The MegaETH pre-deposit bridge event ended chaotically, with a full refund of the $500 million raised.

MegaETH announced the termination of the deposit bridge activity and the full refund of user funds, amounting to as much as 500 million USD, due to technical failures and operational errors. The incident exposed vulnerabilities in smart contracts and flaws in the KYC process, leading to a loss of control over the fundraising process and raising questions about the fairness of community participation. As a key stablecoin USDm geared for liquidity warm-up ahead of the upcoming Frontier Mainnet launch, this setback may impact the pace of project ecosystem development, highlighting the compliance and risk control challenges faced by new blockchain projects during fundraising.

Event Timeline: From Technical Failure to Full Refund

On November 28, MegaETH officially announced the termination of the pre-deposit bridge activity and initiated the full refund process, marking the failure of this fundraising attempt aimed at preloading liquidity for the ecosystem's stablecoin USDm. The incident originated from a technical vulnerability at the moment the pre-deposit bridge was launched: the smart contracts failed due to an incorrectly configured SaleUUID, requiring an urgent fix through a multi-signature mechanism that needed 4 out of 6 approvals. This fundamental error immediately raised user concerns about the reliability of the system.

After fixing the smart contracts, the strict rate limits imposed by the KYC service provider Sonar unexpectedly blocked a large number of user accesses. The team spent over 20 minutes identifying and resolving the issue. When the deposit function was restored, the system randomly opened time windows, causing users who solely relied on page refreshes to fill the initial quota of 250 million USD within just a few minutes, while participants waiting for official notification were completely excluded. This unfair distribution further intensified community conflicts and laid the groundwork for subsequent decisions.

The team then attempted to raise the limit to 1 billion USD to alleviate congestion, but external participants executed the limit adjustment transaction 30 minutes in advance. Since multi-signature transactions can be triggered by anyone once the conditions are met, the team lost control over the timing. Ultimately, after attempts to reduce the limit to 400 million USD and 500 million USD were unsuccessful, MegaETH completely halted activities due to a vulnerability in the KYC process that had not been fixed, and turned to a refund plan.

Key Event Timeline

• Launch moment: smart contracts SaleUUID error caused transaction failure, requires 4/6 multi-signature update
• KYC blockage: Sonar rate limiting blocks traffic, team fixes in 20 minutes.
• Deposit Open: Random time window opens, $250 million quota fills up in seconds.
• Limit Out of Control: $1 billion increase in transactions executed prematurely, team loses control of timing.
• Suspension of decision: KYC vulnerability not fixed, activity terminated and refunds initiated.

In-depth Analysis of Technical Vulnerabilities and Operational Errors

The failure of the MegaETH pre-deposit bridge is not caused by a single factor, but rather a typical case of combined technical defects and operational oversights. The incorrect configuration of the SaleUUID in the smart contracts reflects insufficient testing in the development phase; such basic parameter errors are rare in high-end blockchain projects, especially for core components aimed at supporting stablecoins on the Mainnet. The multi-signature mechanism was supposed to enhance security, but due to the possibility of external interference, it became an uncontrollable trigger, exposing the contradictions between decentralized governance and centralized operations.

The rate limiting issues in the KYC process reveal the risks of third-party service integration. Sonar, as an identity verification provider, has preset strict limits that were not adequately simulated in high concurrency scenarios in the testing environment, resulting in a large number of legitimate users being mistakenly classified as abnormal traffic during the actual launch. This misconfiguration of infrastructure, combined with team response delays, directly undermined the user experience and raised questions about the selection criteria for MegaETH ecosystem partners.

The chaotic dynamic adjustment of the capital limit further highlights the fragility of the operational process. The decision to increase the limit from 250 million USD to 1 billion USD was originally intended to alleviate congestion, but due to the loss of control over the transaction execution sequence, it instead exacerbated market panic. It is worth noting that the team internally worried that the 250 million USD limit would be difficult to achieve, and therefore did not set a personal account cap. This misjudgment of market demand ultimately led to an influx of funds far exceeding expectations, creating a vicious cycle.

Refund Mechanism and Ecological Reconstruction Path

According to the official statement from MegaETH, all funds invested through the pre-deposit bridge will be fully refunded via a new smart contract, which is currently in the auditing phase to ensure safety and reliability. While the refund process has not been given a specific timeline, the team emphasizes that “the contributions of depositors will not be forgotten,” suggesting that early participants may be recognized in other forms in the future, such as Mainnet airdrops or privileged access.

To fill the liquidity gap, MegaETH will reopen the conversion bridge between USDC and USDM before the launch of the Frontier Mainnet, but this time with stricter control mechanisms. This adjustment aims to gradually build the reserve base for the stablecoin USDm while avoiding the chaos of another large influx of funds. From an operational perspective, the new process may introduce phased quota releases, enhanced KYC verification, and a real-time monitoring system to balance fairness and efficiency.

Co-founder brother bing reflected that the team's “original intention was to hope community users could exchange USDm in advance, and interact with on-chain applications as soon as the Mainnet goes live,” but poor execution and market prediction failures led to the loss of this original intention. This statement implies that MegaETH will shift towards a more robust growth strategy, avoiding the short-term speculation of “peaking upon debut,” and instead focusing on the substantial construction of ecological applications, which aligns with the recent industry emphasis on sustainable development trends.

Industry Insights and the Competitive Landscape of Stablecoins

The MegaETH incident has provided important risk control lessons for emerging blockchain projects. In the DeFi space, security audits of smart contracts and stress testing have become standard procedures, but this issue shows that even if the underlying code is correct, operational processes and third-party integrations can still become weak links. Industry experts point out that similar fundraising activities should have a circuit breaker mechanism set in advance, such as automatically pausing when the rate of capital inflow exceeds a threshold, and reserving a manual intervention window for unexpected situations.

From the perspective of competition in the stablecoin market, the launch of USDm was originally seen as a key initiative by the MegaETH ecosystem to counter mainstream stablecoins such as USDT and USDC. This setback may delay its market penetration speed, but the team emphasizes that USDm will receive support from many Frontier Mainnet beta applications. If it can rebuild trust through the conversion bridge before the mainnet launch, there is still a chance to secure a place in niche areas. It is worth noting that several emerging public chains have recently attempted to launch native stablecoins, but technical stability and liquidity guidance remain common challenges.

For participants, this event serves as a reminder of the operational risks in crypto investments. In similar pre-deposit activities, users should not only assess the project's fundamentals and token economics but also pay attention to the technical implementation details and the team's emergency capabilities. In the short term, MegaETH needs to successfully launch through the Mainnet and establish its ecological applications to rebuild its reputation; in the long term, whether the project can stand out in the highly competitive Layer 2 space will depend on its ability to translate this lesson into a more mature product iteration strategy.

Event Impact and Industry Reflection

The chaotic ending of the MegaETH pre-deposit bridge is not only a case of technical operation failure but also reflects the eternal tension in the blockchain industry between the pursuit of innovation and the assurance of stability. The team admitted that their “rough execution” and full refunds, while damaging their reputation in the short term, demonstrated a sense of responsibility. This transparent handling may set a reference standard for crisis management in the industry. As the launch of the Frontier Mainnet approaches, whether MegaETH can turn this setback into an opportunity for ecological optimization will become a key window for observing its long-term value.

From a broader perspective, this event has intensified the market's discussion on the sustainability of fundraising models for emerging public chains. When the boundaries between community-driven and professional operations become blurred, project parties need to find a balance between openness and control. For investors, when participating in similar activities, in addition to focusing on the token economic model, they should also examine the team's technical accumulation and risk control system, in order to move forward steadily in the industry's iteration.