MegaETH Unveils Yield-Bearing Stablecoin to Fund Ethereum L2 Operations

MegaETH, an Ethereum layer-2 protocol, has announced the upcoming launch of a novel yield-bearing stablecoin, USDm. This initiative aims to establish a new business model for L2s, moving beyond traditional reliance on transaction fees. The stablecoin is being developed in collaboration with Ethena, an algorithmic stablecoin protocol.

Key Takeaways

• MegaETH is launching a yield-bearing stablecoin, USDm, on Ethereum's L2.

• The stablecoin is a partnership with Ethena and will utilize BlackRock's tokenized US Treasury bill fund.

• Yield generated will offset sequencer fees, potentially lowering costs for users.

A New Revenue Stream for Layer-2 Protocols

MegaETH's introduction of USDm signifies a potential shift in how Ethereum Layer-2 solutions generate revenue. Unlike conventional L2s that primarily rely on transaction fees, MegaETH plans to use the yield generated from its stablecoin's reserves to cover operational costs, specifically sequencer fees. These fees are incurred when L2s bundle transactions and submit them to the main Ethereum chain.

Partnership with Ethena and BlackRock's BUIDL

The USDm stablecoin will be built on Ethena's USDtb infrastructure. Ethena, known for its algorithmic stablecoin protocol, has a significant total value locked (TVL) of $13 billion. The reserves for USDm will be channeled into BlackRock's BUIDL fund, a tokenized U.S. Treasury bill fund with a substantial market capitalization. This strategic integration aims to provide a steady yield for the stablecoin's reserves.

Benefits for Users and the Ecosystem

According to MegaETH co-founder Shuyao Kong, the USDm stablecoin is designed to "lower fees for users" and enable "more expressive design space for applications." By offsetting sequencer fees with stablecoin yield, MegaETH anticipates a reduction in transaction costs for its users. This approach could also foster greater innovation within decentralized applications built on the L2 network.

The Rise of Yield-Bearing Stablecoins

Yield-bearing stablecoins are digital assets pegged to a stable asset, like a fiat currency, that also offer returns to their holders. The market for these stablecoins has seen significant growth, partly influenced by regulatory developments in the United States, such as the GENIUS Act, which restricts the offering of yield-generating stablecoins by issuers. Protocols like Ethena's USDe and Sky's USDS have benefited from these stricter rules, positioning themselves as key players in this evolving sector.

Addressing Sequencer Fee Controversies

MegaETH's model also addresses ongoing discussions within the Ethereum community regarding sequencer fees. Some participants believe the network should capture a larger portion of these fees. While Ethereum has collected substantial fees over the past year, the amounts have seen a decline since February. MegaETH's strategy offers an alternative perspective on managing these costs within the L2 ecosystem.

Sources

• MegaETH Introduces Yield Stablecoin It Says Will Fund Protocol, Cointelegraph.