In Part 1, we explored the rationale behind selecting MegaETH as the first subject for pre-TGE token valuation and examined its fundamentals, including the Tech Stack, Team, Competitor Analysis, and Ecosystem.

Part 2 will delve into the tokenomics analysis and present the valuation of the $MEGA token from six different perspectives.

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Key Takeaway

• MegaETH has succeeded in reducing block time to 0.01 seconds to create a real-time blockchain.

• Judging by the results of the public sale and pre-deposit, MegaETH appears capable of entering the ranks of the top 14 chains upon mainnet launch.

• Due to MegaETH’s tokenomics structure, short-term dumping is expected to be minimal. Long-term utility and revenue are strong, but the token deflation aspect is judged to be weak.

• The most agreed-upon valuation for $MEGA is $2B ~ $2.3B. However, if market recovery and revenue-based value capture proceed smoothly, the author views $4B as the base valuation.

• Furthermore, if MegaETH proves PMF (Product-Market Fit) as a differentiated L2 and achieves growth beyond expectations, there is room for upside from $6B to $12B.

(※ Due to the length of this article, I intend to publish it in two parts. Part 1 covers the fundamental background of MegaETH (Tech Stack, Team, Competitor Analysis, and Ecosystem), while Part 2 will address the tokenomics analysis and the $MEGA token valuation analyzed from six different perspectives.)

Tokenomics Analysis

1) MegaETH Tokenomics Overview

a) Max Supply Amount: 10B

b) Allocation & Distribution: 75.8% for community

MegaETH features a unique token distribution model known as KPI Staking Rewards, which accounts for 53.3% of the total token supply. These rewards are distributed exclusively to $MEGA stakers and are allocated based on network metrics rather than a simple time-based schedule. The Initial Measurement Metrics/Areas are as follows:

• Ecosystem Growth

• Technical Performance

• MegaETH Decentralization

• Ethereum Decentralization

c) Utility

• ① Gas Fee Payment: Selectable between ETH and MEGA.

• ③ Protocol Governance Participation.

• ② (Future Roadmap) Sequencer Participation Staking: Once the rotation mechanism is implemented after the mainnet launch, $MEGA tokens will be used for staking to participate as a rotating sequencer.

• ⑤ (Future Roadmap) Ultra-low Latency Sequencer Adjacency Staking: Latency-sensitive builders will competitively stake $MEGA to secure a position physically/network-wise closest to the active sequencer to guarantee faster processing.

d) Main revenue model

• Sequencer Margin:

  • The basic/main revenue model for most L2s.

  • The difference between L2 transaction gas fees collected by the Sequencer and the settlement costs of posting data to Ethereum L1.

  • Profit = User Transaction Fees (L2) - Ethereum L1 Data Costs

• USDm Interest Revenue:

  • Interest revenue (yield) generated from USDm’s collateral assets (US Treasuries, etc. RWAs).

  • Part of this revenue will be used to cover Sequencer operating costs, thereby providing users with gas fees at cost or near-zero levels.

e) Value capture model

• Fee Burning: Possibility of introducing a Fee Burning mechanism to offset inflation from staking rewards (requires governance approval).

f) Others

• Compliance: MegaETH released a MiCA-compliant tokenomics whitepaper before the public sale. MiCA is a bill for protecting virtual asset investors, requiring transparency of information and strict legal liability for issuers. The most notable difference between MiCA-compliant and non-compliant projects is the ‘14-day refund guarantee’.

2) Short/Long-term Tokenomics Health Assessment

Primarily, projects issuing tokens (or investors in those tokens) worry about one thing: When will the price crash? Short-term crashes occur when many existing token holders have incentives to dump immediately after TGE. Long-term crashes happen if the project loses competitiveness in the future market or if the value created by the project is not well-captured by the token. If even one of these applies, valuation based on the project’s fundamentals becomes meaningless.

Overview and Criteria

Short-term: Evaluation of dumping by pre-TGE token holders

a) Cover Ratio: ⭕

• Definition

  • Cover ratio = Team Raise Amount (Defense Fund) / Initial Sell Pressure

  • A ratio < 1 indicates a risk of price crashing due to high sell pressure at TGE

• Current Estimate: ~3.7 (Safe)

  • With a ~$90M raise and a $0.2 futures price, the team can absorb the sell pressure

  • Initial Unlock is estimated at ~1.35% (135M MEGA).

    • Fluffle Round: 1.25% (2.5% * 50%)

    • Public Sale: est. min 0.1%

      (Note: The exact unlock % is undisclosed. However, assuming 73% of participants received the minimum allocation (2,650 MEGA) and unlock fully, this amounts to at least 10M MEGA)

    • There is no airdrop allocation

• Risk Factors (Ratio < 1):

  • If the token price exceeds $0.7 at TGE

  • If the immediate Public Sale unlock exceeds 75%

• Comparison with another project:

  Monad, which recently conducted its TGE, also maintained a Cover ratio greater than 1, but MegaETH is situated in a significantly more secure range

  

b) Lock-up Integrity for Early Investors: ⭕

• Strict Schedules: Seed/Echo investors face a 1-year cliff, while Fluffle investors have a 50% TGE unlock with 6-month vesting. Notably, ~20% of public sale participants also opted for a 1-year lock-up.

• Closing the “Celestia Loophole”: In Celestia’s case, VCs recouped their principal during the lock-up period by withdrawing liquid staking rewards (approx. $64M value vs $56M raise).

• MegaETH’s Solution: MegaETH enforces the underlying lock-up terms on staking rewards. Rewards generated from locked tokens cannot be withdrawn immediately, preventing sell pressure from accrued interest.

  

c) Allocation to High-Loyalty Community: ⭕

• Transparent & Bimodal Distribution: MegaETH emphasized fairness during the public sale using a bimodal structure that balances broad ownership with loyalty-based weighting.

