Decentralized finance (DeFi) stablecoin issuer Usual Protocol responded to community backlash after its staked stablecoin USD0++ fell sharply from $1 on Friday, January 11.
On January 9, USD0++ reached $0.92 after falling to $0.89 due to the introduction of a new minimum price mechanism and exit option.
The protocol team has now introduced a series of measures, including early activation of the “Revenue Switch”, to address user concerns and stabilize the ecosystem.
The revenue transition, starting January 13, will allow Usual Protocol to share real-world assets and revenue from protocol operations with the community. The team expects to generate approximately $5 million in monthly revenue, which would represent an annualized return of more than 50% under current conditions. These distributions occur weekly.
“This initiative aims to highlight the real value of USUAL, the balance of its economic model, and the revenue generated by the protocol,” Usual Protocol posted on X.
The team also confirmed that the “1:1 Early Unstake” feature will be activated next week, allowing users to redeem USD0++ with a $1 peg, but requiring them to forfeit a portion of their accumulated rewards as a penalty.
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USD0++ Depeg
Usual Labs changed the code applicable to USD0++ earlier Friday, reducing the redemption value from $0.995 to a new minimum 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 against USD0, a stablecoin pegged to the US dollar.
This update introduces a dual exit mechanism to align USD0++ with its vision of being a bond-like financial instrument based on real revenue streams. Users now have two options: One is a “conditional exit” for a 1:1 redemption of $1 pegs, which requires forfeiture of accumulated rewards, or the “unconditional exit” offers immediate cash-out at a minimum price of $0.87. $1 over 4 years.
These changes have resulted in millions of dollars in 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 U.S. dollar and fully backed by real assets such as U.S. Treasury bonds. Users can stake USD0 to lock up their funds for four years and convert them to USD0++, a bond token that generates returns in USUAL, the protocol’s native token.
community backlash
Stani Kulechov, founder of DeFi platform Aave, criticized X’s update, calling it an example of how hard-coded and immutable price feeds can cause problems.
source: Stany Kuletsov
Michael Egorov, founder of Curve Finance, highlighted the underlying mechanism of USD0++, noting that the discount is possible through the backing of 4-year government bonds. “There will be a discount in USD0++,” he said, adding that the change had caught many people off guard. “This was unexpected for many, so some protocols hardcoded the oracle price from USD0++ to 1.0,” Egorov said.
DeFi researcher Ignas questioned the governance process behind the update.
“The white paper states, ‘The DAO reserves the right to set this price floor, allowing USD0++ holders to exchange their tokens for USD0 at a rate lower than the standard 1:1 redemption ratio.’ Where was the DAO vote? USUALx holders will have to vote on this,” Ignas pointed out.
Cointelegraph reached out to Usual Labs for comment but did not receive a response before publication.
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