How MegaETH Achieved a TVL of 700m Within a Week of TGE? Analyzing the Packaging Strategy

Author: Van1sa

The controversy between MegaETH and Monad has lasted for a long time. In my eyes, they are textbook examples that can be used to explain "how to analyze TVL" and "how to cold start a new chain."

The structure of this article:

• Compare the Defi TVL, stablecoins, and Bridged TVL data of the two chains
• Analyze the methods used by MegaETH to package TVL
• Mega's TVL has inflated figures, so did Monad win? Thoughts on cold starting a new chain

1. Comparison of Defi TVL, Stablecoins, and Bridged TVL Data

Data source: defillama Snapshot time: May 6, 2026, 12:00

1. Defi TVL

The real money "put into DeFi protocols" is when users place crypto assets into DEX liquidity pools, lending protocols, staking protocols, etc., which will be counted in TVL.

MegaETH's TVL is more than double that of Monad, but there are two issues:

The first issue is that Mega's TVL is highly concentrated in the Aave protocol (remember this clue). Besides the native protocol Kumbaya, the other Top 10 protocols account for almost less than 1%. Monad's TVL is distributed across various protocols.

The second issue is that Mega's TVL is particularly high, but the 24-hour DEX trading volume and APP Fees are inferior to Monad, indicating that Mega's money "turns over relatively slowly." Just like looking at financial statements, one cannot only look at the funds; the capital turnover rate can better illustrate the problem.

2. Stablecoin Market Value

The total value of stablecoins issued or circulating on this chain can only indicate how much dollar liquidity is on-chain and cannot directly represent the activity level of the ecosystem.

MegaETH's stablecoin market value is approximately 715.68 million, which was less than 100 million a week ago, highly correlated with factors such as Mega TGE and Terminal Points farming.

Mega's core stablecoin is USDm, accounting for as much as 68.3% (remember this clue). USDm is Mega's native stablecoin, issued by Ethena's stablecoin stack. The secondary stablecoin is USDe, a synthetic stablecoin issued by Ethena on Ethereum, which has been bridged in.

Mega's stablecoin scale is larger, but the structure is very concentrated.

Monad's dominant stablecoin asset is USDC, with the secondary stablecoin being USDT0, which are almost all universal dollar assets, distributed more naturally.

3. Bridged TVL:

The total value of assets bridged in from other chains. This number often exceeds DeFi TVL because many assets, after being bridged in, do not immediately enter protocols and may just stay in wallets, waiting for airdrops, events, or ecosystem launches.

I found that the Bridged TVL statistics for the two chains on Defillama are inconsistent. Mega's data includes the Native Token $MEGA, while Monad's data does not include $MON, and it also counts Mega's native stablecoin USDm in Bridged TVL.

So here we only look at the proportion of Third Party:

After excluding the Native Token, the proportion of external assets entering Mega through third-party bridges and specific asset channels is approximately 57.0%, while Monad is 30.6%.

The liquidity brought by third-party bridges can help new chains quickly cold start. However, when analyzing the quality of TVL, a high proportion of Third Party means that the funds are more strategic, more unstable, and mainly follow short-term incentives. (This will be proven in detail later)

In summary: From these data, MegaETH is very wealthy, but the sources of funds, asset types, and protocol acceptance methods are too concentrated, giving a strong sense of packaging.

Question the packaging, prove the packaging.

2. The Methods of MegaETH Packaging TVL

I previously provided two clues: the Aave protocol contributes 86.6% of Mega's TVL, and USDm and USDe contribute 96.7% of Mega's stablecoin market value. Let's continue the analysis:

1. Supply and Borrow Composition on Aave for Mega

Data source: Aave V3

Note: DefiLlama used the net value method to calculate Aave's TVL, which may differ from the numbers mentioned earlier

"The Aave risk team LlamaRisk pointed out that MegaETH exhibits stablecoin leverage cycle behavior."

To state the conclusion first: USDe was bridged into Mega with the purpose of being used as collateral to borrow USDm, which is then deposited into Aave, forming a stablecoin leverage cycle that inflates Aave's supply and borrow data.

Evidence 1: In the Aave governance proposal, it is clearly suggested to set a special E-Mode for USDe on Mega and set the LTV to 90% and LT to 93%. If 200 million USDe is staked in Aave, theoretically, the maximum that can be borrowed is 200 * 90% = 180 million USDm, which corresponds to the 178.8 million in the data.

