The MegaETH pre-deposit event has fallen into chaos, with a multi-signature error causing 500 million USD to be locked.

On November 25, the high-performance Layer 2 project MegaETH's pre-deposit event encountered a major technical failure, as the team mistakenly set a 4/4 signature requirement in the Gnosis Safe multisignature Wallet (originally planned as 3/4), resulting in the transaction being executed 34 minutes early. Although the contract was audited by Zellic and Slowmist and was not attacked, the operational error caused approximately $500 million of user funds to be locked in a contract controlled by the team. The incident triggered a strong reaction from the community, with bearish sentiment accounting for about 60%, and the OTC Trading price of MEGA Token remained in the range of $2 to $3, with the Mainnet launch plan still scheduled for December.

Technical Failure Analysis: From API Crash to Multisignature Errors Chain Reaction

At 9:00 AM Eastern Time on November 25, the MegaETH pre-deposit event officially opened to Sonar Wallet users who completed KYC. The project initially set a deposit limit of 250 million USDC and offered a 2.5% MEGA Token airdrop multiplier reward for early participants, which immediately triggered FOMO in the market. However, just a few minutes after the event began, the third-party API service completely crashed under the surge of traffic, causing the official website to be down for an hour, laying the groundwork for subsequent chain failures.

When the system resumed at 10 AM, an astonishing scene occurred — the entire $250 million quota was sold out in 156 seconds. On-chain data showed that during this time, approximately 83% of the quota was captured by whale addresses and bot programs, leaving ordinary retail users to sigh at the sold-out deposit interface. This extreme imbalance in quota distribution immediately sparked controversy in the community, but a more serious problem was yet to come. At 10:15 AM, the team suddenly announced an increase in the deposit limit to $1 billion, a decision that directly triggered strong protests from early participants.

A critical technical error occurred during the system adjustment process. The team accidentally set the signature requirement from the originally planned 3/4 to 4/4 while preparing a $1 billion transaction using the Gnosis Safe multisignature Wallet, which put the transaction in a state that could be executed by anyone. At 10:26, a sharp-eyed user discovered this vulnerability on the blockchain explorer and executed the transaction 34 minutes ahead of the scheduled restart time. This action caused the deposit function to go completely out of control, with funds pouring into the contract like a tidal wave, and the team instantly lost control of the situation.

From a technical perspective, this incident exposed multiple flaws in the operational processes of the project team. Although the smart contract itself passed dual audits by Zellic and Slowmist without any security vulnerabilities, mistakes in the offline operation still led to systemic risks. Especially in a high-pressure environment, the team made hasty decisions consecutively—first attempting to reduce the limit to 400 million, and eventually setting it at 500 million. These frequent changes further exacerbated market panic, ultimately turning what was originally a simple liquidity guidance activity into a crisis of trust.

Key Event Timelines and Data

09:00 EST: The event starts, the API crashes instantly.

10:00 EST: System recovery, 250 million quota snapped up in 156 seconds.

10:15 EST: The team announced that the limit has been raised to 1 billion USD.

10:26 EST: Users discovered a multisignature vulnerability and executed it in advance.

10:30 EST: The team is committed to protecting the rights of early participants.

12:00 EST: Completely abandon the $1 billion plan

Final locked funds: approximately $500 million

Contract Auditors: Zellic, Slowmist

MEGA OTC Trading price: 2-3 USD

Community Sentiment Analysis: The Battlefield of Public Opinion Under Extreme Polarization

After the incident, discussions about MegaETH on social media showed a clear polarization. According to data from the public opinion monitoring platform LunarCrush, in the first 24 hours, the related topic was mentioned over 50,000 times, with about 60% taking a critical stance and 40% expressing support. Critics referred to the incident as a “circus performance” and initiated the #RefundMegaETH topic on X platform, demanding that the project party immediately refund funds and apologize. Supporters, however, focused on the performance of “original demand”—being able to lock in $500 million even in a bear market, believing that this proves the project's long-term value.

