# USDm Guide

## Overview
USDm is the native stablecoin of MegaETH, developed in collaboration with Ethena. It serves as the canonical unit of account and base liquidity across MegaETH.
Instead of charging a margin on sequencer fees, MegaETH directs the predictable yield from USDm’s reserves to cover operational costs. This allows the network to maintain sub-cent gas fees while staying economically sustainable and fully transparent.

## Mint & Redeem Mechanics
Minting and redemption are permissioned, meaning that only entities which are authorized by Ethena will have access to the relevent contracts on Ethereum. These will typically include market makers, OTC desks and authorized bridge operators. Public users may obtain or exit USDm through secondary markets or bridges (Refer to **Secondary Liquidity** for more details).

### Where Minting and Redemption Occur
- **Chain:** Ethereum mainnet
- **Interface:** megausd.money (Ethena hosted frontend) and APIs
- **Bridging:** USDm moves to MegaETH via OFT-compatible bridges. Mint and burning occur exclusively on Ethereum.

### Accepted Collateral
- **Asset:** USDC on Ethereum mainnet
- **Collateral Ratio:** 1:1 issuance
- **Reserve Assets:** USDtb held by institutional custodians

### Primary Mint Flow (Authorized Users)
1. The user visits megausd.money and submit an authorization application.
2. Once approved, the authorized user deposits USDC into the designated contract on Ethereum mainnet.
3. Ethena mints USDm 1:1 against the deposit and allocates corresponding USDtb reserves.
4. Newly minted USDm is automatically transferred to the user's MegaETH address through the OFT bridge.

> Note:
> - Minted USDm is not accessible on Ethereum mainnet.
> - Ethena maages all KYC/AML compliance for issuance and redemption.

### Primary Redeem Flow (Authorized Users)
1. Authorized users burn USDm via Ethena's redemption contract on Ethereum mainnet.
2. Ethena returns USDC 1:1 to the user's designated Ethereum address.

> Redemption Buffer
Ethena maintains a USDC buffer equivalent to roughly 10% of total backing to facilitate immediate redemptions.
This buffer can be increased temporarily if higher withdrawal activity is expected.
When the buffer is fully utilized, authorized users may redeem directly in USDtb, which is actively traded on major centralized exchanges such as Bybit.
Ethena typically replenishes the buffer once daily during manual operation, with plans to automate replenishment over time.

## Secondary Liquidity

Public users cannot mint or redeem USDm directly, but they can interact with it seamlessly through bridges and on-chain liquidity venues on MegaETH.

### Onboarding Flow (Public Users)
1. A public user holding major stablecoins such as USDC or USDT accesses a frontend operated by MegaETH and selects USDm as the destination asset.
2. Under normal conditions, the router bridges the stablecoins and swaps them into USDm through AMM or CLOB liquidity on MegaETH.
>Note: If on-chain depth is limited, the router engages a designated authorized user who can mint USDm directly on Ethereum mainnet and supply it at par to complete the transaction.
3. This results in the user aquiring USDm with minimal slippage, regardless of market conditions.

### Exit Flow (Public Users)

#### (1) Via DEXs
Users swap USDm to major stablecoins via DEXs on MegaETH. After conversion, they may bridge out said stablecoins through supported bridges.
> Note: Peg stability depends on market depth and market-maker activity and may deviet under stress conditions.

#### (2) Via Solver-Mediated Bridge Lanes
Users initiate a cross-chain swap from USDm on MegaETH to a stablecoin on another chain. Solvers deliver the target stablecoin on the destination chain while absorbing USDm on MegaETH. They can later recycle that USDm through the primary redeem flow, DEXs or the PSM backstop.

#### (3) Via Peg Stability Module (PSM) Backstop
The Peg Stability Module (PSM) serves as the ultimate liquidity backstop from USDm on MegaETH and guarentees par redemption between USDm and USDT0 during stress events, market dislocations, or periods of thin on-chain liquidity. The facility is based on audited Hashnote tMMF contracts (Apache 2.0, Halborn-audited). To exit via the PSM, a user shall:

1. Call `redeem(amount)` on the Redemption Contract on MegaETH to start a 1:1 swap between USDm and USDT0.
2. The Redemption Contract routes the request to the Settlement Contract, which executes the trade.
3. The Settlement Contract pulls USDT0 liquidity from the liquidity source and transfer it to the user.
4. If the user wishes to bridge out USDT0, they may do so using standard routes.

> Note: The PSM should not replace natural market liquidity on MegaETH and should instead exists to provide a transparent, on-chain mechanism for guarenteed stability.

## Reserve Transparency
Ethena publishes monthly attestations detailing the composition and balances of USDtb reserves that back USDm. Reserves are held with regulated custodians and primarily consist of BlackRock’s tokenized U.S. Treasury fund (BUIDL) via Securitize, alongside liquid stablecoins for redemptions. All attestations are made publicly available through Ethena’s official channels.

## FAQ
**Is USDm always 1:1 with the U.S. dollar?**
USDm is designed to maintain 1:1 convertibility through multiple liquidity layers: primary redemption for authorized users on Ethereum, deep DEX liquidity on MegaETH, solver-mediated bridge lanes, and the PSM backstop that guarantees par swaps during stress events.

**Can public users mint or redeem USDm directly?**
No. Primary minting and redemption are restricted to authorized entities approved by Ethena. Public users can acquire or exit USDm through on-chain DEXs, bridges, or the PSM facility on MegaETH.

**What backs USDm?**
USDm is fully backed 1:1 by USDtb, issued by Ethena. USDtb reserves are held with regulated custodians and consist mainly of tokenized U.S. Treasuries (BUIDL by BlackRock via Securitize) and liquid stablecoins for redemption liquidity. Ethena publishes monthly attestations verifying these reserves.

**What happens if minting or redemption is paused?**
If primary issuance or redemption is temporarily paused, users can still swap or exit through secondary liquidity on MegaETH. The PSM provides extra liquidity, which can be redeemed at-par with USDT0.

**Does MegaETH hold or manage USDm reserves?**
No. Reserve management, custody, and compliance are handled entirely by Ethena and its regulated issuer entities. The MegaETH Foundation focuses on maintaining on-chain liquidity through DEXs, bridges, and the PSM, but does not custody reserves.