How does MegaETH achieve a TVL of $700 million within one week of TGE? Breakdown of the packaging strategies

Author: Van1sa

The controversy between MegaETH and Monad has lasted a long time. In my view, they are textbook examples that can be used to explain “how to analyze TVL” and “how to bootstrap a new chain” — two extreme cases.

The structure of this article:

• Comparing DeFi TVL, stablecoins, and bridged TVL data of the two chains
• Breaking down MegaETH’s packaging of TVL
• Mega’s TVL has inflated numbers, so did Monad win? Reflections on bootstrapping a new chain

1. DeFi TVL, Stablecoins, and Bridged TVL Data Comparison

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

1. DeFi TVL

The actual “money put into DeFi protocols” refers to users depositing crypto assets into DEX liquidity pools, lending protocols, staking protocols, etc., which are counted towards TVL.

MegaETH’s TVL is more than twice 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 having a high share, other top 10 protocols account for less than 1%. Monad’s TVL, on the other hand, is spread across various protocols.

The second issue is that Mega’s TVL is extremely high, but its 24-hour DEX trading volume and app fees are inferior to Monad, indicating Mega’s funds are “moving slower.” Just like analyzing financial statements, you can’t look at capital alone; turnover rate better explains the situation.

2. Stablecoin Market Cap

The total value of stablecoins issued or circulating on this chain only shows how much USD liquidity is on-chain, and does not directly represent ecosystem activity.

MegaETH’s stablecoin market cap is about 715.68 million, up from less than 100 million a week ago. This is highly related to Mega’s TGE, Terminal Points farming, and other factors.

Mega’s core stablecoin is USDm, accounting for 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 and bridged in.

Mega’s stablecoin size is larger, but its structure is very concentrated.

Monad’s dominant stablecoin asset is USDC, with USDT0 as a secondary stablecoin, both are general dollar assets, and their distribution is more natural.

3. Bridged TVL:

The total value of assets bridged from other chains. This number often exceeds DeFi TVL because many assets, after bridging in, are not immediately used in protocols; they might just sit in wallets, or wait for airdrops, events, or ecosystem launches.

I found that Defillama’s statistics for bridged TVL on the two chains are inconsistent: Mega’s data includes the native token $MEGA, while Monad’s data does not include $MON, and Mega’s native stablecoin USDm is also counted as bridged TVL.

So here, we only look at the proportion from third-party sources:

Excluding native tokens, external assets entering Mega via third-party bridges and specific asset channels account for about 57.0%, while Monad is 30.6%.

Liquidity brought by third-party bridges can help a new chain bootstrap quickly. But when analyzing the quality of TVL, a high proportion of third-party assets indicates more strategic, less stable funds that follow short-term incentives (more on this later).

Summary: From these data, MegaETH is extremely wealthy, but the source of funds, asset types, and protocol engagement are overly concentrated, giving a strong sense of packaging.

Questioning packaging, proves packaging.

2. MegaETH’s Packaging of TVL

I previously provided two clues: Aave protocol contributes 86.6% of Mega’s TVL, and USDm and USDe account for 96.7% of Mega’s stablecoin market cap. Let’s continue analyzing:

1. Composition of Mega’s Aave supply and borrowings

Data source: Aave V3

Note: DefiLlama uses a net value method to calculate Aave’s TVL, so numbers may differ from earlier.

“LlamaRisk, the Aave risk team, pointed out that MegaETH exhibits stablecoin leverage cycling behavior.”

First, the conclusion: USDe is bridged into Mega specifically as collateral to borrow USDm, which is then deposited into Aave, creating a stablecoin leverage cycle that inflates Aave’s supply and borrow data.

Evidence 1: In Aave governance proposals, it’s explicitly suggested to set a dedicated E-Mode for USDe on Mega, with LTV at 90% and LT at 93%. If 200 million USDe are staked in Aave, the maximum borrow would be 200m * 90% = 180m USDm, matching the 178.8m borrowed in the data.