Renowned crypto commentator CryptoCobain stated in a summary of the event: “This has been a crazy journey; from a technical standpoint, it has been a failure, but from the perspective of market demand, it has been a success.” This contradictory sentiment represents the views of many neutral observers. On one hand, the team's mistakes in basic operations raise concerns about their professional competence; on the other hand, the influx of huge amounts of capital indicates the market's desire for high-performance Layer2 solutions. Especially considering the current context of skyrocketing Gas fees on the Ethereum Mainnet, the promised 100,000 TPS and sub-second finality of MegaETH indeed hit the industry's pain points.

Analyzing the participant structure, early users who managed to secure quotas naturally became the most steadfast defenders of the project. They emphasized in various communities that although the process was chaotic, the contract security was not threatened, and the funds remained intact. On the other hand, retail investors who missed the opportunity are divided into two factions: one part blames the project for favoring whale users, while the other part hopes the team will learn from this and improve after the Mainnet launch. This division actually reflects the long-standing skepticism about fairness in the cryptocurrency market—when opportunities are limited, will ordinary investors always be left to pick up the scraps?

The comments from industry KOLs have also added more dimensions to the event. Some opinion leaders pointed out that such events are quite common in the early stages of innovative projects, and what is important is the team's response afterwards and long-term execution ability. They compared it to early challenges faced by Layer 2 projects like StarkNet and zkSync, which ultimately gained market trust through continuous technological iterations. However, critics countered that, in an era of tightening regulation, such basic operational errors could attract unnecessary regulatory attention, negatively impacting the entire Layer 2 sector.

Fund Security Assessment: Where Will the Locked 500 Million USD Go?

As of November 26, approximately $500 million of user funds are still locked in contracts controlled by the MegaETH team. According to monitoring by blockchain security company PeckShield, these funds are distributed across three main contract addresses, all of which are USDC stablecoins. Importantly, all contracts have undergone strict auditing, and no security vulnerabilities have been found other than backdoors or withdrawal restrictions. The team has enabled an exit channel, but the proportion of funds choosing to exit is less than 5%, indicating that the majority of participants are still willing to wait for the Mainnet launch.

From a technical perspective, the security of funds is indeed guaranteed by multiple layers. The deposit contract used by MegaETH employs a time lock mechanism, requiring at least a 7-day delay for any movement of funds, which allows ample time to monitor for abnormal transactions. Additionally, the contract has set up multisignature withdrawal permissions, currently controlled by 5 independent parties, including the core project development team, representatives of investment institutions, and the community governance committee. Although this design cannot completely eliminate centralization risks, it significantly increases the difficulty of fund misappropriation.

The project's communication strategy after the incident also affects the security situation of the funds. The team held a 3-hour AMA session on the official Discord channel, where the technical leader explained the reasons for the incident in detail and promised to introduce a third-party organization to oversee the subsequent processes. In addition, the team announced a specific roadmap before the Mainnet launch, including the bug bounty program that will start on December 1 and a new round of testnet activities. These transparency measures have alleviated community anxiety to some extent and provided reasons for hesitant participants to continue trusting.

From a legal perspective, the locked funds are in a gray area. Since MegaETH has not yet officially issued tokens, the current activities may legally be interpreted as a “Simple Agreement for Future Tokens (SAFT)” or a similar structure. Under the framework of U.S. securities law, such an arrangement may involve a complex application of the Howey test, particularly in cases where the project explicitly promises airdrop returns. Although there has been no statement from regulatory agencies yet, this uncertainty itself has become the sword of Damocles hanging over the project.

Project Outlook Assessment: The Imbalance Test of Technical Strength and Operational Capability

MegaETH, as a highly anticipated high-performance Layer 2 project, indeed has an impressive technical vision. The project promises to achieve a processing capacity of 100,000 TPS in an Ethereum-compatible environment through an optimized parallel execution engine and a new state synchronization protocol. The core team comes from top tech companies such as Google and Jump Trading, with a strong background in distributed systems. This technical background was originally the project's biggest selling point, but this operational incident has raised doubts about whether its execution ability matches its technical ambition.