• Targeted Allocation Criteria:

  • 25% (Long-term Supporters): Prioritized based on past engagement in MegaETH/Ethereum communities, social media activity, and GitHub contributions.

  • 75% (Activity Based): Distributed via a comprehensive evaluation of on-chain activity, testnet participation, and off-chain engagement (e.g., Twitter, Kaito scores).

• Incentivizing Commitment: Participants opting for a 1-year lock-up received a 10% discount/bonus and higher allocation probability, effectively targeting early contributors and long-term believers.

Long-term: Evaluation of value capture flywheel potential

a) Utility aspect: ⭕

• Unlike existing L2s, MegaETH plans to use the MEGA token for sequencer decentralization beyond simple governance.

• Specifically, depositing tokens will be required to participate as a sequencer or to use a nearby sequencer in the future, so demand for the token is expected to increase as the network grows.

• However, it seems it will take quite some time for this utility to be implemented (planned to use a single sequencer at initial launch).

b) Revenue model aspect: ⭕

• Generally, stablecoin revenue is overwhelmingly larger than sequencer margin.

• Comparing Base and Arbitrum, which generate the most tx and revenue in the rollup ecosystem, to Ethena, shows a 5x to 10x difference.

• The stablecoin business has a much more advantageous structure than the L2 infrastructure business in terms of margin rate and scalability of the business model itself.

• Accordingly, if stablecoin issuance within MegaETH occurs smoothly in large quantities, it is expected to far exceed existing L2 revenues.

  

c) Token Deflation aspect: ⚠️

• MegaETH plans to reduce gas fees to near-zero levels as revenue from USDm increases.

• Accordingly, as gas fees decrease, fee burning will also decrease, so the deflationary effect is seen as minimal.

Summary)

In summary, structurally, MegaETH is not expected to have severe short-term dumping, and a positive flywheel is expected in terms of utility and revenue in the long term. The downside is that since the project’s revenue flows more into the ecosystem rather than being directly returned to token holders, the value capture of the token itself could be weak. Therefore, simple fee burning is judged to be insufficient, and supplementary mechanisms for token price management seem necessary in the long term.

Valuation

1) A: Futures Trading Price

The futures trading price of a pre-TGE token reflects market participants' expectations for the initial circulating market capitalization. If this price persists until listing, market makers are likely to form spreads around it. Consequently, these prices serve as a valuable indicator for predicting ultra-short-term price movements immediately following the TGE.

Currently, $MEGA is traded on five exchanges, with Hyperliquid commanding more than half of the volume. Although the price reached a high of $0.7, it held steady in the $0.22 - $0.235 range these days. This zone represents the "Base Consensus" where early buyers felt comfortable.

→ [A: $2.3B]

2) B: Pre-market Price

On Whales Market, pre-TGE tokens can be traded based on ICO allocation or pre-token (or point) collateral.

Although the price consolidated around the $0.33 level for an extended period, trading volume was minimal. Consequently, the $0.22 range—which recorded the highest recent buying volume—can be considered the level where the market’s base consensus has formed.

→ [B: $2.2B]

3) C: Private Sale Based Price

MegaETH raised a total of $30M across the Seed and Echo rounds, both at a $200M valuation. The Seed round serves as a critical milestone. It signifies that professional VCs—rather than just friends or angels—have validated through due diligence that the team’s vision is ‘worth betting on.’

However, at this stage, hypotheses remain unverified and Product-Market Fit (PMF) is still being explored. Due to these high risks, the valuation is set conservatively. Top-tier crypto VCs, such as Dragonfly, typically target at least a 10x return to compensate for this risk premium. Working backwards from this target, the Implied Fair Value expected by investors is approximately $2.0B ($200M x 10)

→ [C: $2B]

4) D: Public Sale Based Price

MegaETH’s public sale was heavily oversubscribed, exceeding the $50M target by 27.8 times. With approximately $1.39B committed for just 5% of the total supply, the implied FDV reaches a massive $27.8B.

(FDV Calculation: 1,390,735,255 / 0.05 = 27,814,705,109)

However, this figure should be interpreted with caution. It likely reflects inflated demand from participants using multiple accounts (Sybil attacks) to maximize their allocation chances, making it less reliable than other valuation models.

→ [D: $27.8B]

5) E: Potential Revenue Based Price (12 months later)

MegaETH’s revenue model is twofold, consisting of Sequencer Margin (transaction fees) and Stablecoin Yield (interest from USDm collateral). Based on the expected traction analysis, I drafted Bearish, Base, and Bull scenarios.

Notably, Across all scenarios, stablecoin yield accounts for over 90% of total revenue. Even, the total revenue projected in the Base scenario ($21.05M) positions MegaETH near the median revenue of the top 14 chains by TVL (comparable to Polygon’s $21M or Arbitrum’s $24.4M). This is significant because MegaETH achieves this revenue scale not by relying solely on sequencer margins—which are constrained by gas fee competition—but by adopting a highly scalable stablecoin-based revenue model.

Scenario Breakdown:

• Bearish Case: Assumes stablecoin issuance meets only the initial pre-deposit cap of $250M.

  • Revenue: ~$10.9M (Yield: $10M / Fees: $0.9M)

  • Valuation: Applying a conservative P/F ratio of 100 (reflecting current depressed L2 multiples like Arbitrum’s ~90) results in an FDV of ~$1B.

• Base Case: Assumes issuance reaches $500M, the amount actually filled just before the pre-deposit closed.

  • Revenue: ~$21.05M (Yield: $20M / Fees: $1.05M)

  • Valuation: With a P/F ratio of 200, the estimated FDV is ~$4.2B.

• Bull Case: Assumes the full pre-deposit max cap of $1B is utilized.

  • Revenue: ~$40.6M (Yield: $40M / Fees: $0.6M)

  • Valuation: With a premium P/F ratio of 300, the FDV could reach ~$12.1B.

