Power on Arduino Mega

I am new to the Arduino platform - I am playing with a few blinking LEDs and a HEF4794 Shift Register. My question is about powering the Arduino via USB vs. an external 5VDC or 12VDC supply. Here is what I am seeing - when I connect the Arduino via USB - I see 5V at the Shift Register - exactly what I expected. I have the loaded the program to the processor. I connected the Arduino to a 5VDC supply using the 2.1mm connector and only see 3.3V at the Shift Register. After a little more reading, I connected my Arduino to a 12V supply - I see 5V at the Shift Register (it is connected via a breadboard to the 5V +/gnd on the Arduino). I am planning to build a large scale LED matrix that will require more current than the USB can supply - what is the correct voltage for an external supply - 5 or 12? Thanks!

the power connector has a diode and a 5 volt regulator directly after that, that is the loss you are seeing... the sweet spot is around 7-9v, 7 just about being the minimum the regulator needs to provide 5 volts.

now if you have a 5 volt supply and its already regulated, putting out a nice stable 5 volts under all load conditions you can plug it into the +5 V and ground headers bypassing the regulator.

The Barrel jack/onboard regulator is good for ~800mA.
The 2560 uC has a limit of how much current you can put thru it.

How much current do you foresee needing overall for the large scale matrix?

I have a board with 12 TPIC6B595 shift registers each of which can sink a lot of current per IO pin and a lot of current overall.
That could be more appropriate for a large scale matrix.

Here it is with 6 of the 12 registers populated. It was designed with 12V LED strips in mind, up tp 96 individual LEDs from 5V will not be a problem.

Thanks for the suggestion on the TPIC6B595 - I may order a couple and play. You are correct - they can handle a lot more current. I need to run the numbers, but I am thinking about a 32x32 matrix. Even with efficient LEDs that will be fair amount of current to source and sink. Timing will also be an issue - so the LEDs are not too dim due to the cycle time through the entire matrix. Lots of problems to solve - I love it!!

Comments / suggestions / ideas - Always welcome!

Well, use superbright LEDs, like 8000-10000mCD, at 5-10mA will be super bright. Can do it with just 320mA at 10mA per LED.