Decentralized finance (DeFi) stablecoin issuer Usual Protocol responded to community backlash on Friday, January 11 after its staked stablecoin USD0++ was sharply pegged from $1. .
On January 9, USD0++ fell to $0.89 and then reached $0.92 following the introduction of a new price floor mechanism and exit option.
The protocol's team has now introduced a series of measures to address user concerns and stabilize the ecosystem, including the early activation of a “revenue switch.”
Starting January 13th, the revenue switch will allow Usual Protocol to share revenue from real-world assets and protocol operations with the community. The team is projecting monthly revenue of approximately $5 million, which equates to an annualized return of more than 50% under current conditions. These distributions occur weekly.
“This initiative aims to highlight the tangible value of USUAL, the balance of its economic model, and the revenue generated by the protocol.” Usual Protocol Posted With X.
The team also confirmed that the “1:1 Early Unstake” feature will be activated next week. This allows users to redeem USD0++ at a $1 peg, but they will have to forfeit some of their earned rewards as a penalty.
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USD0++ Depeg
Usual Labs made changes to the code governing USD0++ early Friday, lowering the redemption amount from $0.995 to a new minimum floor price of $0.87. This change blindsided many investors and developers who relied on the premise that USD0++ could always be exchanged 1:1 with USD0, a stablecoin pegged to the US dollar.
This update introduces a dual exit mechanism to align USD0++ with the vision of a bond-like financial instrument backed by a real source of income. Currently, users have two choices. A “conditional termination” is a one-for-one redemption at a $1 peg that requires forfeiture of earned rewards. The other option is “Unconditional Termination,'' which provides instant cash-out at a floor price of $0.87. This price increases in stages to $0.87. $1 for 4 years.
These changes have caused millions of dollars in liquidations and liquidity shifts on platforms like Curve Finance and Pendle.
USD0 is a stablecoin with a market capitalization of $1.57 billion, pegged to the U.S. dollar and fully backed by real-world assets such as U.S. Treasury bills. Users can stake and convert USD0 to USD0++. USD0++ is a bond-like token that locks up 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 X update, calling it an example of how hard-coded, immutable price feeds can cause problems.
sauce: Stani Krechov
Michael Egorov, founder of Curve Finance, highlighted the underlying mechanics of USD0++, noting that its backing with four-year Treasury bills increases the likelihood of a discount. he said“There should probably be a discount on USD0++,” he added, adding that the change caught many off guard. “This was unexpected for many, so some protocols hard-coded the USD0++ price oracle to 1.0,” Egorov said.
DeFi researcher Ignace questioned the governance process behind the update.
“The DAO reserves the right to set this floor price, allowing USD0++ holders to exchange their tokens for USD0 at a rate below the standard 1:1 redemption ratio,” the whitepaper states. Where was the DAO vote? USUALx holders should have voted on this,” Ignace said. pointed Outside.
Cointelegraph reached out to Usual Labs for comment, but did not receive a response prior to publication.
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