→ [E: $1B / $4.2B / $12.1B]

6) F: Relative Comparison with Similar L2s

Based on the outlined scenarios, I benchmarked MegaETH against comparable L2 chains. It is important to note that a project’s FDV is not strictly proportional to its metrics. Even with similar traction, value capture can diverge significantly due to differences in tokenomics and market sentiment.

Mantle serves as a prime example. Despite recording lower TVL and revenue than Polygon or Arbitrum, it commands the highest FDV among L2s. This valuation premium is driven by effective supply control (via high staking APY) and growth expectations from its Bybit integration.

Consequently, I established the following comparative baselines:

• Bear & Base Cases: Compared with Polygon ($1.1B) and Arbitrum ($2B), which exhibit similar revenue profiles in these scenarios.

• Bull Case: Compared with Mantle ($6B), reflecting a scenario where the project successfully captures a high valuation premium.

→ [F: $1.1B / $2B / $6B]

Summary)

In summary, the comprehensive valuation results for MegaETH are as follows.

• Market Consensus Group: $2.0B ~ $2.3

  • The value where most indicators coincided: A (Futures: 2.3), B (Pre-sale: 2.2), C (Seed: 2), F-2 (Peer Value Base: 2)

  • This suggests that the strongest Fair Value for MEGA currently thought by the market and early investors is between $2.0B ~ $2.3B.

• Target Fair Price and Upside Potential: $4B ~ $12B

  • The Base scenario is drawn based on figures MegaETH has already achieved, allowing for an expectation of a fair value of $4B based on Base scenario fundamentals.

  • Should the market recover, leading to expanded L2 P/S multiples, and the project effectively captures value by mitigating token inflation, the valuation has the potential to scale towards the Bull scenario of $6B to $12B+

• Outlier: D ($27.8B)

  • The ‘total committed amount’ of the public sale is an indicator of “Market Demand Strength” rather than actual corporate value.

  • Needs to be excluded when calculating fair valuation.

• Volatility Range: $1.0B ~ $12B

  • Since E-1 ($1B) and F-1 ($1.1B) appear similar, the downside is open up to $1.0B in the worst case.

  • On the other hand, the Bull Case has the potential to expand from $6B to $12B.

Risk

MegaETH is currently a highly spotlighted L2, but risks still exist internally and externally. These are as follows:

• The mainnet is not yet live; performance scalability and stability remain unproven in a production environment.

• Reliance on a single sequencer during the initial launch phase poses temporary centralization and censorship risks.

• The abrupt termination of the pre-deposit campaign—involving cap adjustments and subsequent refunds—raises questions regarding operational maturity.

• The L2 narrative has cooled amidst fierce competition. The current landscape suffers from an oversupply of infrastructure relative to applications, exacerbated by low switching costs for users.

• The entry of giants like Stripe, Circle, and Kraken—who already possess established product-market fit (PMF) and deep liquidity—presents a significant barrier to MegaETH’s “0-to-1” ecosystem growth.

• Market skepticism persists regarding the ability of infrastructure layers (chains) to capture value effectively compared to application-layer protocols.

• Patient capital is scarce thesedays. According to Keyrock and Memento Research, most tokens launched last and this year are trading below their TGE price, with most experiencing sharp declines within 15 days of listing.

Conclusion

MegaETH is cited as the most anticipated TGE project of 2026. While everyone’s reason for being bullish on MegaETH may be different, the major strengths of MegaETH that I think of are as follows:

1. Not just faster than existing chains, but implementing Web2 real-time literally on-chain.

2. Building services that can exist ‘only’ on MegaETH through the MegaMafia program

3. Strong community and transparent communication from key members to maintain and improve community trust.

While the latter two are non-technical “soft power” advantages, they are crucial for maintaining user retention in a market where post-TGE attention typically fades rapidly.

My conviction was further reinforced during the pre-deposit phase. Despite securing $500M in mere seconds, the team chose to return all funds. While some criticized this as operational inexperience, the incident actually highlighted the project’s integrity. Shuyao Kong’s subsequent statement perfectly encapsulated their philosophy of sustainable growth:

“The 500M that came in, although it instantly propelled us to the top five in the public chain revenue rankings, we are very clear in our hearts that this kind of money that comes in under such circumstances is, for the Mega team, a debt.

In the end, a healthy ecosystem should grow bit by bit and try to avoid peaking right at debut.” - Shuyao Kong

As Vitalik stated in Endgame, we must be “open to all of the futures, and does not have to commit to an opinion about which one will necessarily win.” In this spirit, rather than dismissing new chains due to challenging market conditions, we should evaluate the potential of ecosystems like MegaETH with an open mind.

I look forward to MegaETH’s successful mainnet launch and its journey toward sustainable growth.

Disclaimer

The author personally participated in MegaETH’s public sale and is a pre-TGE token holder.

This valuation is for the purpose of ‘estimating’ what value might be appropriate through relative comparison with other projects, as there are not enough statistical figures (e.g., 3-year revenue, cost data) before MegaETH lists.

Please be aware that the assumptions used in the valuation and the Buy/Sell ranges under that valuation are all written under the author’s subjective judgment, and clearly state that the actual value of the MegaETH token may not flow as below.

Therefore, I inform you that this is not a recommendation to buy or sell a specific asset. NFA, DYOA. Also, since it is assumed that market conditions after MegaETH’s token launch will occur amidst a crypto bear market like now, I notify that such valuation may be largely meaningless if a crypto bull market unfolds due to macro issues, etc.

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There are a total of 501 chains (L1, L2) currently tracked on DefiLlama. Among these, 32 L1s and 15 L2s were launched this year.

However, approximately 95% of the total TVL is concentrated in just 5 chains, with over 68% concentrated in Ethereum alone. Many new L1s and L2s gather significant attention and liquidity before their launch, but immediately after TGE, both liquidity and users vanish as if they were never there.

Due to this, there was a period where “airdrop farmers” were blamed. However, in current times where new users and liquidity are scarce and market conditions are unfavorable, there is a growing sense of doubt and skepticism regarding whether “new chains” are needed in the first place.

