MegaETH Refunds All Pre-Deposit Funds After USDm Launch Failures

TLDR

• MegaETH will refund all funds from its USDm Pre-Deposit Bridge following operational failures during launch
• A misconfigured multisig transaction allowed deposits to reopen 34 minutes early, pushing total deposits past $400 million
• Technical issues included a wrong contract parameter, strict KYC rate limits, and loss of control over transaction timing
• The refund contract is currently under audit with repayments starting after review completion
• MegaETH plans to reopen a new USDC-USDm conversion bridge before its Frontier mainnet beta launch

MegaETH announced on Thursday it will refund all user deposits from its Pre-Deposit Bridge for USDm, the network’s planned stablecoin. The Ethereum Layer-2 project admitted to multiple operational failures during the launch process.

The team opened pre-deposits on Tuesday with a $250 million cap. Problems started immediately when the deposit contract contained an incorrect SaleUUID that required a multisig update to fix.

At the same time, Sonar, the KYC provider handling identity verification, applied unexpected rate limits that blocked most user traffic. The team took over 20 minutes to identify and resolve the problem.

When deposits reopened at a randomized time, users who were actively refreshing the page filled the entire $250 million cap within minutes. Many users who relied on official announcements were unable to participate.

MegaETH then decided to raise the cap to $1 billion. During this process, the team misconfigured a multisignature transaction that controls contract parameters.

The transaction was incorrectly set to require all four signatures instead of three out of four. This error allowed an external party to execute the queued transaction roughly 34 minutes before the planned reopening time.

Early Execution Causes Chaos

Deposits resumed earlier than scheduled because Safe multisig transactions can be executed by anyone once required signatures are met. The team lost control of the timing completely.

Total deposits quickly surpassed $400 million as the early opening caught the team off guard. MegaETH tried to limit damage by reducing the cap to $400 million, but transaction confirmation delays meant deposits kept flowing in.

A second attempt to set the cap at $500 million also failed. By that point, MegaETH suspended the entire process and scrapped plans to expand the limit to $1 billion.

The team cited unresolved bugs in the KYC flow as an additional reason for halting operations. In their announcement, MegaETH acknowledged the execution was “sloppy” and that expectations were not aligned with their internal goals.

Refund Process and Future Plans

All deposits will be returned through a new smart contract currently under audit. MegaETH stated that no funds were ever at risk during the incidents.

The team said depositor contributions will be recognized later but did not provide specific details. A new USDC-USDm conversion bridge will open before the Frontier mainnet beta launch.

MegaETH describes itself as an Ethereum Layer-2 network focused on transaction speed and low costs. The project claims theoretical capacity of up to 100,000 transactions per second with fees below $0.01.

Ethereum currently processes about 30 transactions per second. MegaETH uses a proof-of-stake model with performance-based staking rewards.

Token holders who stake MEGA will participate in governance through a decentralized autonomous organization. Both the DAO and full staking framework are expected to launch 12 to 18 months after mainnet goes live.

The refund process will begin after the audit of the new contract is completed. MegaETH plans to establish stable liquidity before attempting a wider rollout of its network.

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