MegaETH’s $400 Million Stablecoin Launch Goes Wrong, All Funds Refunded
TLDR
- MegaETH will refund all deposits from its USDm Pre-Deposit Bridge after operational failures during launch
- A misconfigured multisig transaction allowed early reopening, causing deposits to exceed $400 million unintentionally
- Technical issues included incorrect contract parameters, KYC provider rate limits, and timing control failures
- The $250 million cap was filled within minutes, locking out users who relied on official communications
- Refunds are pending smart contract audit, with a new USDC-USDm bridge planned before mainnet beta launch
MegaETH will return all funds deposited into its Pre-Deposit Bridge following a series of technical failures that disrupted the launch of its native stablecoin, USDm. The Ethereum Layer-2 project announced the decision Thursday on X, acknowledging what it called “sloppy execution” during the rollout.
The pre-deposit campaign opened Tuesday with a $250 million limit. Users immediately encountered problems when the deposit contract contained an incorrect SaleUUID parameter. This required an emergency multisig update to fix.
At the same time, Sonar, the KYC provider handling identity verification, applied strict rate limits that blocked many users from accessing the platform. The team needed more than 20 minutes to identify and resolve the issue.
Once the system came back online, deposits resumed at a randomized time. Users who were actively refreshing the page filled the entire $250 million cap within minutes. Those waiting for official announcements found themselves locked out completely.
MegaETH then decided to raise the deposit cap to $1 billion. This is where the most serious problem occurred.
During the process of increasing the cap, a multisignature transaction controlling the contract parameters was misconfigured. The transaction was set to require all four signatures instead of three out of four. Once the required signatures were collected, the transaction became executable by anyone.
An external party executed the queued transaction roughly 30 minutes before the bridge was scheduled to reopen. Deposits resumed earlier than planned and quickly surpassed $400 million.
The team attempted to contain the situation by reducing the cap to $400 million. Transaction speeds meant this effort failed as deposits continued flowing in. A second attempt to set the cap at $500 million also failed to stop the uncontrolled inflow.
MegaETH eventually suspended the entire process. The team scrapped plans to expand the limit to $1 billion and halted further deposits, citing unresolved bugs in the KYC system.
Technical Details Behind the Failure
The misconfigured multisig transaction created a critical vulnerability in the launch process. Safe multisig transactions become executable by any party once the required number of signatures is reached. MegaETH lost control over the timing of the cap increase as a result.
The team emphasized that no user funds were ever at risk during these events. All deposits remained secure in the smart contract throughout the process.
The KYC provider issues added to the chaos. Sonar’s rate limiting prevented legitimate users from completing deposits during the initial window. This created an unfair advantage for users who managed to bypass or avoid these restrictions.
What Happens Next
MegaETH will process refunds through a new smart contract currently under audit. The team did not provide a specific timeline for when refunds will begin, stating only that repayments will start shortly after the audit completes.
The project plans to reopen a conversion bridge between USDC and USDm before launching its Frontier mainnet. This beta phase will aim to establish stable liquidity under more controlled conditions. The team stated that depositor contributions will be recognized in the future but did not specify how.
MegaETH is designed as an Ethereum Layer-2 network targeting high-speed transactions. The project claims theoretical capacity of up to 100,000 transactions per second with sub-millisecond latency and fees below $0.01. Ethereum currently processes about 30 transactions per second.
The refund contract is under audit, with all deposits set to be returned to participants.
The post MegaETH’s $400 Million Stablecoin Launch Goes Wrong, All Funds Refunded appeared first on CoinCentral.
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