Amidst rising market fatigue towards new Layer 1/2 chains, MegaETH is approaching its mainnet launch. In the Conviction Round held last October, it recorded an oversubscription of 28 times the target amount, attracting the largest scale of funds last year. However, the fundamental market skepticism facing new chains is a challenge MegaETH must also resolve.

In this article, we will judge whether MegaETH can survive as a chain with meaningful competitiveness among countless others, and based on this, we will attempt a valuation of MegaETH’s native token, $MEGA.

Furthermore, starting with this report, we intend to continuously publish valuation analyses on promising “Pre-TGE” stage projects ahead of their launch. The background for planning this analysis series lies in the structural limitations currently facing the crypto market.

According to Ash from Memento Research, over 84% of the 118 tokens introduced to the market this year are currently trading at a price lower than their TGE price. In particular, the fact that over 46% recorded their ATH on the day 1 and then turned to a downward trend is significant. This shows that the majority of projects monopolize market attention only immediately after TGE, but fall into a “short-term speculative pattern” where they are pushed out of investors’ interest in less than a day.

However, not all market flows are like this. Blue-chip assets like Bitcoin, Ethereum, and Solana exist, proving their value over the long term and renewing ATHs. Among projects launched within the last year, Hyperliquid and Zora are achieving price increases alongside fundamental growth.

If we can judge a project’s value more precisely based on fundamentals, we can move away from the short-term approach of mechanical selling (Dumping) immediately after listing and capture true investment opportunities. Now, rather than simple trading timing, a project’s “sustainability” and “substantial intrinsic value” must become key investment indicators.

Key Takeaway

• MegaETH has succeeded in reducing block time to 0.01 seconds to create a real-time blockchain.

• Judging by the results of the public sale and pre-deposit, MegaETH appears capable of entering the ranks of the top 14 chains upon mainnet launch.

• Due to MegaETH’s tokenomics structure, short-term dumping is expected to be minimal. Long-term utility and revenue are strong, but the token deflation aspect is judged to be weak.

• The most agreed-upon valuation for $MEGA is $2B ~ $2.3B. However, if market recovery and revenue-based value capture proceed smoothly, the author views $4B as the base valuation.

• Furthermore, if MegaETH proves PMF (Product-Market Fit) as a differentiated L2 and achieves growth beyond expectations, there is room for upside from $6B to $12B.

(※ Due to the length of this article, I intend to publish it in two parts. Part 1 covers the fundamental background of MegaETH (Tech Stack, Team, Competitor Analysis, and Ecosystem), while Part 2 will address the tokenomics analysis and the $MEGA token valuation analyzed from six different perspectives.)

Background

1) Business/Technical Structure

Why MegaETH?

The core goal of MegaETH is to create a real-time blockchain. MegaETH aims to make this possible by providing 100,000 TPS and 10ms (0.01s) block times.

In the case of Web2 services we typically use, user requests are processed in about 0.15 to 0.4 seconds, and the results are delivered through the app/site screen. This timeframe can be seen as what we perceive as “real-time”.

On the other hand, most existing blockchains take over 1 second just for block time (processing time), and latency is also about twice as high as Web2. Therefore, even a blockchain considered fast (1.2s) requires a waiting time about 3 times longer than the slowest Web2 service (0.4s).

MegaETH aims to provide services in real-time like general Web2 by reducing block time, which accounts for the largest portion of user waiting time, to within 0.01 seconds. Accordingly, the total latency is about 0.21 seconds, which sufficiently falls within the “real-time” category of Web2.

Tech Stack 1 - Node Specialization and Hardware Optimization

MegaETH’s structure is a realization of the “Endgame” presented by Vitalik Buterin. It maximizes block creation efficiency by basing its structure on centralized high-performance nodes (Sequencers) for block creation, while decentralized light nodes perform verification.

The reason MegaETH is developing an L2 rather than its own L1 is that L2 has the optimal structure for performance. In the case of L1, all nodes must perform the same tasks (computation, verification, storage), requiring identical specifications. This acts as a constraint in determining how much hardware requirements for general users to run nodes can be increased to boost performance without damaging the blockchain’s decentralization.

However, L2s like MegaETH use Ethereum as a settlement layer and EigenDA as a DA layer, delegating security and censorship resistance to the base layer. This allows them to configure nodes to focus solely on performance enhancement. Consequently, MegaETH distinguishes nodes into four types, differentiating the missions and spec conditions for each, specifically concentrating high-spec conditions on the Sequencer.

MegaETH’s Sequencer requires a high-end server with 100+ CPU cores, 1-4TB of high-capacity RAM, and 10Gbps bandwidth because the Sequencer exclusively handles block creation and transaction execution on L2. Verification and full nodes, with lower specs than the Sequencer, are separated into roles of verifying the Sequencer’s results or storing state, allowing the entire network speed to become as fast as the Sequencer’s processing speed.

Tech Stack 2 - Dual Block Processing Mechanism

The MegaETH Sequencer processes blocks in parallel by handling 100 high-frequency mini-blocks per second while bundling EVM blocks periodically every 1 second. Mini-blocks consist of a compressed transaction list and minimal metadata to reduce data load and, most importantly, are created every 0.01 second to provide real-time Pre-confirmation and APIs.

Also, to be compatible with the existing Ethereum ecosystem, it bundles mini-blocks via EVM blocks at 1-second intervals to change the EVM state. This guarantees perfect compatibility, allowing immediate integration with MegaETH without needing to reconstruct Ethereum’s core infrastructure or systems.

However, simply increasing hardware performance and centralizing nodes does not rapidly speed up the chain. According to MegaETH’s research, even using a server with 512GB RAM results in only 1,000 TPS, and parallel processing only doubles the speed. This implies bottlenecks exist not only in node performance or tx processing methods but also in how data is read/written and state synchronization.

