MegaETH Partners with Ethena to Launch USDm Stablecoin and Reduce Layer 2 Fees

MegaETH's USDm stablecoin

Summary:
MegaETH is introducing the USDm stablecoin in collaboration with Ethena. This innovative asset utilizes yields from institutional-grade reserves to fund network operations, thereby minimizing user fees. The aim is to create a more sustainable economic model for layer-2 solutions, breaking free from traditional transaction markup systems.

Key Takeaways:

Launch of the USDm Stablecoin: MegaETH is releasing USDm, a native stablecoin aiming to lower fees and promote sustainable network operations.
Partnership with Ethena: Ethena's expertise and established products, like USDe, enhance USDm's potential and operational frameworks.
Yield-Based Funding Model: USDm uses reserve yields instead of user transaction fees to finance operations, ensuring stable and low costs for users.
Institutional Backing: The stablecoin's reserves are mainly in BlackRock’s tokenized treasury, ensuring a reliable yield.
Innovative Layer-2 Design: The partnership addresses the inconsistencies between ecosystem growth and fee revenue, creating more favorable conditions for application development.

MegaETH is developing a groundbreaking economic model through the introduction of the USDm stablecoin. This new stablecoin capitalizes on the yields derived from institutional-grade reserves to support network operations, with the objective of permanently separating revenue from user fees.

On September 8, MegaETH announced its collaboration with Ethena to launch USDm, a stablecoin that is designed to finance sequencer operations without imposing transaction markups on users. By doing this, USDm aims to use reserve yields to cover network expenses, allowing MegaETH to keep fees low while ensuring operational sustainability. The reserves are primarily held in BlackRock’s tokenized treasury fund, known as BUIDL.

MegaETH emphasizes that USDm is intended to address a critical issue in layer-2 design: the misalignment that occurs between the growth of the ecosystem and the revenue generated from fees. Typically, blockchain networks derive value by charging extra on sequencer fees, a model that can become increasingly unstable as transaction throughput rises and data costs decrease. In contrast, USDm alleviates the financial burden from users and utilizes reserve yields to support network functioning.

This structure aims to establish fees that are both stable and minimal, fostering better conditions for applications that struggle when every action incurs notable costs. Co-founder Shuyao Kong expressed enthusiasm, stating, “USDm means lower fees for users and a more expressive design space for applications. We are excited to work with Ethena to enable a win-win scenario for all stakeholders in our ecosystem.”

According to MegaETH, the initial reserves for USDm are largely allocated to BlackRock’s tokenized U.S. Treasury fund via Securitize, lending institutional-grade support and a predictable revenue stream. While the stablecoin is launching with its foundation in USDtb, the reserves have the flexibility to incorporate other Ethena products like USDe as market conditions evolve.

Strategically, partnering with Ethena was a key decision. Ethena, known for USDe, the third-largest USD-denominated crypto asset, brings its institutional-grade USDtb foundations to this collaboration. As outlined in the announcement, USDtb has approximately $1.5 billion in circulation and showcases a pioneering effort in regulatory compliance, having been developed in partnership with Anchorage Digital Bank with the impending GENIUS Act in consideration. The reserves are mainly stored in BUIDL, with Ethena and Securitize facilitating 24/7 atomic swaps between USDtb and the underlying treasuries, guaranteeing efficient settlement and transparency.