On January 11th, in response to recent criticism from the community, Usual Protocol – a company specializing in decentralized finance (DeFi) and stablecoin issuance – addressed the sudden deviation of its staked stablecoin USD0++ from the $1 mark.
On January 9th, the value of USD0++ dipped down to as low as $0.89, then rose to $0.92, after the implementation of a novel floor price system and exit strategies were introduced.
The team behind the protocol has recently implemented a set of actions, such as an immediate implementation of a “revenue flipper”, to tackle user issues and bring stability to the environment.
Beginning January 13th, the revenue distribution mechanism enables Usual Protocol to distribute earnings from real-world assets and protocol operations among its community. The team anticipates around $5 million in monthly income, which equates to an annual return of over 50% under present circumstances. These distributions are scheduled for weekly disbursement.
This project intends to emphasize the real-world worth of USUAL, showcasing its economically sound structure, and revealing the earnings produced by this very protocol, as stated on X.
Next week, it’s been made clear that the “Immediate Redemption Before Unlocking” function will become active. This feature lets users cash out their USD0++ at its $1 value, but there’s a catch: they’ll need to surrender some of their earned rewards as a consequence.
USD0++ depegs
Previously, Usual Labs adjusted the code for USD0++ on Friday, lowering its redemption worth from $0.995 to a fresh minimum price of $0.87. This modification took several investors and developers by surprise as they had presumed that USD0++ could consistently be exchanged one-to-one for USD0, a stablecoin tied to the U.S dollar.
The recent update added two methods for withdrawal to make USD0++ consistent with its goal of being a financial instrument tied to real-world income streams, resembling bonds. These options are:
1. A “conditional exit” that allows users to redeem at par value (1:1) with the $1 peg, but they must surrender any accumulated benefits or rewards.
2. An “unconditional exit” providing an immediate cash-out at a minimum price of $0.87. Over a period of four years, this price will increase and eventually reach $1.
As a result, substantial sales worth millions occurred on financial platforms like Curve Finance and Pendle, along with significant alterations in their liquidity.
USD0, a stablecoin boasting a market capitalization of $1.57 billion, is tied to the U.S. dollar and backed by real-world assets like U.S. Treasury bills. Users can deposit USD0 to transform it into USD0++, a bond-like token that keeps funds locked for four years and rewards yield in the platform’s native token, USUAL.
Community backlash
As a researcher, I’ve recently taken notice of Stani Kulechov’s critique regarding the update on X. He points out that the use of hardcoded and immutable price feeds in such systems can potentially lead to issues. In simpler terms, this means that when prices aren’t flexible or adjustable, problems may arise.
Michael Egorov, the founder of Curve Finance, pointed out the workings of USD0++, emphasizing that its backing by four-year U.S. Treasury bills could lead to a discount. He explained, “It’s reasonable to anticipate a discount for USD0++,” and further added, “This was an unexpected situation for many, resulting in some protocols setting the price oracle for USD0++ at 1.0.
Ignas, a DeFi researcher, questioned the governance process behind the update.
The document, known as a whitepaper, explains that the Decentralized Autonomous Organization (DAO) has the power to establish a minimum price threshold for the tokens. This means that owners of USD0++ can swap their tokens for USD0 at a rate less than the regular 1:1 exchange rate. Ignas noted that it was the USUALx holders who were required to cast their votes on this matter in a DAO vote.
CryptoMoon reached out to Usual Labs for comments but received no response before publication.
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2025-01-11 12:32