Tech Stack 3 - Data Structure Change and Real-Time State Sync

MegaETH aims to change many fundamental structures beyond node configuration to analyze existing L2 structures and remove bottlenecks. It introduced a “new data structure” to retrieve and update data directly in memory instead of disk. It also developed a proprietary protocol that allows other nodes to efficiently sync blocks created by the Sequencer every 10ms by reflecting only the state changes (Diff) delivered by the Sequencer into their database without re-performing complex computations.

MegaETH plans to use a single Sequencer in the short term but intends to decentralize this by having multiple Sequencers in the future, applying market economy logic to maintain an efficient structure.

2) Team

MegaETH was founded by three co-founders with strengths in both technology and BD. Yilong Li and Lei Yang hold Ph.Ds in Computer Science from Stanford and MIT, respectively, playing key roles in implementing MegaETH’s ultra-low latency.

Shuyao Kong, a Harvard Business School graduate and former Global Head of BD at ConsenSys, leads MegaETH’s unique market positioning. Active on X (formerly Twitter) under the persona “Brother Bing,” she communicates casually with the community and incorporates her fashion sense into branding, introducing differentiated goods and sensual NFT designs. This strategy contributes significantly to imprinting MegaETH not just as a technology project but as a “brand” with a strong fandom.

3) Raising History

MegaETH conducted a total of 5 raising rounds, collecting a total of $93.5M. In the first pre-seed round, the foundation bought back 4.75% of token equity from investors to reallocate it for the community. In the Seed round, not only top-tier VCs like Dragonfly participated, but key contributors to the Ethereum ecosystem like Vitalik, the ConsenSys CEO, and Hasu participated as angels.

MegaETH proved its market popularity through three community raisings. In particular, the public sale “Conviction Round” attracted a total of $1.39B in community funds, which is an overwhelming figure about 5 times higher than Monad ($269M), which attracted the second-largest amount.

Shuyao Kong adopted an “English Auction” method for true price discovery but demonstrated leadership considering both investor protection and sustainable growth by setting a price cap of $0.999 to avoid excessive valuation before mainnet launch.

4) Market and Competitors

Ethereum and L2

The “Endgame” written by Vitalik Buterin in Dec 2021 signaled the opening of the full-scale L2 era with a roadmap where “Rollups become the core infrastructure of the Ethereum ecosystem”.

“Once again, we get a world where block production is centralized, block validation is trustless and highly decentralized, and censorship is still prevented...” - Vitalik from Endgame

Subsequently, major rollups like Optimism, Arbitrum, zkSync, and StarkNet appeared, activating the L2 ecosystem. EIP-4844 (Dencun upgrade), key for rollup-centric scaling, introduced a non-execution data format called “Blob”. This reduced gas costs by over 10 times compared to the existing Calldata method but raised concerns about cannibalizing Ethereum’s revenue.

However, judging that rollups hinder Ethereum’s growth is premature. Following the Pectra upgrade, which doubled the Blob allowance per block, related demand and usage have increased, leading to a rebound in on-chain costs.

Vitalik Buterin and the Ethereum Foundation still evaluate rollups as a key stage of the roadmap and define the relationship between Mainnet and Rollups as a “Symbiotic Partnership”. Indeed, both Pectra and Fusaka, the major upgrades last year focus on reducing rollup costs and resolving Data Availability (DA) issues.

This move reflects Ethereum's unique philosophy of not confining the network to specific industries or purposes, but rather securing broader scalability to encompass diverse ecosystems

“The profound benefit of the Ethereum rollup-centric roadmap is that it means that Ethereum is open to all of the futures, and does not have to commit to an opinion about which one will necessarily win.” - Vitalik from Endgame

Comparison with Top 14 TVL Chains

Currently, L2Beat registers 128 L2s, and DefiLlama tracks over 500 total chains. While Rollups seem like a “common destiny” with Ethereum as they rely on it for settlement, they are on their own path for survival. Like independent L1 chains, they must secure liquidity via bridges, induce users to add the chain and generate transactions, and compete to attract attractive dApps for retention. Thus, L2s must compete not only with peer L2s but with all L1 chains that are “faster and cheaper than Ethereum”.

As mentioned, the latency for “Real-time” Web2 services is about 0.4s. To implement this on blockchain, block time must be within 0.2s (considering latency). Among the top 14 chains by DeFi TVL, only Hyperliquid and Aptos support block times under 0.2s. Including Sui and Arbitrum, only about 4 are close to real-time. However, we sometimes feel bored even with 0.3s required by Instagram or Netflix. The time we truly perceive as real-time is somewhere between 0.15s and 0.3s. To provide this UX, block time must be shortened to the 0.01s level, and MegaETH is the only one to achieve this record so far.

However, simply being fast does not automatically bring liquidity, users, and dApps. Considering the recent Conviction Round, Pre-deposit results, and ecosystem support program (Mega Mafia), MegaETH already possesses business and strategic competitiveness comparable to the top 14 chains. If this trend is maintained, it is projected to sufficiently enter the top 14 by Market Cap or TVL upon mainnet launch.

5) Ecosystem

Mega Mafia

Mega Mafia is the flagship accelerator program of the MegaETH ecosystem, aiming to build dApps possible only on MegaETH. Two cohorts have been conducted so far, onboarding 28 projects. The 13 teams in the first cohort raised over $40M from top VCs like Franklin Templeton and Robot Ventures during the cohort period.

Mega Mafia consists of services like consumer apps and HFT-based DeFi that must be literally “real-time,” which were difficult to implement due to latency issues in existing blockchains. MegaETH’s differentiation arises not just from the speed users feel, but from the services/dApps composing the ecosystem. The Mega Mafia program eschews the approach of simply forking and replicating dApps from existing chains. Instead, it fully supports the development of innovative '0 to 1' based apps that create unprecedented value by leveraging MegaETH's overwhelming performance.

Projects like Cap Money, HelloTrade, and Noise are prime examples that empirically demonstrate why builders and users must choose MegaETH.

