The usual protocol faces criticism after unbinding USD0++

Admin3 weeks ago

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USD0++ was unlinked after the new rules caused panic and losses.
The usual protocol introduced reforms such as revenue sharing and 1:1 uninstallation.
The value of the protocol’s token, USUAL, decreased by 18.7%.

criticism Usual protocol The DeFi stablecoin issuance protocol was due to the loss of parity in the stablecoin, USD0++. This began the decoupling process on January 9 at a level of $0.89, while reaching later stages of recovery. Its price reached $0.92 and sparked fear in both users and the crypto industry.

USD0++ is not a regular stablecoin but a liquid derivative of USD0, and works somewhat like stETH when combined with ETH in Lido Finance. Although USD0 is fully pegged to the US dollar, and therefore backed by US Treasury bills. USD0++ works like a bond since users stake USD0 to receive rewards in terms of treasury bond yields and the protocol’s native token. Normal, but the money is locked for four years.

Changes introduced by the usual protocol

The problem started when Usual Protocol changed the USD0++ recovery mechanism. Before that, users could redeem USD0++ in a 1:1 ratio with USD0. This update introduced an alternative recovery mechanism for USD0++ set at a minimum price of $0.87. Which rates long-term bonds as a discount. This shocked many users, causing significant liquidations and liquidity shifts in Curve Finance and Pendle.

To counter this backlash, the usual protocol announced several measures. “Revenue Switching” will go live on January 13, sharing profits from real assets and operations with the community. Current conditions will increase revenues by more than 50% annually, generating monthly revenues of approximately $5 million. These profits are scheduled to be distributed weekly. The protocol will also introduce a “1:1 Early Unslooking” feature that enables users to claim USD0++ at a peg price of $1, but will penalize them by requiring their rewards to be forfeited.

The update was countered by key individuals in the cryptocurrency space. Stani Kulichov, founder of Aave, criticized the update stating that it exposes the risks of encrypted price feeds. Michael Egorov, founder of Curve Finance, was anticipating the discount on USD0++ because it is similar to bonds. But at the same time, he acknowledged that the sudden change left many unprepared. The governance process has also been criticized, as governance is part of the protocol’s structure, and USD0++ holders had no say in the voting.

Impact on the USUAL token

USUAL, the protocol’s native token, has not been spared from controversy, and in the last 24 hours, it has lost 18.7% of its value. The usual protocol now faces rebuilding trust and stabilizing its ecosystem. How the team addresses the concerns will determine its future in the competitive DeFi space.