MegaETH launches native USDm stablecoin with Ethena to subsidize sequencer fees
Quick Take MegaETH, an Ethereum scaling solution by MegaLabs, is introducing a new stablecoin called USDm. Instead of charging sequencer margins like most Layer 2s, USDm will use reserve yield to fund sequencer operating expenses. This is meant to keep transaction fees low and stable while aligning incentives between the chain, users, and developers.
MegaETH, an Ethereum scaling solution developed by MegaLabs, is introducing a stablecoin named USDm on the chain that’s touted to replace traditional sequencer margins and route reserve yield to cover network operations, according to details shared with The Block.
Built in partnership with decentralized finance protocol Ethena, the model is designed to align chain and ecosystem incentives by running the sequencer at cost and keeping transaction fees low and stable for users and builders.
Several Layer 2 networks generate revenue by adding a markup to sequencer fees. According to MegaETH, this model can create tension with users and developers, especially as EIP-4844 reduces data costs and makes fee margins more unpredictable.
USDm seeks to resolve this by channeling stablecoin reserve yield toward shared network costs when the project goes live on mainnet. Rather than serving as profit for the chain, the reserve income is programmatically directed to cover sequencer operating expenses.
The project launched its public testnet earlier this year and is currently operational, featuring 10ms block times and over 20,000 transactions per second.
USDm on Ethena's rails
The first iteration of USDm will be issued on Ethena’s USDtb rails. According to the teams, this structure provides institutional-grade backing and transparent accounting, as USDtb reserves are held primarily in BlackRock’s tokenized U.S. Treasury fund (BUIDL) via Securitize, alongside liquid stablecoins for redemptions.
USDm will swap into USDtb rather than offer direct fiat redemption at launch, a MegaETH representative told The Block. The team didn’t disclose a target float to cover daily operating expenses, saying those parameters will be sized over time.
Ethena, issuer of the third-largest stablecoin USDe, brings scale and compliance plumbing to the partnership. The protocol reports about $13 billion in TVL, making it a top-10 DeFi protocol, according to The Block's data dashboard. Furthermore, its reserve-backed USDtb has roughly $1.5 billion in circulation and a “line of sight” to compliance with the U.S. federal framework called the GENIUS Act through a collaboration with Anchorage Digital Bank .
Regarding additional revenue sources, such as MEV, MegaETH stated that details will be revealed closer to the mainnet rollout. The project previously announced its public testnet in early March.
Addressing alternatives like using fees for token buybacks or grants, as some competitors have floated, the team called buybacks “good in principle” but premature without an announced token. They added that distributing yield directly to users isn’t feasible under the GENIUS Act, so applying yield to sequencer OPEX is the first step and may evolve as the network matures.
“Regarding buybacks, we think buybacks are good, but it’s premature to discuss buybacks without having announced a token,” the team told The Block. “The point of the stablecoin is to give the community better outcomes (yield distribution is not possible bc of genius). Today, that is OPEX. As stablecoin rev grows and mega matures, how that yield is best put back into users will also change.”
USDm will be deeply integrated across wallets, paymasters, dapps, and onchain services on MegaETH. Stablecoins already active on the network, including USDT0, which is the chain’s canonical representation of USDT, and cUSD, remain options for developers and users.
MegaETH bills itself as a real-time, Ethereum-secured blockchain with a heterogeneous, hyper-optimized execution environment. The network aims to achieve 10-millisecond latency and process up to 100,000 transactions per second, all while preserving Ethereum composability. According to the team, this performance can make entire categories of streaming and interactive applications viable once fees are consistently sub-cent. Last December, the protocol raised $10 million in three minutes via Echo , the angel investor platform founded by famous cryptocurrency trader Jordan Fish, popularly known as Cobie.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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