Independent Infrastructure Construction

MegaETH is strategically using external partnerships to build unique core infrastructure. It launched RedStone Bolt, optimized for MegaETH’s processing speed, to provide real-time price feeds.

Also, through a partnership with Ethena, it plans to issue its own stablecoin, USDm. USDm is based on Ethena’s USDtb stack and invests over 90% of collateral assets in BlackRock’s tokenized fund, BUIDL. This blocks bridge risks from external stablecoins while returning yield generated from collateral assets like government bonds to the ecosystem development fund, promoting sustainable growth.

The entire ecosystem of MegaETH is as follows:

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Fast forward to September 2025, those ambitions have materialized, and Ethena is now assembling its own Survey Corps to hunt the Titans beyond the walls.\

As the pioneer of the yield-bearing stablecoin category, Ethena entered 2025 with explosive TVL growth, cementing itself as the undisputed #3 stablecoin. Every strategic move like DAT, Converge, Fee Switch, Hyperliquid integrations, Stablecoin-as-a-Service has rippled across the market, forcing incumbents to take notice.

But how did Ethena grow this strong, and what missions remain before unleashing its own Rumbling?

Divergence 💥

Ethena’s 2025 updates can be understood as advancing three core objectives:

1. Creating demand for ENA via DAT and Converge.

2. Expanding TVL through Stablecoin-as-a-Service, Hyperliquid ecosystem, DeFi integrations (Aave, Pendle).

3. Strengthening rewards for sENA holders via Fee Switch and Converge ecosystem incentives.

1. ENA Demand Creation

DAT
Ethena’s DAT initiative functions much like a corporate share buyback. The protocol announced two rounds of ENA buybacks in 2025, $360M in July and $530M in September, totaling $890M in committed capital. By systematically removing ENA from circulation, DAT creates instant demand and confidence for the token.

Converge
In collaboration with Securitize, Ethena is building Converge, a blockchain network launching in late 2025. ENA will serve as the staking token for the Converge Validator Network (CVN), a core validator set responsible for network governance and security. This introduces a new, tangible use case for ENA, embedding it into the very fabric of the chain.

2. TVL Expansion

Hyperliquid Ecosystem

Through HIP-3, anyone can deploy new trading pairs on Hyperliquid. Ethena plans to provide USDe pairs across assets and even launch a perp DEX called Hyena. Users could deposit sUSDe as collateral, maintain ~11% yield, and trade seamlessly. As the deployer, Ethena would capture 50% of fees, with projections ranging from $59M to $351M in potential annual revenue.

Stablecoin-as-a-Service (SAAS)

Ethena’s collaboration with MegaETH to launch USDm introduced a new stack: enabling ecosystems to issue their own native stablecoins. Instead of ceding stablecoin revenues to issuers, chains can now capture that value internally while Ethena benefits from adoption of its SaaS model. This positions Ethena as both infrastructure provider and liquidity driver across ecosystems.

(Just before publishing the article, news also broke in the Sui ecosystem about suiUSDe and USDi as part of its Stablecoin-as-a-Service initiative)

3. sENA Rewards Strengthening

Fee Switch

Fee Switch is a mechanism that distributes protocol revenues to ENA token holders. Specifically, a portion of the fees earned by the Ethena protocol is redirected to users who stake ENA (sENA holders). First proposed in November 2024, the initiative had, by September 2025, met all execution conditions and entered the implementation phase.

Until now, sENA holders were not directly exposed to protocol revenues, even though Ethena was generating substantial revenue ($>500m). With the Fee Switch, they will now be directly exposed. How much could they receive? While the exact percentage is not yet finalized, industry precedents suggest an allocation in the range of 5%–15% of revenues.

Previously, Ethena’s revenue distribution allocated 80% to USDe holders and 20% to the Treasury. Some users expect that a portion of USDe rewards might be redirected to sENA holders, but my perspective is slightly different.

Looking more closely at the Ethena Value Stream, the Treasury receives not only a share of protocol revenue but also vested ENA tokens.

So, how much is directed to the Treasury? Roughly speaking, in August 2025 alone, about $40M likely accrued to the Treasury:

• Protocol revenue: $54.7M monthly revenue × 20% → ~$11M

• Token vesting: 40.6M ENA vested monthly × $0.70 (average August price) → ~$28M

Of course, in the early stages of a protocol, a large share of revenues must be reinvested for aggressive growth. But Ethena has now reached a level of stability. Moreover, reducing rewards paid to sUSDe holders would undermine liquidity attraction, making that option less viable.

Thus, the most reasonable path forward is to allocate a portion of what previously went to the Treasury and redirect it to sENA holders through the Fee Switch.

Converge Eco Points

Through Converge and the dApps announced to be deployed on it, sENA holders are currently receiving Converge ecosystem points. This exposure positions them for a variety of potential future airdrops. By strengthening rewards for sENA holders in this way, Ethena increases the incentive to stake ENA, ultimately reducing sell pressure on the token.

TVL is the pitch point of two gears

Ethena is structured as a dual-token protocol, built around USDe and ENA. By analyzing the flywheels of each token separately, we can gain a clearer structural understanding of how the protocol operates. The most striking feature of the model is that “TVL increasing” appears as a common driver in both flywheels.

This aligns with Ethena’s recent strategic updates like Stablecoin-as-a-Service, expansion into the Hyperliquid ecosystem, and looping integrations with Aave and Pendle, all of which ultimately feed back into TVL growth. Taken together, these moves represent highly deliberate choices aimed at reinforcing TVL as the central axis of Ethena’s design.

Beyond the Wall

I believe Ethena now stands at a stage where it is transitioning from a yield-focused protocol into the realm of a true stablecoin. By “true stablecoin,” I don’t simply mean a dollar-pegged asset, but rather a currency that functions as money.

To function as money, a stablecoin must secure the three fundamental roles: medium of exchange, store of value, and unit of account. Achieving this requires two indispensable values: Trust and Adoption.

