On January 9th, a well-known DeFi stablecoin provider revealed a significant upgrade to their USD0++ system. This update introduces twin redemption methods aimed at enhancing the long-term durability of the token.
The modifications are integral to a comprehensive plan aimed at harmonizing the secured stablecoin with its ambition to metamorphose USD0++ into a bond-like financial asset, underpinned by actual income sources.
Consequently, the declaration led to an instant market upheaval; the value of USD0++ plummeted to as low as $0.89 but eventually settled near $0.92, representing a decline of about 8%, dropping significantly from its $1 fixed price.
Users are finding it challenging to adjust as they navigate the revised redemption choices offered by the twin-exit mechanism, which presents them with either a contingent or an unrestricted withdrawal, and sudden updates in the guidelines regarding the minimum value of the staked stablecoin.
In a recent post, Stani Kulechov, the founder of Aave, expressed his thoughts on the current situation, pointing out that it demonstrates yet another instance of potential issues arising from “using permanently set and unchangeable pricing data sources.
Dual exit mechanism: A rock and a hard place
On January 9, as scheduled, a new feature called “dual exit mechanism” was implemented. This feature offers users a “conditional withdrawal,” which enables them to redeem their holdings at the fixed price of $1, but they must relinquish some of the accumulated rewards in exchange – essentially imposing a penalty for early withdrawals.
As a researcher, I’m considering the “immediate unconditional withdrawal” option that provides an instant payout at a base price of $0.87, which is expected to climb steadily up to $1 within a span of four years.
As an analyst, I’ve noticed a shift in strategy by the DeFi stablecoin issuer, which was followed by an update to the official protocol documentation. One user, identified as X, has raised concerns, describing this change as “questionable” or “suspicious,” suggesting a potential issue that warrants further investigation.
CryptoMoon reached out for comments from Usual on community concerns but received no response.
Market fallout
The recent adjustments to the four-year plan and modifications in the redemption processes led to significant market turbulence, causing extreme fluctuations. As a result, the new minimum price is now set at $0.87, representing a drop from the previous price of $0.9995, based on one user’s post on X.
On financial platforms like Curve Finance and Pendle, some liquidity providers reported abrupt changes, leading to approximately $hundreds of millions exiting the Decentralized Finance (DeFi) sector. These shifts might have triggered large-scale liquidations worth millions of dollars.
As a crypto investor, I understand that Usual’s decentralized autonomous organization plans to safeguard against potential losses in non-migratable markets by assuming responsibility for these debts, up to the current market value.
USD0 vs. USD0++
USD0+ represents the secured variant of the stablecoin, USD0. This stablecoin is engineered for both stability and high liquidity. It’s fully backed by tangible assets such as U.S Treasury bills, primarily intended to be used as a collateralized token that maintains its value relative to the US dollar.
In simpler terms, the “staked” form of USD0 acts like a bond-type financial product. Here, users deposit or lock away their USD0 into USD0++ to earn returns or interest, which is generated by the issuance of the project’s native token, USUAL.
As an analyst, I find myself contemplating the terms of USD0++ investment. This particular opportunity carries a four-year commitment, which may vary depending on the redemption mechanics, and it’s not instantly accessible without facing penalties for early withdrawal.
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2025-01-10 14:58