend the Saga network to serve as high-performance infrastructure optimized for Web3 developers and applications through unique technical innovations. Their architecture enables unlimited blockspace without the need for sharding relied on by other competitors.

Privy, a decentralized data privacy protocol, has raised $4 million in seed funding to continue developing solutions that empower users to control their personal data. The round was led by Paradigm and included participation from several prominent blockchain investors who share Privy’s vision for a more privacy-preserving internet. The founders created Privy to tackle the issue of centralized entities monetizing and exploiting user data without consent. Their protocol leverages zero-knowledge cryptography to enable secure, encrypted data sharing that puts users back in control. Applications built on Privy allow users to selectively disclose information, implement fine-grained access controls, and get compensated when they choose to share data.