Trust means that people must believe, “If I accept this token, others will accept it too,” and that under any circumstance, one stablecoin will always equal one U.S. dollar. Building trust takes immense effort, but losing it can happen in an instant — making it all the more critical.

But trust alone is not enough. For a stablecoin to gain true monetary status, it also needs adoption. Even the most stable and trustworthy asset is meaningless if only a handful of parties accept it. Adoption is directly tied to network effects: the more people use it, the more valuable it becomes, and the more entrenched its monetary role.

When trust and adoption reinforce each other, a stablecoin acquires genuine monetary characteristics. This is the deep moat that USDT and USDC have successfully built.

From this perspective, Ethena’s major protocol updates can be interpreted as steps along USDe’s journey toward becoming a true stablecoin.

• DeFi Integrations → Market Cap → Trust
  Through partnerships with protocols like Aave and Pendle, Ethena has achieved explosive TVL growth. This helps compensate for its relatively smaller market cap compared to USDT and USDC, while reaching a certain scale serves as a proof point for the protocol’s credibility.

• Hyperliquid Eco → CEX → Adoption
  Since the early days of Web3, centralized exchanges (CEXs) have been the most powerful players. They are where the overwhelming majority of trading takes place, where asset prices are determined, and where the largest revenues are generated. While Ethena has Bybit as a partner, it lacks a dominant CEX relationship on the level of Binance for USDT or Coinbase for USDC.
  Ethena appears to be addressing this gap through a strategic partnership with Hyperliquid. Hyperliquid is considered strong enough to challenge Binance’s dominance, making this a highly meaningful strategy.

• Stablecoin as a Service → Ecosystems → Adoption
  The number of chains that support a stablecoin is one of the most direct indicators of its adoption. Compared with USDT and USDC, USDe is currently supported on fewer chains. However, through Stablecoin-as-a-Service, Ethena can expand to more ecosystems, improving not only TVL but also overall adoption.

• TON Partnership → Region → Adoption
  USDT and USDC each have distinct regional strongholds: USDT leverages its first-mover advantage in Asia, Latin America, and Africa, while USDC’s regulatory compliance gives it strength in North America and Europe.
  By contrast, USDe does not yet have a strong regional foundation. In my view, this will be one of Ethena’s biggest challenges going forward. Securing regional dominance generally comes only after a stablecoin has already proven itself as “true money,” which means building trust and adoption must come first.
  From this perspective, considering Telegram’s strong user base in emerging markets, the TON partnership can be interpreted as a strategic attempt to expand Ethena’s footprint in those regions.

Pure Titans Standing in Ethena’s Way

Limited Long-term Testing
Ethena launched in 2024. Compared to USDT and USDC, it has not yet been tested over a sufficiently long period. Given that Ethena’s primary revenue source, perp funding spreads, tends to weaken during bear markets, the protocol must prove it can survive through harsher and more prolonged downturns.

Need to Demonstrate Regulatory Readiness
It remains unclear how well-prepared Ethena is for regulatory scrutiny compared to Tether and Circle. This may explain why USDe is often emphasized as a “synthetic dollar asset” rather than a stablecoin. Since North America and Europe are the largest and most heavily regulated markets, demonstrating regulatory readiness is an essential capability.

Lack of Strong CEX Partners and Regional Base
Although Ethena is making progress by leveraging the Hyperliquid ecosystem, the absence of a powerful CEX partner remains a drawback. Similarly, the lack of a strong regional foundation continues to be a challenge. But recently, Ethena started to making a strong partnership with Binance.

Big Remaining Emission of $ENA

Roughly half of ENA tokens are still locked. While these reserves can serve as resources for reward programs and other protocol initiatives, they also represent potential sell pressure. This overhang could weigh on the price of ENA.

Korea, the Key for Ethena

If Ethena succeeds in securing the Korean market, one of the largest countries by global spot trading volume, it could simultaneously resolve two persistent challenges: the lack of a strong CEX partner and the absence of a regional stronghold.

Upbit currently records the highest spot trading volume worldwide, and Bithumb has also been expanding its share. Both exchanges are deeply rooted in Korea’s retail-driven market, where investor purchasing power is exceptionally strong.

Of course, the Korean market comes with its own constraints: it is centered on KRW trading pairs rather than USD pairs, and it operates under a stringent regulatory environment. Nevertheless, opportunities are there. Korean investors maintain consistently high demand for USD assets; following the recent change in government, discussions around introducing a KRW stablecoin have accelerated; and the recent launch of Upbit’s Layer 2 “Giwa” highlights room for collaboration.

Ethena Revenue Projection

Ethena is expanding its business across multiple fronts, and protocol revenues are expected to diversify as well. This makes it difficult to forecast revenues with precision. Still, even a rough projection can provide valuable insight into Ethena’s future trajectory.

Using the Tokenomics Simulator developed by Nonce Classic, and assuming Ethena maintains its historical growth rate, while incorporating Hyena’s projected revenues based on the bear- and bull-case estimates suggested by Delphi founder Jose, Ethena’s cumulative revenue could reach approximately $3B by 2028. For comparison, Aave has generated around $1.6B in cumulative fees since 2020, making Ethena’s projection an attractive figure.

Ethena, Arming

In 2025, Ethena is fully arming itself to challenge the two Titans. From creating ENA demand through DAT and Converge, to expanding across chains with the Stablecoin-as-a-Service stack, to partnerships with Hyperliquid, and MegaETH, and finally activating the Fee Switch, Ethena has entered a phase of comprehensive mobilization. These moves are not mere updates; they are rewriting the playbook of a stablecoin market once considered untouchable.

If Ethena succeeds, it would not only mark the triumph of a single protocol but also ignite a broader paradigm shift in the stablecoin sector. By securing both trust and adoption, and strengthening its monetary status, Ethena’s path would serve as both a guide and a challenge for other DeFi projects.

