Usual Protocol Introduces Revenue Sharing to Stabilize Depegged USD0++ Stablecoin

DeFi stablecoin issuer Usual Protocol has introduced a new “revenue switch” measure to stabilize the ecosystem and address user concerns following the sharp depeg of its staked stablecoin, USD0++, from $1.

As reported by Blockworks on Friday, Jan. 11, USD0++ dropped as low as $0.89 on Friday morning before recovering to around $0.92. The stablecoin is designed to be pegged to USD0, a stablecoin pegged to the US dollar, and is supposed to be redeemable at a 1:1 ratio.

However, an update to the code earlier on Friday changed the 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.

The update also 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.

The changes led to multimillion-dollar liquidations and liquidity shifts on platforms such as Curve Finance and Pendle.

To address the situation, Usual Protocol's team has introduced a series of measures, including the early activation of the revenue switch, which was initially planned for later this year.

Starting Jan. 13, Usual Protocol will share its earnings from real-world assets and protocol operations with its community, as stated in a post on X.

The team projects approximately $5 million in monthly revenues, which would translate 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,” the post reads.

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.

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 members expressed dissatisfaction with the lack of communication and transparency regarding the update.

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.

“Another example of why hardcoded and immutable price feeds lead to problems,” Kulechov wrote.

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.

“USD0++ should likely have a discount (4y TBill backing, making a discount likely),” Egorov said, 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,'” Ignas said. “Where was the DAO vote? USUALx holders needed to vote on this.”

Blockworks has reached out to Usual Labs for further comments but did not receive a response at press time.