MegaETH USDm (USDm) is the native stablecoin for the MegaETH blockchain, an Ethereum Layer 2 network designed for high-throughput, low-latency applications. ^{[1] [2]} Developed in partnership with Ethena Labs, USDm's primary purpose is to create a new economic model for Layer 2s by using the yield generated from its U.S. Treasury-backed reserves to subsidize the network's operational expenses. ^{[7] [3]} This mechanism allows MegaETH to price gas "at-cost" and provide users with consistently low and stable transaction fees. ^{[4] [5]}​

Overview and Purpose

​MegaETH USDm was conceived as an integral component of the MegaETH Layer 2's economic architecture. Announced on September 8, 2025, the stablecoin was designed to address the perceived misalignment of incentives in traditional Layer 2 networks. ^{[7] [3]} According to MegaETH, many Layer 2s generate revenue by adding a markup to sequencer fees, which can create volatility and conflict with user interests, especially as technologies like EIP-4844 reduce underlying data costs. ^[3]​

USDm's model circumvents this by programmatically directing the yield from its underlying reserve assets to cover the sequencer's operational expenses (OPEX). This allows the sequencer to run "at-cost" without needing to generate profit from transaction fees. ^[7] The stated goal of this approach is to align incentives across all network participants—users, application developers, and the network itself—by keeping transaction costs minimal and predictable. ^{[3] [2]} This economic design is intended to make the MegaETH network particularly suitable for real-time, high-throughput applications that require low and stable fees to be viable. ^[2]​

​Shuyao Kong, co-founder of MegaETH, stated: "USDm means lower fees for users and a more expressive design space for applications. We are excited to work with Ethena to enable a win-win scenario for all stakeholders in our ecosystem." ^[7]​

Backing and Reserves

The initial version of USDm is issued using Ethena Labs' "Stablecoin-as-a-Service" platform, also referred to as a "whitelabel stack". ^{[2] [6]} It is built directly on Ethena's USDtb infrastructure, meaning USDm is directly backed by Ethena's USDtb stablecoin. ^[2]​

The reserves backing USDtb, and by extension USDm, are designed for institutional-grade stability and are held fully on-chain. The primary reserve asset for the initial version of USDm is BlackRock's tokenized U.S. Treasury fund, BUIDL, which is managed via the Securitize platform, with a target allocation of approximately 90%. The remainder is held in liquid stablecoins to ensure sufficient liquidity for redemptions. The architecture is designed to be flexible, allowing for future changes to its collateral composition. ^[7] At the time of its announcement, USDm did not offer direct fiat redemption; instead, users could swap USDm for the underlying USDtb. The stablecoin is designed for deep integration across the MegaETH ecosystem, including use in wallets, paymaster services, and decentralized applications (dApps). ^[3]​

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Compliance

Through its partnership with Ethena Labs, USDm gains a potential compliance pathway under the U.S. GENIUS Act framework. This is facilitated by Ethena's established relationship with Anchorage Digital Bank. ^[7] The MegaETH team noted that this framework influenced the stablecoin's economic design, stating that direct yield distribution to users was not considered a feasible option, making the subsidization of network operational expenses the primary use for the generated yield. ^[3]​

In a statement regarding the use of reserve yield, the MegaETH team clarified their position:

"The point of the stablecoin is to give the community better outcomes (yield distribution is not possible bc of genius). Today, that is OPEX. As stablecoin rev grows and mega matures, how that yield is best put back into users will also change." ^[3]

History and Development

The development of USDm is part of the broader MegaETH project, which focuses on building a high-performance Layer 2. The project's timeline includes several key milestones preceding the stablecoin's launch.

