Complete Analysis of the MegaETH Pre-deposit Event: Technical Error Leads to Full Refund, Layer 2 Ecosystem Governance Sparks Heated Discussion

The Ethereum Layer 2 scaling solution MegaETH announced on May 23 that it will fully refund all funds raised during the pre-deposit bridge event. The incident stemmed from the USDm stablecoin pre-deposit activity on May 21, where the fundraising process went out of control due to third-party bridge service interruptions, multiple adjustments to the deposit limit, and errors in multi-signature transaction configurations. Data shows that the initial $250 million quota was sold out in 3 minutes, and the misconfiguration allowed deposits to open early and exceed $400 million. This incident not only exposed operational safety risks in emerging Layer 2 projects but also triggered deep reflections on the maturity of decentralized finance infrastructure in the market.

The Ups and Downs: The 48-Hour Chaotic Journey of the Pre-Deposit Bridge

On May 21 at 9 AM Eastern Time, MegaETH officially launched the pre-deposit bridge activity for the USDm stablecoin. As the first public offering of this Layer 2 network's native stablecoin, the activity encountered technical failures from a third-party bridging service provider at the outset, resulting in nearly 1 hour of service disruption. It is worth noting that USDm is designed as a collateralized stablecoin pegged 1:1 to the US dollar, and the pre-deposit mechanism before its mainnet launch aims to ensure exchange stability by pre-loading collateral.

After the service was restored, the originally planned deposit limit of $250 million was quickly filled within 3 minutes, reflecting the strong demand in the market for high-performance Layer 2 solutions. The team subsequently announced an increase of the limit to $1 billion, but this decision became the catalyst for subsequent chain issues. According to on-chain data monitoring, at this time, more than 20,000 independent addresses were participating in deposits, mainly transferring funds through cross-chain channels of mainstream CEX.

During the adjustment of the deposit limit, the team originally planned to execute transactions using a 3-of-4 multi-signature mechanism, but mistakenly set it to a 4-of-4 full signature mode. This configuration error allowed permissions that should have been controlled to be compromised by external participants, resulting in the deposit channel unexpectedly opening 34 minutes before the planned restart. The event has now escalated from a simple technical failure to a typical case of governance mechanism failure.

Technical Error Deep Dive: Multi-signature Vulnerability and Risk Control Deficiency

The core technical issue of this incident focuses on the permission management aspect of smart contracts. Multi-signature wallets, as a standard security solution for decentralized projects, have their signature threshold settings directly related to the control of funds. The MegaETH team acknowledged in a community announcement that the originally designed 3-of-4 signature scheme could ensure that even if a single key is lost, normal operations would not be affected; however, the incorrect 4-of-4 setting has left the system in a vulnerable “all or nothing” state.

Key Error Node Timeline

• 09:00 ET: Pre-deposit starts, third-party bridge service interrupted
• 10:00 ET: Service restored, $250 million limit exhausted in 3 minutes
• 10:15 ET: The team announced that the cap has been raised to 1 billion USD.
• 10:42 ET: Misconfiguration of multi-signature transaction led to early opening of deposits.
• 11:20 ET: Deposits exceed 400 million USD, the team resets the limit for the first time.
• 12:05 ET: The secondary adjustment limit is set to stop expanding at 500 million USD.

From a risk control perspective, this incident has exposed three deep-seated issues: first, the project team is overly dependent on third-party service providers and has failed to establish effective backup plans; second, the upgrade mechanism of the smart contracts lacks a sandbox testing phase; finally, the community communication channels have not timely synchronized change information. These deficiencies are also evident in deposit activities of similar projects like Stable, resulting in common industry risks.

Blockchain security experts point out that Layer 2 projects often underestimate the importance of traditional financial-level risk control while pursuing transaction speed. Although the zero-knowledge proof technology used by MegaETH can achieve tens of thousands of transactions per second, the maturity of the underlying governance framework still requires time to settle. It is worth noting that the affected funds have all entered traceable smart contracts, providing convenience for subsequent audits.

Refund Plan and Ecological Reconstruction Path

According to the official announcement on May 23, the refund smart contract is undergoing a security audit by a third-party organization, and it is expected to initiate the automatic refund process within 7 working days after the audit is completed. The team emphasizes that “depositors' contributions will not be forgotten,” suggesting that early participants may be compensated through airdrops or preferential treatment. This crisis management approach shows improvement compared to the multiple DeFi project exit scams that occurred in 2023.

It is worth noting that MegaETH has also announced an ecological reconstruction plan: before the launch of the Frontier mainnet test version, the conversion bridge between USDC and USDm will be reopened. This initiative aims to prepare for the complete mainnet launch by introducing more liquidity support. From the technical roadmap perspective, the project's use of parallel EVM architecture and instantaneous determinism features is still regarded as an important evolution direction for the next generation Layer 2.

Market analysts believe that although this refund decision has caused a short-term crisis of trust, it will help standardize the operational standards of emerging projects in the long run. Compared to the delays in the mainnet of several Layer 1 projects at the beginning of 2024, MegaETH's quick response reflects the team's sense of responsibility. Currently, the community is more concerned about whether it can validate the repair plan in the pressure test of the testnet in June, particularly in the upgraded version of the multi-signature module.

Reflection on Layer 2 Financing Models and Industry Insights

The MegaETH event is not an isolated case. Just last month, the Layer 1 public chain Stable, which focuses on stablecoin trading, also sparked controversy during its pre-deposit phase. On-chain data shows that a majority of the first round of deposits was seized by a few large wallets before the official opening, leading the community to question whether there was internal manipulation by the project team. These two incidents collectively reflect a common pain point in the current blockchain financing ecosystem: the gap between technological idealism and operational reality.

From the perspective of industry development stages, 2024 has become the concentrated landing year for Layer 2 solutions. According to Dune Analytics data, as of May, the total locked value (TVL) across all tracks has exceeded $45 billion, a 210% increase compared to the same period last year. However, the frequent loss of control in financing activities has exposed a mismatch between the speed of infrastructure construction and the scale of capital inflow. Industry experts suggest that new projects should establish a three-stage verification mechanism: smart contract auditing, simulated environment stress testing, and gradual release of quotas.

For investors, this incident serves as a reminder to pay attention to three dimensions when participating in early projects: the blockchain operation and maintenance experience of the technical team, the multi-protection mechanisms of smart contracts, and the completeness of crisis response plans. Although MegaETH's commitment to a full refund avoided direct financial losses, the improvement of industry governance transparency still requires the community to jointly promote it.

Aftermath of the Event and Outlook on Ecological Evolution

The refund decision of MegaETH has temporarily mitigated the trust crisis, but the market recognition of its technical roadmap will face more severe tests. With the imminent launch of the EigenLayer mainnet and the gradual implementation of the Polygon 2.0 architecture, the second half of 2024 will become a critical reshuffling period for Layer 2 solutions. Whether the project can find a balance between maintaining community trust and promoting technological innovation will determine its ability to secure a place in the fiercely competitive scalability race. This incident has also prompted more developers to reassess the eternal proposition of “speed and security” in decentralized governance, injecting reflective momentum into the mature evolution of the entire industry.