Summary
LlamaRisk supports the initial parameters for the deployment of Aave V3 on MegaETH. At least $62.8M in initial liquidity commitments has been confirmed internally across core pairs to bootstrap the ecosystem. These efforts ensure that the instance launches with sufficient depth to support liquidations and scaling.
We believe that it is rational to launch the instance with a subset of initially proposed assets, also restricting all borrowing to E-Modes uniquely. After the initial phase, additional asset listing proposals are expected to follow, each of which will be reviewed in depth by LlamaRisk and other SPs.
Initial Setup
Aave’s MegaETH instance will be initially structured to enforce all borrowing to happen exclusively under E-Modes. This is enabled by the Aave V3.6 update and ensures future flexibility for collateral isolation. Therefore, the market will be structured around USDm as the primary stablecoin, together with USDT0 as a bluechip stablecoin choice. As of now, the market will heavily depend on ETH-correlated assets as well as BTC.b on the collateral side.
The initially proposed yield-bearing stablecoins (cUSD, stcUSD, USDe, sUSDe) are planned to be deployed at a later time after the initial market deployment. This also holds for iTRY and wiTRY, which represent a novel asset type not yet approved and included in the Asset Class Allowlist. Nonetheless, we are in touch with the respective teams (Cap and Brix) and are carrying out internal due diligence in order to prepare for the eventual deployment proposals of these assets.
Chain-Specific Asset Evaluations
Note: USDm is a novel asset not yet onboarded on other Aave markets; BTC.b has recently been acquired by Lombard and shifted to a different technical setup, therefore, both of these assets required in-depth asset reviews, presented in separate responses on this forum thread.
USDT0 (LayerZero OFT)
USDT0 serves as the canonical representation of USDT on MegaETH.
- Standard: Powered by the LayerZero’s OFT standard.
- Mechanism: Uses a lock-and-mint architecture on Ethereum Mainnet (via
OFTAdapter), ensuring 1:1 backing and cross-chain interoperability without fragmented liquidity pools. - Access Controls: The contract is an upgradable OpenZeppelin Transparent Proxy. Ownership and ProxyAdmin functions are controlled by a 3/5 Safe Multisig, with the OFT Contract acting as the authorized minter/burner adapter.
As the chain is in the private mainnet mode, the total supply of the asset is yet to be fully bootstrapped, with a 32.5M total supply, 4.5M of which resides in a Uniswap V3 USDm/USDT0 pool.
Source: MegaETH Blockscout, January 27, 2026
WETH
WETH is the standard wrapped native asset representation on MegaETH.
- Standard: Non-upgradable contract that wraps the chain’s native asset into an ERC20-compatible representation.
- Mechanism: Users mint WETH by bridging native ETH through the canonical bridge.
- Access Controls: The underlying ETH locked on Ethereum Mainnet is controlled by the MegaETH network’s 4/8 Safe Multisig. The L2 token contract itself is non-upgradeable.
The total supply of WETH on MegaETH is 114.2, with most of the supply flowing into Uniswap V3 pools and other contracts, potentially representing preparatory steps for liquidity bootstrapping.
Source: MegaETH Blockscout, January 27, 2026
wstETH
wstETH is the bridged representation of Lido’s wrapped staked ETH, utilizing Chainlink CCIP.
- Standard: Upgradable OpenZeppelin Transparent Proxy using the
BurnMintERC20Transparentimplementation. - Mechanism: Cross-chain issuance operates via the Chainlink CCIP lock-and-mint bridge. The
SiloedLockReleaseTokenPoollocks tokens on Mainnet, while theBurnMintTokenPoolon MegaETH handles minting and burning upon receiving verified CCIP messages. - Access Controls: The Proxy Admin is a 3-hour RBACTimelock. This structure introduces a standard delay for proxy upgrades and configuration changes.
At the time of writing, there is no supply of wstETH available on MegaETH.
ezETH
ezETH is the bridged representation of Renzo’s liquid restaking token.
- Standard: Upgradable Transparent Proxy using XERC20 standard.
