MegaETH Launches Native USDm Stablecoin with Ethena to Subsidize Sequencer Fees and Align Ecosystem Incentives

September 9, 2025 – In a move to revolutionize fee structures on Ethereum scaling solutions, MegaETH, developed by MegaLabs ^[1], has unveiled its native stablecoin, USDm, in partnership with the prominent DeFi protocol Ethena ^[2]. This innovative token aims to eliminate traditional sequencer margins by redirecting reserve yields to cover network operating expenses, ensuring low and predictable transaction fees for users and developers.

Quick Take

1. MegaETH, an Ethereum scaling solution by MegaLabs, is introducing a new stablecoin called USDm.
2. Instead of charging sequencer ^[3] margins like most Layer 2s, USDm will use reserve yield to fund sequencer operating expenses.
3. This is meant to keep transaction fees low and stable while aligning incentives between the chain, users, and developers.

Revolutionizing Sequencer Economics

MegaETH, which positions itself as a "real-time" blockchain capable of processing over 20,000 transactions per second with 10ms block times, is addressing a key pain point in Layer 2 networks: unpredictable fee margins. Many L2s generate revenue by adding markups to sequencer fees, but as Ethereum's EIP-4844 reduces data costs, these margins become volatile, creating tension with users and builders.

USDm changes this dynamic by programmatically directing stablecoin reserve income to subsidize sequencer cost said. This model aligns incentives across the ecosystem, fostering a more sustainable environment for high-performance applications like streaming and interactive services.

The project launched its public testnet earlier this year and is already operational, boasting sub-cent fee potential once fully scaled. Back in December 2024, MegaETH raised $10 million in just three minutes through Echo ^[4], the angel investor platform founded by crypto trader Cobie ^[5].

USDm on Ethena's Rails: Institutional Backing and Compliance

The inaugural version of USDm will be issued via Ethena's USDtb infrastructure, offering robust, institutional-grade reserves. These are primarily held in BlackRock's tokenized U.S. Treasury fund, BUIDL, through Securitize, supplemented by liquid stablecoins for seamless redemptions. At launch, USDm will not support direct fiat redemptions but will instead swap into USDtb, ensuring transparent accounting and compliance.

Ethena, known for its $13 billion TVL stablecoin USDe (the third-largest by market cap), brings significant scale and regulatory plumbing to the table. Its USDtb variant, with about $1.5 billion in circulation, is positioned for compliance with the U.S. GENIUS Act through a partnership with Anchorage Digital Bank. This framework, signed into law earlier this year, provides a major regulatory boost for stablecoins, enabling faster and cheaper cross-border payments compared to traditional finance.

MegaETH did not specify a target float for USDm to cover daily operations, noting that parameters will be adjusted over time. Additional revenue streams, such as Maximum Extractable Value (MEV), will be detailed closer to mainnet launch.

Addressing Alternatives: Buybacks, Grants, and Yield Distribution

In response to industry trends like using fees for token buybacks or developer grants, MegaETH emphasized a pragmatic approach. "Regarding buybacks, we think buybacks are good, but it’s premature to discuss buybacks without having announced a token," the team stated. Direct yield distribution to users is currently not feasible under the GENIUS Act, making sequencer OPEX subsidies the optimal first step.

As the network and stablecoin revenue mature, the team anticipates evolving this model to better reinvest yields into the community, potentially exploring new mechanisms for user benefits.

Deep Integrations and Existing Options

USDm is set for seamless embedding across MegaETH's ecosystem, including wallets, paymasters, decentralized applications (dApps), and on-chain services. This integration will enhance the "expressive design space" for builders, as noted by MegaETH co-founder Shuyao Kong ^[6] in related announcements.

MegaETH's architecture—a heterogeneous, hyper-optimized execution environment secured by Ethereum—targets up to 100,000 TPS with 10ms latency, preserving full composability. This performance could unlock new categories of real-time applications, provided fees remain consistently low.

Broader Implications for Stablecoins and L2s

This launch underscores a growing trend in crypto ecosystems to develop proprietary stablecoins, reducing reliance on giants like Tether's USDT and Circle's USDC. Recent examples include MetaMask's stablecoin with M0 and Stripe, and Hyperliquid's search for a stablecoin partner. With the stablecoin market exceeding $270 billion, initiatives like USDm highlight the sector's push toward cost efficiency and regulatory alignment.

Ethena's expansion into stablecoin-as-a-service further cements its role, leveraging its yield-generating model—holding spot crypto while shorting derivatives—to support partners like MegaETH.