As 2025 closes and 2026 begins, the question remains: will Ethena slay the Titans and establish itself as the “third Titan” in the truest sense?

Reference

• https://app.ethena.fi/dashboards/transparency

• https://docs.ethena.fi/ena

• https://dune.com/hildobby/ethena

• https://dune.com/entropy_advisors/ethena-protocol-metrics

• https://www.llamarisk.com/research-ethena

• https://4pillars.io/ko/articles/Ethena-not-Stablecoin

• https://defillama.com/protocol/fees/ethena

• https://tokenomist.ai/insights/ena-the-stablecoin-bet

• https://thedefireport.io/research/ethena-memo?utm_source=chatgpt.com

1. Understand why the yield bearing stablecoin sector is gaining increasing attention in the current market environment,

2. Propose a structured evaluation framework for assessing yield-bearing stablecoins based on stability and profitability criteria, and

3. Examine whether the native tokens of top-performing protocols successfully capture the value generated by their underlying businesses.

Through this exploration, we hope to provide a comprehensive perspective on how the next generation of stablecoins — and their associated token economies — are evolving.

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What’s Yield-Bearing Stablecoin?

In an era where even your cash earns yield, stablecoins are evolving — from silent placeholders to active income generators.

Recently, yield-bearing stablecoins have been gaining attention in the market. Traditionally, stablecoins like USDT and USDC served primarily as transactional mediums, but issuers like Tether and Circle have generated massive profits by earning yield on their collateral reserves. In fact, Tether became the 7th largest net buyer of U.S. Treasuries globally as of 2024, highlighting its growing influence within the global financial system.

Against this backdrop, in a rising interest rate environment, a new question emerged among investors: “Why am I not earning any yield?”
Traditional stablecoins did not share their yield with users. In response, projects like Ondo, Usual have introduced models that distribute a portion of the generated yield to stablecoin holders. This trend has accelerated the influx of TradFi investors into crypto and, together with the growth of the Real World Asset (RWA) sector and greater regulatory clarity, is pushing yield-bearing stablecoins closer to mainstream adoption.

A yield-bearing stablecoin can be defined as a stablecoin that allows holders to passively earn a yield (APY) simply by holding the asset.
In this research, we propose an evaluation framework based on four criteria: collateral safety, operational transparency, yield level, and yield consistency.

Yield-Bearing Stablecoin Evaluation Framework

Currently, there are approximately 40 yield-bearing stablecoin projects identified in the market. Among these, projects with a fully diluted valuation (FDV) or total value locked (TVL) below $30 million were excluded, as they are considered insufficiently validated at scale. Furthermore, projects that have not launched a native token will be included at next article.

Only protocols that pass the above filtering criteria will be evaluated for their stability and profitability, based on four key metrics: collateral safety, operational transparency, APY level, and APY consistency. The specific evaluation criteria for each category are as follows:

The Stability Score is calculated by assigning 3 points for High, 2 points for Mid, and 1 point for Low in both the collateral safety and operational transparency categories, then summing the two scores. The Profitability Score is calculated by multiplying the APY by 1 if the APY consistency is High, and by 0.5 if it is Low.

The visualization below plots each protocol based on their calculated (X, Y) coordinates according to these criteria.

In the second filtering step, projects offering APYs lower than CEX benchmarks (Coinbase USDC 4.1%, Binance USDT 4.4%) or delivering relatively low yields within the same stability group were also excluded.

After filtering, two finalists remained: Usual and Syrup Finance. However, Usual was excluded due to concerns about governance risk. Thus, Syrup Finance, which demonstrated the most balanced structure, was selected as the subject of deeper analysis.

Syrup Finance

Syrup Finance is a project launched by Maple Finance last year. Originally, Maple Finance was founded in 2021 and sought to pioneer the underdeveloped area of undercollateralized lending for institutional borrowers. However, after the collapse of FTX in 2022, Maple’s TVL plummeted from $150 million to around $1 million, facing an existential crisis.

In 2024, Maple made a comeback by launching the Syrup platform, offering permissionless access to institutional-grade yields for DeFi users.

Syrup issues fixed-rate loans to institutional borrowers such as hedge funds and family offices, with collateral primarily consisting of highly liquid assets like BTC and ETH. The platform also utilizes liquid staking tokens (LSTs) like stETH and jitoSOL, and engages in native staking through providers like Figment. To minimize liquidation risks, Syrup leverages an OTC network for off-chain collateral liquidation and implements a flexible margin call structure.

Okay but, is $SYRUP sweet?

While Syrup has proven the attractiveness of syrupUSDC, successfully growing both its TVL and protocol revenue, the key question remains: Is the native token, $SYRUP, effectively capturing that value?

Currently, Syrup allocates 20% of its protocol revenue toward buying back $SYRUP tokens. Protocol revenue primarily comes from two sources:

• Management Fees — a cut taken from lenders’ interest income when loans are originated through the platform,

• Service Fees — additional charges paid by borrowers for loan management and administration.

Using the average protocol revenue over the past three months to project annualized revenue, and calculating the number of tokens repurchased at the current $SYRUP price, the buyback amounts to only about 0.5% of the total token supply per year. At this pace, it would take over 200 years to fully buy back the circulating supply.

Moreover, the staking yield for $SYRUP holders sits around 2.5%, which is not particularly attractive compared to alternative opportunities in DeFi.

In summary, Syrup Finance does deliver compelling yields relative to its stability, backed by independent revenue streams by institutional lending. This has driven strong user and asset inflows into the protocol.

However, the majority of value creation is concentrated in syrupUSDC, not the $SYRUP token itself. Thus, it may be time to ask an important question for protocols offering yield-bearing stablecoins: Do they really need a native token at all?

In the next piece, we will expand our evaluation framework to include protocols that have not yet launched — or do not plan to launch — a native token.

Disclaimer: This article is for informational purposes only, not investment advice. Always consult with a professional for investment decisions. This article is published at Apr 26, 2025.

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