MegaETH, an advanced layer-2 protocol designed for high throughput on
Ethereum
networks, encountered major setbacks during the initial launch of its USDm stablecoin pre-deposit event. The team was forced to abandon its plan to raise the deposit ceiling to $1 billion after a series of technical glitches and user abuses. Originally, the project
planned to begin accepting pre-deposits
on November 25, setting a $250 million limit and focusing on verified users who had participated in the oversubscribed MEGA token
auction
. Yet, almost immediately after launch, the process was disrupted by website failures and errors in multisig transaction settings, which led the team to halt deposits at $500 million and cancel the $1 billion target
according to reports
.
The problems started when MegaETH's KYC system malfunctioned due to setup mistakes, preventing verified users from accessing the platform
according to sources
. At the same time,
a Safe multisig transaction that had all required signatures
was executed too soon, which allowed deposits to quickly surpass the $250 million cap. An internal review showed that the multisig was mistakenly set to require 4 out of 4 signatures instead of the intended 3 out of 4, which enabled the transaction to go through without proper authorization
as technical analysis shows
. This misconfiguration, combined with users repeatedly refreshing the page, caused the cap to be reached rapidly and led MegaETH to offer a withdrawal feature for those impacted
as reported
.
To make matters worse,
a suspected large-scale crypto investor took advantage of
the protocol’s pre-signed transaction process, triggering the cap increase and speeding up the distribution of USDm before the official start. The overall cap was later adjusted to $5 billion, with more than $4.83 billion already distributed, reflecting both high demand and operational weaknesses
as detailed in reports
. The MegaETH team admitted to the mistakes in a public statement, saying, "We hold ourselves to a higher standard and accept full responsibility," while also pledging to implement a retroactive fix and withdrawal process for those affected
according to team statements
.
Despite these launch difficulties, MegaETH remains optimistic about its USDm stablecoin, which is created through Ethena's USDtb mechanism and is intended to help cover sequencer expenses on its real-time, Ethereum-based layer-2 platform
as described in reports
. The initiative,
supported by Ethereum co-founders
Vitalik Buterin and Joe Lubin, is targeting a throughput of 100,000 transactions per second with latency under one millisecond. Those who joined the pre-deposit phase and completed KYC during MegaETH's $1.39 billion MEGA token auction
as per official records
will be considered for future incentives, though liquidity rollout has been sped up due to the exploit
as reported
.
This episode highlights the complexities of launching large-scale blockchain projects, with some critics suggesting that stricter engineering standards could have prevented the issues
according to industry analysis
. Still, MegaETH's openness in disclosing the problems has earned some respect, even as users voice concerns about the fairness of early allocations
as noted in user forums
. The project's development schedule remains on track, with a mainnet debut planned for early 2026
according to official statements
.