USDB: a new stablecoin based on the Layer 2 blockchain (Layer 2)
This move allows decentralized platforms to attract additional liquidity, which can positively impact their development. Blast was one of the projects that issued its own stablecoin.
What is USDB?
USDB (USDB) is a stablecoin issued on the Layer 2 (or L2) Blast blockchain. Since March 2024, when the protocol was launched, USDB has rapidly gained popularity and expanded its user base. USDB was the first stablecoin to launch initially on a Layer 2 network. Stablecoins are usually released first on Layer 1 blockchains such as Ethereum, Solana, TON, and others, but USDB was a unique case.
Blast is a layer 2 network designed to help scale the Ethereum blockchain and provide a liquidity protocol for generating returns from ETH cryptocurrency and stablecoins. In just one quarter after launch, the blockchain value locked in (TVL) of the Blast protocol has grown from zero to $1.24 billion as of July 2024.
The capitalization of USDB stablecoin exceeds $370 million. USDB is among the ten largest stablecoins by this indicator, only slightly inferior to PayPal USD, which could not gain even $100 million capitalization despite the high popularity of its payment service (PayPal has about 435 million active users worldwide).
How does Blast work?
Blast generates revenue through native Ethereum staking (as a validator) and RWA. Blast can be seen as a liquid-stacking protocol like Lido Finance and RocketPool, only at the second layer of the blockchain, which reduces transaction costs.
One of Blast's main features is that the protocol is designed so that the user does not transfer a wrapped token (such as WETH or stETH) to the second-layer network but rather the native ETH cryptocurrency of the Ethereum network, a process called relocation. In other words, ETH is not "wrapped" when transferred from Ethereum L1 to Blast L2 but is directly transferred.
Why would Blast need its stablecoin?
Problems with "relocating" tokens, including "stable" tokens, were one of the main reasons for launching its own USDB stablecoin. Tokens such as Tether (USDT), USD Coin (USDC), and others cannot be relocated from one network to another — they only turn around: that is, they are blocked in the smart contract of one network and unblocked in another.
USDB became the first stablecoin to relocate for various smart contracts, just like ETH from Ethereum to Blast. This has become the main feature of this stablecoin.
As in the case of ETH and stablecoins, users can block their USDB tokens and receive automatic returns from them, which are generated by the Blast relocation functionality used.
USDB outlook
As noted above, USDB stablecoin is gaining capitalization at a fairly high rate: $370 million in just four months. For example, PayPal USD (PYUSD) reached only $158 million during the same period, and the largest euro-linked stablecoin, STASIS Euro (EURS), reached only $135 million in capitalization during its five years of existence.
Considering the growth rate of the L2 ecosystem Blast itself, the prospects of USDB stablecoin are quite optimistic. For now, USBD is available exclusively in the Blast ecosystem, but in the future, probably with a positive outcome, this asset may appear in other blockchain networks.
Some main stop factors include the tiny liquidity compared to the leading stablecoins. When even large stablecoins such as USDC, whose capitalization exceeds $34 billion, sometimes lose their peg to the U.S. dollar, tokens with a capitalization of less than $1 billion face much higher risks.
