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Usual Protocol has introduced a revenue-sharing model to stabilize its ecosystem following USD0++ depegging from $1.
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Usual Protocol, a decentralized finance (DeFi) stablecoin issuer, responded to community backlash on Friday, Jan. 11, after its staked stablecoin USD0++ sharply depegged from $1.
On Jan. 9, USD0++ dropped as low as $0.89 before reaching $0.92, following the introduction of a new floor price mechanism and exit options.
The protocol’s team has now introduced a series of measures, including the early activation of a “revenue switch,” to address user concerns and stabilize the ecosystem.
The revenue switch, starting on Jan. 13, allows Usual Protocol to share its earnings from real-world assets and protocol operations with its community. The team projects approximately $5 million in monthly revenues, translating to an annual percentage return of more than 50% under current conditions. These distributions will occur weekly.
“This initiative aims to highlight the tangible value of USUAL, the balance of its economic model, and the income generated by the protocol,” Usual Protocol posted on X.
The team also confirmed that a “1:1 Early Unstaking” feature will be activated next week, allowing users to redeem their USD0++ at the $1 peg but requiring them to forfeit a portion of their accrued rewards as a penalty.
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USD0++ depegs
Usual Labs had altered the code governing USD0++ earlier on Friday, reducing its redemption value from $0.995 to a new minimum floor price of $0.87. This change blindsided many investors and developers who relied on the assumption that USD0++ could always be redeemed one-to-one for USD0, a stablecoin pegged to the US dollar.
The update introduced dual exit mechanisms to align USD0++ with its vision of a bond-like financial instrument backed by real-world revenue streams. Users now have two options — a “conditional exit” for 1:1 redemption at the $1 peg, requiring forfeiture of accrued rewards, or an “unconditional exit” offering immediate cash-out at a floor price of $0.87, which will gradually rise to $1 over four years.
These changes led to multimillion-dollar liquidations and liquidity shifts on platforms such as Curve Finance and Pendle.
USD0, a stablecoin with a market capitalization of $1.57 billion, is pegged to the US dollar and fully backed by real-world assets such as US Treasury bills. Users can stake USD0 to convert it into USD0++, a bond-like token that locks funds for four years and generates yield in the protocol’s native token, USUAL.
Community backlash
Stani Kulechov, founder of DeFi platform Aave, criticized the update on X, calling it an example of how hardcoded and immutable price feeds can lead to problems.
Source: Stani Kulechov
Michael Egorov, founder of Curve Finance, highlighted the underlying mechanics of USD0++, noting that its backing by 4-year Treasury bills makes a discount likely. He said, “USD0++ should likely have a discount,” adding that the change caught many off guard. “This was unexpected for many, so some protocols hardcoded price oracle for USD0++ to 1.0,” Egorov stated.
Ignas, a DeFi researcher, questioned the governance process behind the update.
“Whitepaper specifies that ‘the DAO reserves the authority to set this price floor, allowing USD0++ holders to exchange their tokens for USD0 at a rate below the standard 1:1 redemption ratio.’ Where was the DAO vote? USUALx holders needed to vote on this,” Ignas pointed out.
Cointelegraph reached out to Usual Labs for comments but received no response before publication.
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This article first appeared at Cointelegraph.com News