Evidence 2: Using health factor calculations, if 200m USDe borrow 178.8m USDm, then health factor = 200m * 93% / 178.8m ≈ 1.04. This aligns with LlamaRisk’s report that active borrowers’ health factors are concentrated around 1.03-1.05.

Evidence 3: Etherscan shows MegaETH’s USDm total supply is about 499.5 million, with the Aave contract holding about 420 million, accounting for roughly 84% of USDm’s total supply. Subtracting this from the supplied amount of 599.6m in Aave gives about 179.6m.

At this point, you might say it’s just user incentives, and the 178m leverage cycle isn’t counted in DefiLlama’s TVL, but it still looks suspicious!

2. The higher the TVL of a lending protocol, the more it might mean nobody needs your tokens.

Under the net value method, TVL of a lending protocol = Total Supplied - Total Borrowed = funds available to borrow.

A higher TVL in lending protocols isn’t necessarily good, so we also need to look at utilization.

Excluding the leveraged USDm, you’ll find that the utilization rate of funds in Aave on Mega is almost zero.

USDm’s supply APY is 5.12%, with 4.76% subsidized by Mega itself, while borrow APY is only 1.34%. Nobody wants to borrow because they don’t know what to do with it.

Thus, USDm and USDe are more like display assets in Aave, with limited contribution to protocol revenue or real on-chain demand. Mega’s app fee data also supports this.

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

“LlamaRisk states: USDm’s supply side is highly concentrated, with a single address holding 80%.”

From previous analysis, we know that USDe’s supply is dominated by stablecoin cycling strategies, with growth rates and health factor distributions indicating these are highly capital-efficient strategic funds, not ordinary users’ deposits.

After removing inflated figures, USDm and USDe contribute about 620m in TVL via Aave, but these funds are controlled by large players and are highly strategic.

Summary: Mega’s TVL needs to be viewed with a discount. Its funds are too concentrated, purpose-driven, heavily reliant on a few big players and lending markets, and lack genuine demand.

It’s not about faking, but Mega’s TVL isn’t organically grown; it’s “carefully packaged” via USDm and USDe, then “displayed” in the most basic lending protocols.

3. Reflections on Bootstrapping a New Chain

MegaETH’s inflated TVL doesn’t mean Monad has lost. I’m not writing this to diss Mega; after all, it made early retail participants profitable. But some people mindlessly criticize Monad using TVL, which prompted this article.

Objectively, Monad’s capital structure is healthier and more diversified.

But it also has a fatal flaw: on-chain applications haven’t yet absorbed this capital.

Five months after mainnet launch, no killer app has emerged; 24-hour DEX volume and app fees are still less than ideal. Monad’s core narrative is high-performance EVM, which needs to be proven not by “I can host many applications,” but by “many applications must rely on my performance.” Currently, this remains a false proposition.

The two chains’ bootstrapping approaches are two extremes:

MegaETH creates a flywheel with USDm, aiming to attract a large user base and capital quickly.

Monad focuses on building infrastructure, onboarding assets, and cultivating developers, letting users and capital decide whether to stay long-term.

Neither approach is inherently good or bad, but their risks are very different:

MegaETH needs to prove in the future that “these funds aren’t just packaging”; Monad needs to figure out “how to retain funds long-term after they come in.”

Early-stage capital on new chains often has expectations. Users bridging assets might do so to experience applications, participate in ecosystem tasks, potential airdrops, or early gains.

Therefore, we shouldn’t focus solely on “packaging,” but on “absorption.” After funds arrive, if there aren’t enough compelling applications, they will stay in wallets, bridges, a few DeFi protocols, or basic LPs.

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

Let’s stop obsessing over TVL. What we should watch is: can DEX trading volume be sustained? Is lending demand growing naturally? Are perpetuals, gaming, and consumer apps taking off? Can app fees stabilize or increase? Will TVL spread from a few basic DeFi protocols to more applications?

If these indicators don’t keep pace, no matter the bootstrapping method, the chain risks becoming a ghost chain.