Evidence 2: Using the health factor in reverse, if 200 million USDe borrowed 178.8 million USDm, the health factor = 200 million * 93% / 178.8 million ≈ 1.04. This completely aligns with LlamaRisk's report stating that the health factors of active borrowers are concentrated between 1.03-1.05.

Evidence 3: MegaETH's Etherscan shows that the total supply of USDm is approximately 499.5 million, with a single Aave contract holding about 420 million, accounting for about 84% of the total supply of USDm. Subtracting the supplied amount of USDm in Aave, which is 599.6 million, from 420 million gives exactly 179.6 million.

At this point, you might still argue that it is user incentive behavior, and the leveraged cycle of 178 million has not been counted in DefiLlama's TVL, but something still feels off!

2. The higher the TVL of lending protocols, the more likely it is that your tokens are not needed.

Under the net value method, the TVL of lending protocols = Total Supplied - Total Borrowed = funds that can still be borrowed.

The higher the TVL of lending protocols, it is not necessarily a good thing, so we also need to look at the utilization rate.

Excluding the USDm borrowed through the leverage cycle, you will find that the capital utilization rate on Aave for Mega is almost zero.

The Supply APY for USDm is 5.12%, of which 4.76% is subsidized by Mega itself, while the Borrow APY is only 1.34%, and still, no one is willing to borrow because they do not know what to do with it.

Thus, USDm and USDe are more like display items placed in Aave, contributing limited value to protocol revenue and real demand for on-chain activities. Mega's App Fee and other data also indicate this.

3. The deposits, staking, and borrowing behaviors of these USDm and USDe are actually dominated by large holders.

"LlamaRisk states: The supply side of USDm is highly concentrated, with a single address accounting for 80%."

Through the previous analysis, we know that the supply of USDe is dominated by stablecoin cycle strategies, and both the growth rate and health factor distribution indicate that this is highly capital-efficient strategic funding, not ordinary user deposits.

After removing the inflated figures, USDm and USDe contributed 620 million TVL through Aave, but this funding is dominated by large holders and is very strategic.

In summary: Mega's TVL needs to be viewed with a discount; its money distribution is too concentrated, too purposeful, too reliant on a few large holders and the lending market, and lacks real demand.

It is not to say that it is fraudulent, but rather that Mega's TVL is not naturally grown through the ecosystem; instead, it is "carefully packaged" by USDm and USDe, "displayed" in the most basic lending protocols.

3. Thoughts on Cold Starting a New Chain

MegaETH's TVL has inflated figures, but that does not mean Monad has won. I am not writing this to diss Mega; after all, it has allowed early participants to profit. However, some people blindly use TVL to diss Monad, which prompted this article.

Objectively speaking, Monad's funding structure is healthier and more diversified.

But it also has a fatal flaw: on-chain applications have not yet captured these funds.

Five months after the mainnet launch, there is still no Killing App emerging, and the 24-hour DEX trading volume and App Fees are still not ideal. Monad's core narrative is high-performance EVM, and what this narrative truly needs to prove is not "I can support many applications," but rather "there are already many applications that must use my performance." However, at this stage, this is still a false proposition.

The cold start methods of the two chains are two extremes:

MegaETH created a flywheel with USDm, aiming to attract a large number of users and funds in the short term.

Monad's focus is still on building infrastructure, laying asset entry points, and cultivating developers, allowing users and funds to choose whether to stay long-term.

There is no absolute good or bad in these two methods, but the risks are completely different:

MegaETH needs to prove in the future that "these funds will not always rely on packaging"; Monad needs to think about "how to retain funds long-term after they come in."

Early funding for new chains often has expectation attributes. Users bridge assets to the new chain, possibly to experience applications, or for ecosystem tasks, potential airdrops, or early profits.

Therefore, we should not focus the issue on "packaging," but rather on "digestion." After funds come in, if there are not enough good applications to support them, they will remain in wallets, bridges, a few DeFi protocols, or basic LPs.

Although comparing an Ethereum Layer 2 with an independent Layer 1 is quite unfair, I believe the "competition" between them is far from reaching an exciting stage.

Let's stop using TVL as a talking point; what we should look at is: whether DEX trading volume can be sustained, whether lending demand grows naturally, whether Perps, games, and consumer applications have emerged, whether App Fees can steadily increase, and whether TVL will spread from a few basic DeFi to more applications.

If these indicators do not keep up, regardless of the cold start method, it will become a ghost chain.

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