- Mechanism: Cross-chain integration leverages Hyperlane. A
HypXERC20Lockboxon Mainnet transmits messages via the HyperLance Mailbox. Relayers deliver these to MegaETH, where theHypXERC20contract validates and mints ezETH. - Access Controls: The Implementation Proxy is currently controlled by a 3/6 Safe Multisig.
At the time of writing, there is no supply of ezETH available on MegaETH.
wrsETH
wrsETH is the bridged representation of Kelp DAO’s liquid restaking token.
- Standard: Upgradable Transparent Proxy utilizing the
RsETHTokenWrapperimplementation. - Mechanism: The asset wraps the rsETH OFT version. It utilizes LayerZero for cross-chain functionality, where the
rsETH OFTadapter acts as the facilitator to receive bridge messages and mint/burn tokens. - Access Controls: A 3-day TimelockController governs critical functions, including the list of assets eligible for native minting. The ProxyAdmin is also subject to this 3-day Timelock.
At the time of writing, there is minimal supply of wrsETH available on MegaETH.
Asset Liquidity
The heuristics used to determine adequacy for initial supply and borrow caps are based on the following:
- Projected Price Impact: Based on the $62.8M in confirmed initial commitments, we anticipate that once deployed, liquidity will be sufficient to support a target price impact threshold of 5-7.5% for core collateral assets. These projections are anchored by significant commitments in WETH and stable/stable pairs.
- Contingency on Deployment: The proposed parameters and caps outlined in this document are preliminary. A final validation of realized liquidity depth and DEX router efficiency will be required post-deployment to ensure that the Aave Effect and committed bootstrapping efforts meet the necessary safety requirements for scaling.
- Correlated E-Modes: In this deployment, each asset will be assigned its own specific E-Mode, limiting the borrowing to bluechip (BTC.b, WETH and wstETH) stablecoin borrowing and LST/LRT (wstETH, wrsETH, ezETH) WETH borrowing. This allows for higher capital efficiency while isolating the specific risk profiles of different providers.
| Assets | Committed DEX Liquidity | Proposed Supply Cap |
|---|---|---|
| USDm | ~$16.60M | $50.00M |
| USDT0 | ~$16.60M | $50.00M |
| WETH | ~$23.10M | 50.00K (~$179M) |
| wstETH | ~$2.50M | 12.00K (~$43M) |
| wrsETH | ~$2.00M | 10.00K (~$36M) |
| ezETH | ~$2.00M | 10.00K (~$36M) |
| BTC.b | ~$3M | 120 (~$10M) |
The following commitments have been confirmed with strategic partners to ensure deep liquidity at launch. We further expect that targeted incentive programs as well as DEX launches will immediately grow the liquidity TVL at the time of deployment.
Core Stable & ETH Pairs
| Pairs | Committed Liquidity TVL | DEX Venue |
|---|---|---|
| WETH / USDm | $16.6M | Kumbaya |
| WETH / USDT0 | $16.6M | Kumbaya |
| USDT0 / USDm | $16.6M | Kumbaya |
| BTC.b/USDm | up to $3.00M | TBD |
Correlated LST/LRT Pairs
| Pairs | Committed Liquidity TVL | DEX Venue |
|---|---|---|
| wstETH / WETH | $5.0M | Kumbaya |
| wrsETH / WETH | $4.0M | Kumbaya |
| ezETH / WETH | $4.0M | Kumbaya |
Perps and Spot Trading Platforms
A novelty introduced by the MegaETH’s architecture is the capability to support real-time trading platforms, such as the WCM exchange. Since such exchanges will reside fully onchain, the orderbook liquidity will also become an integral part of chain’s overall liquidity flows. Therefore, instead of solely focusing on DEX liquidity levels, liquidations on Aave will also be supported by liquidity on the native, orderbook-based exchanges.
Parameter Recommendations
Parameters have been agreed jointly with @ChaosLabs. We also agree on the approach of using regular Chainlink Price Feeds as of the initial launch.
Disclaimer
This review was independently prepared by LlamaRisk, a community-led non-profit decentralized organization funded in part by the Aave DAO. LlamaRisk is not directly affiliated with the protocol(s) reviewed in this assessment and did not receive any compensation from the protocol(s) or their affiliated entities for this work.
The information provided should not be construed as legal, financial, tax, or professional advice.