Ethereum layer-2 project Megaeth to refund $400m after USDM launch failure

Ethereum layer-2 megaeth will refund over $400m after a misconfigured multisig and third-party bridge issues derailed its usdm pre-deposit launch.

Ethereum Layer-2 project MegaETH announced it will refund all funds raised through its Pre-Deposit Bridge following operational failures that disrupted the launch of its native stablecoin, USDm, according to a statement from the project.

The refunds follow a series of technical issues, including a misconfigured multisig transaction that triggered an early reopening of the deposit platform, pushing total deposits past $400 million, the project said. Refunds are pending completion of a smart-contract audit, with a new USDC-USDm bridge planned before the mainnet beta launch.

MegaETH opened pre-deposits for USDm on Tuesday with an initial $250 million limit. The launch encountered disruptions from the outset, according to the project’s timeline. A technical problem with a third-party bridge provider rendered the service inaccessible for approximately one hour while users awaited access.

Once the platform resumed operations, the $250 million threshold was reached within minutes. The team subsequently announced plans to raise the deposit cap to $1 billion, according to the statement.

During the process of increasing the cap, a multisignature transaction controlling contract parameters was incorrectly configured. The transaction was set to require all four signatures instead of three out of four approvals. The error allowed an external party to execute the queued transaction nearly 34 minutes before the bridge was scheduled to reopen, resulting in deposits resuming earlier than planned and surpassing $400 million.

MegaETH attempted to contain the situation by reducing the cap to $400 million, then later raising it to $500 million. The project ultimately abandoned plans to expand the limit to $1 billion.

Following the incident, MegaETH confirmed it will return all funds to participants. The refund contract is currently under audit, with repayments scheduled to begin after the review is completed, according to the project.

MegaETH plans to reopen its conversion bridge between USDC and USDm ahead of its Frontier mainnet release, which will serve as the network’s beta phase.

MegaETH is an Ethereum Layer-2 network designed to improve transaction speed and reduce costs for blockchain applications. While Ethereum processes approximately 30 transactions per second, MegaETH claims a theoretical capacity of up to 100,000 transactions per second, with sub-millisecond latency and fees below $0.01.

The project uses a proof-of-stake model with a performance-based system to calculate staking rewards. Holders who stake MEGA tokens will participate in governance through a decentralized autonomous organization, allowing them to vote on future changes. Both the DAO and the full staking framework are expected to launch 12 to 18 months after mainnet goes live, according to the project.