In December 2024, the MegaETH project raised $10 million in funding in three minutes through Echo, an angel investor platform founded by Jordan Fish (also known as Cobie). Following its initial funding, MegaETH deployed its public testnet in early March 2025. This testnet demonstrated high-performance metrics, with block times of 10 milliseconds and transaction throughput reported to be over 20,000 transactions per second (TPS), with an eventual target of up to 100,000 TPS. ^{[7] [3]}​

In October 2025, MegaETH conducted its public MEGA token sale, which was reportedly oversubscribed by 27 times and drew more than $1.39 billion in maximum bids. Participation in this sale required Know Your Customer (KYC) verification, which later became a prerequisite for the USDm pre-deposit program. ^[1]​

The plan to launch the USDm stablecoin was officially announced on September 8, 2025, in partnership with Ethena Labs. ^{[7] [3] [2]}​

USDm Pre-Deposit Launch (November 25, 2025)

To bootstrap liquidity ahead of its mainnet launch, MegaETH initiated a pre-deposit window for USDm on November 25, 2025. The event was highly anticipated but experienced significant operational issues. ^{[4] [5] [8]}

The Plan

The pre-deposit program was scheduled to begin at 9 a.m. ET on November 25, 2025. It was designed with the following parameters:

• Total Deposit Cap: $250 million. ^[1]
• Individual Cap: None. ^[6]
• Accepted Asset: Only USDC on the Ethereum network. ^[1]
• Allocation: First-come, first-served. ^[6]
• Eligibility: Participation was restricted to users who had completed KYC verification for the October 2025 MEGA token sale. Residents from several jurisdictions, including the United States, United Kingdom, China, and Russia, were excluded. ^[1]
• Lock-up: All deposited funds were to be locked until the official mainnet launch of the MegaETH network. ^[1]
• Incentives: Pre-depositors were told they would "get consideration towards the Rewards Campaign." ^[1]

The initial plan was praised by some observers for its controlled approach. One analyst noted, "USDm going live under Ethena’s whitelabel stack plus a hard cap on deposits is exactly the kind of controlled rollout you want for something this size." ^[6]​

Launch Day Events and Technical Issues

Despite the planned controlled rollout, the launch quickly devolved into a series of compounded technical failures and reactive measures by the team. ^[8]

1. Initial Failures: At the scheduled start time, all user deposit transactions began to fail. The root cause was identified as a SaleUUID (a unique identifier) mismatch between MegaETH's Pre-Deposit Contract and the value expected by the third-party KYC provider, Sonar. Fixing this required a multisig transaction, which introduced a delay. ^[8]
2. Second Outage: Immediately after the initial issue was fixed, Sonar's API began blocking traffic due to a misconfigured rate limit that was too low for the event's demand. This again halted all deposits until the team resolved the issue 23 minutes later. ^[8]
3. Instant Cap Fill: Once services were restored at an unannounced time, the initial $250 million deposit cap filled in just 156 seconds, primarily by users who were continuously refreshing the website. ^{[9] [8]}
4. Cap Increase Plan & Multisig Issue: To accommodate the high demand, the team announced a plan to raise the deposit cap to $1 billion and scheduled it for the top of the next hour. They prepared the necessary 4-of-6 Safe multisig transaction in advance. ^[8]
5. Premature Execution: A core feature of Safe multisigs allows any external user to trigger a transaction once it has gathered the required signatures. An external party discovered the fully signed transaction and executed it approximately 30 minutes before the announced time. This unexpectedly reopened deposits, allowing users monitoring the blockchain to deposit while others waited for the official time. ^{[8] [4]}
6. Chaotic Deposits & Damage Control: The premature opening led to a disorderly surge of deposits. Scrambling to regain control, the team first attempted to set a new, lower cap of $400 million, but by the time this multisig transaction confirmed, total deposits had already surpassed that amount. A subsequent transaction to cap the deposits at $500 million was successful. ^[8]
7. Halted Expansion: With the $500 million cap completely filled and citing the preceding issues, the team officially abandoned the plan to raise the cap to $1 billion. ^{[8] [5]}

Aftermath and Official Response

The final total deposit amount was halted at $500 million. ^{[5] [8]} In the aftermath of the event, the MegaETH team publicly acknowledged the failures and issued an apology for the "subpar user experience."

"We've encountered unexpected issues throughout the process and are no longer moving forward with the $1 billion cap. We will be sharing a retro shortly. Apologies for the turbulence." ^[4]

The team later published a detailed post-mortem on the social media platform X, stating, "This was not acceptable... we expect higher of ourselves and there are no excuses." ^[8] They reassured the community that despite the operational errors, no user funds were lost and all smart contracts remained secure. A withdrawal option was also provided for users who were unsettled by the turbulent launch, particularly those who deposited under the assumption of the original $250 million cap and wished to exit their positions. ^{[8] [4]}​