MegaETH to return all funds from pre-deposit bridge, citing 'sloppy' execution

MegaETH, an upcoming Ethereum Layer 2 scaling solution, announced that it has decided to return all capital raised from its bridge fundraising activity.

"Execution was sloppy and expectations weren't aligned with our goal of preloading collateral to guarantee 1:1 USDm conversion at mainnet," the MegaETH team wrote in a post on social media platform X on Thursday.

On Tuesday, MegaETH opened deposits for USDm, the native stablecoin for the blockchain. However, the event execution was marred with outages, several changes in deposit cap, and a misconfigured multisig transaction that triggered an unexpected early reopening of deposits.

The bridge launch for the stablecoin was scheduled for 9 a.m. ET with an initial $250 million cap. However, the event was immediately affected by an operational issue involving the third-party bridge provider, rendering the service inaccessible for approximately one hour. Following service restoration, the $250 million limit was reached in less than three minutes. MegaETH subsequently announced a decision to raise the cap to $1 billion.

Operational control failed during the cap adjustment process, where the multisig transaction queued to increase the cap was incorrectly configured with a 4-of-4 signature requirement instead of the intended 3-of-4. This mistake allowed the transaction to be executed by an external party approximately 34 minutes before the planned bridge relaunch.

The premature reopening led to deposits surpassing $400 million. The MegaETH team then attempted two cap resets, first to $400 million, and then to $500 million. After this, the team said it will no longer expand the cap to $1 billion.

In the Thursday announcement, MegaETH said the smart contract for the refund process is currently under audit, and refunds will be made shortly after the completion.

"Depositor contributions will not be forgotten," the team added.

MegaETH said that it will reopen the conversion bridge between USDC and USDm ahead of the launch of Frontier mainnet, the upcoming mainnet beta for the Layer 2, to deepen liquidity prior to the full launch.

Stable, a Layer 1 blockchain focused on stablecoin transactions, also met controversy during the first phase of its deposit campaign last month, where onchain data showed that a bulk of deposits were filled by a small cluster of large wallets prior to the official opening. Crypto community members scrutinized the situation, alleging involvement of insiders.