Stablecoin developer Usual is under scrutiny after changing the 1:1 redemption mechanism for USD0++, the yield-bearing token tied to the USD0 stablecoin.
USD0++, the staking version of Usual’s USD0 stablecoin, fell to $0.92 – 8% below the previous redemption value – after new early exit options caused a sell-off and disrupted the largest Curve pool.
USD0++ is not a stablecoin. It is a USD0 stake version designed to hold funds for four years while earning USUAL tokens as rewards. Previously, USD0++ could be redeemed 1:1 with USD0, but now users must choose between two exit options: a conditional exit, where 1:1 is redeemed but part of the accrued rewards is lost, or an unconditional exit at a minimum price from $0.87 and gradually increasing to $1 in four years.
So the @usualmoney team has been claiming for a few weeks that USD0++ was exchangeable for 1:1 USD0, so everything was chilly.
Today they have stopped the 1:1 redemption feature without any prior announcement to trap farmers and keep their TVL.
USD0++ is now trading at $0.92. Please send this… pic.twitter.com/aZNArIQoy0
— CBB (@Cbb0fe) January 10, 2025
The changes have turned USD0++ into a mix of a bond and a yield farming instrument. While high-risk users can stake USD0 into USD0++ to farm USUAL tokens with high returns, more conservative holders can lock in their money for four years to earn a fixed 4% annual return.
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As a result, the system design creates compromises. Holders of USD0 sacrifice returns for stability, while holders of USD0++ lock in funds and hope that USUAL rewards will make up for their lost returns, and USUAL stakers capture returns from others while betting on the token’s price appreciation.
The recent updates have made USD0++ riskier and less attractive, with long lock-up periods and changing redemption rules making it less attractive than more liquid options, leading to a wave of selling as traders and yield farmers tried to exit the market , creating the largest curve. pool becomes unbalanced and pushes the price of USD0++ below $1.
At the time of writing, Usual Labs, the company behind the Usual protocol, has not made any public statements regarding the USD0++ price changes. In 2024, Usual Labs raised $7 million and secured a commitment of $75 million in total value, committed at USD0, from investors including IOSG Ventures, Kraken Ventures, GSR, Mantle, Starkware, and Flowdesk, among others.
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