Usual Money's protocol update sparks community concern as USD0++ drops below 92 cents

Usual Money’s staked USD0 token dropped 8.5% from $1 to $0.915 via decentralized exchanges on Friday following the protocol’s dual exit update.

While Usual’s USD0 is a U.S. Treasuries-backed stablecoin, currently still pegged to $1, the liquid staked version, USD0++, operates more like a zero-coupon bond that is locked up for four years and earns holders Usual’s native utility and governance token, USUAL, at the end of the term.

“If you expect 4% annually over four years, the fair value of USD0++ today should be around $0.855. This means you’d buy it at $0.855, hold it for four years, and redeem it at $1 for a risk-free 4% return,” mytwogweis explained . “Before today’s announcement, you could redeem USD0++ 1:1. Now, that’s all changing.”

Usual Money’s original docs previously did not contain a floor price section, according to a web archive version of its site. However, the latest version now does include one, stating that “the floor is set manually (e.g., 0.87 USD0 per USD0++).” Its blog update says it offers “dual-path primary exits for USD0++ with 0.87 USD0 floor price via USUAL dAPP and 1:1 early unstaking available early next week.”

This means users have a conditional exit option to redeem USD0++ at a 1:1 ratio by giving up a portion of accrued yields. Alternatively, users can redeem at a floor price, currently set to $0.87, which will gradually increase to $1 over the next four years.

USD0++/USD price chart. Image: CoinGecko .

Community criticism

While the USD0++ whitepaper says the token is composable, allowing for exit liquidity through the secondary market incentivized by USUAL rewards, with a fair value theoretically set at $1 as long as the yield offered by USUAL exceeds the risk-free yield, it warned the secondary market may still face some volatility. However, community members claim it was hard-coded to $1 on decentralized exchanges and marketed as such.

“They let users mint/buy usd0++ at $1 (no discount, 1-1 programmed) and then magically implement a new hardcoded 0.87 floor, effectively locking (i.e., evaporating) 13% of the principal for 1,500,000,000 USD,” crypto community member “olimpio” said .

“So @usualmoney team has been claiming for a few weeks that USD0++ was redeemable for 1:1 USD0 so everything was chill,” another alleged. “Today, they stopped the 1:1 redeem function without any prior announcement to trap farmers and keep their TVL.”

However, others sought to defend the protocol. “Not fair, bro. It has two sides,” May Mei responded . “1. USD0++ is essentially a bond of USD0 for 4 years. Every day, USD0++ enjoys daily yield in USUAL. The par value of USD0++ will be low and gradually increase to USD0 over the 4-year period. 2. It is true that this is somewhat sudden and unexpected for those who are unaware, but it is positive in the long term. USD0 is still a stablecoin and is backed by T-Bills.”

Following the redemption change, many holders rushed for the exits, with millions of USD0++ offloaded, causing severe imbalance in its largest USD0/USD0++ Curve pool, mytwogweis said, which swung to 92%.

In December, Usual announced it was launching an extension of M^0’s M token, called UsualM, marking the latest diversification of the stablecoin issuer’s reserves. That same month, the venture wings of crypto exchanges Binance and Kraken led a $10 million Series A funding round for Usual, with participation from Ethena, the synthetic dollar platform; Ondo, the firm specializing in real-world assets; and Echo, a decentralized crowdfunding platform founded by crypto luminary Jordan Fish (widely known as Cobie).

The Block reached out to Usual Money for comment.