From an investment perspective, MegaETH secured $85 million in seed round funding from top venture capital firms such as Paradigm and Multicoin Capital. These institutions are known for their rigorous technical due diligence and operational assessment, and their endorsement provides a certain level of credibility to the project. According to insiders, the investors have intervened in the incident management, requiring the team to bring in professionals for operational management and to establish a more rigorous risk control process. This institutional-level oversight could become a turning point for the project to turn crisis into opportunity.

The mainnet launch schedule has become another focal point of attention. The team reiterated in the latest announcement that the mainnet launch plan for December remains unchanged, but acknowledged that a “phased launch” may be necessary to ensure stability. Specifically, testing will first be opened to a select group of white hat hackers and security researchers, followed by a gradual expansion of access. This conservative strategy, while potentially delaying ecological development, aligns with the current extreme pursuit of security. Historical experience shows that projects that have faced early setbacks often perform more robustly in the long term.

The competitive landscape in the market cannot be ignored. Compared to other emerging Layer 2 solutions like Scroll and Taiko, MegaETH does have theoretical advantages in performance metrics, but this incident may affect dApp developers' willingness to migrate. Especially since DeFi protocols have extremely high stability requirements for the underlying chain, any uncertainty could lead to delays in collaboration. The project team needs to demonstrate real technical strength in next month's Mainnet presentation to regain the trust of the developer community.

Industry Revelations: Lessons and Best Practices from Liquidity Guidance in Layer 2 Projects

The MegaETH incident is not an isolated case. Looking back at the development history of Layer 2, similar issues have occurred multiple times. The “Genesis Airdrop” event of zkSync Era in 2023 sparked controversy due to qualification recognition issues; the token distribution of StarkNet in 2024 also faced network congestion and skyrocketing Gas fees. These recurring problems indicate that the entire industry has yet to form a mature liquidity guidance scheme, especially in balancing fairness, security, and efficiency, which still faces challenges.

From a technical architecture perspective, the current mainstream deposit contract designs have inherent flaws. Most projects adopt a centralized control model in pursuit of convenience, but this actually creates a single point of failure risk. A better solution might be to adopt a progressive decentralization approach — initially managed by the team, but gradually transferred to governance contracts as the network matures. At the same time, introducing insurance mechanisms or collateral bonds to provide additional security for participants is already standard practice in traditional finance.

The importance of community communication strategies was vividly demonstrated in this incident. The MegaETH team's information release at the onset of the crisis was indeed chaotic, but the subsequent transparent communication helped to restore its reputation. Industry experts suggest that project teams should develop a comprehensive emergency plan before events, including clear information release channels, established compensation schemes, and independent technical supervision. These preparations may seem cumbersome, but once an accident occurs, they will become a critical line of defense in maintaining community trust.

The regulatory compliance dimension cannot be ignored. As the cryptocurrency market matures, regulatory agencies in various countries are increasingly focusing on token distribution activities. The U.S. SEC has recently intensified its enforcement against “unregistered securities offerings,” and the EU's MiCA regulations will be fully implemented in 2025. Project teams need to fully consider these legal requirements when designing liquidity guidance mechanisms, including appropriate investor certification, information disclosure, and anti-money laundering processes, or they may face serious legal consequences.

When the precision of code collides with the uncertainty of human nature in the world of cryptocurrency, the MegaETH incident provides a perfect case study. From a technical perspective, it was merely a simple configuration error; but from the perspective of ecological development, it reveals the eternal tension between innovative projects in their pursuit of technological breakthroughs and ensuring operational stability. Perhaps the true insight lies in the fact that in the blockchain realm, which champions “code is law,” the maturity of human organization still determines the ultimate fate of technology – no matter how beautiful the promises in the white paper may be, the devil in the details of execution should never be ignored.