Article source: Frank
Author: Frank, PANews
The stablecoin space is booming; according to incomplete statistics from PANews, there have been 30 stablecoin projects that announced funding since the second half of this year alone. As a decentralized stablecoin project backed by U.S. treasury bonds, Usual also announced its Series A funding on December 23, led by two major exchanges, Binance Labs and Kraken Ventures. In a market landscape dominated by established giants like DAI and USDe, is there still room for newcomers in the stablecoin space? Does the rising TVL indicate that it will become another blockbuster stablecoin? This article will explore Usual's core potential and risks from the perspectives of its underlying operational logic and profit distribution design.
Short-term treasury bonds as collateral, with all returns shared with the community.
From an operational logic perspective, Usual is no longer operated by a single centralized entity, but is governed by the on-chain community. Additionally, in terms of profit distribution, Usual channels 100% of the generated profits into the protocol treasury to benefit the community, while 90% of the tokens are allocated to the community and 10% to the team and investors.
The core issuance mechanism of stablecoins is the collateral mechanism, especially for fiat stablecoins, where the collateral assets are the most critical factors for asset security and stablecoin stability. The stablecoin product currently issued by Usual is USD0, which is special because it does not use traditional collateral such as cash or gold, but instead chooses ultra-short-term U.S. treasury bonds (T-Bills) with a term of only a few weeks to a few months, which are highly liquid and stable as collateral assets. This is because they are backed by national credit and are considered 'risk-free return' categories, thereby reducing reliance on commercial banks. Ultra-short-term treasury bonds have advantages in credit and liquidity, which is also why Usual claims to be an RWA stablecoin issuer.
However, there is a crucial point here: if one directly purchases ultra-short-term treasury bonds or other low-risk products, it can indeed achieve lower risk. However, PANews learned from Usual's official documentation that Usual itself does not directly purchase U.S. treasuries, but instead invests the collateral funds into a 'packaged' treasury/repurchase product (USYC) through a partnership with Hashnote.
In other words, Usual does not directly buy treasuries or operate repurchase agreements, but entrusts the collateral assets to the duly vetted partner Hashnote for management. While Hashnote is also a regulated partner with registered entities in the Cayman Islands and the U.S., and the asset types involved in their collaboration are nearly risk-free ultra-short-term treasury bonds, this model may not necessarily present a lower risk compared to Tether and others that work with commercial banks. However, Usual's goal is to have the community vote on future collateral asset providers, which does not necessarily mean using Hashnote forever. Recently, Usual announced a partnership with Ethena and BlackRock's tokenization platform Securitize, using BUIDL and USDtb as collateral; as a result, USD0's collateral assets will no longer be limited to USYC.
'USD0++' creates a new gameplay of locked assets + circulating notes + exit games.
To encourage users to mint and use USD0, Usual launched the incentivizing USD0++, while also designing a game-theoretic mechanism. USD0++ is a staked version of USD0, where users can earn rewards by staking USD0 and the official governance token USUAL. As of December 25, the annualized yield of USD0++ exceeded 64%, having previously reached over 80%. This high yield has attracted significant capital into USD0's minting process.
However, the design of USD0++ is different from other LSTs; the unified maturity date of USD0++ is June 30, 2028, which is a four-year lock-up period. During this time, users can continuously earn USUAL token rewards, but this does not mean that users must regularly commit their funds for four years. USD0++ itself is a transferable token that can be bought and sold in the secondary market, allowing holders to 'liquidate' or transfer even before maturity.
In addition, Usual has designed three exit mechanisms: USUAL Burning Redemption; Price Floor Redemption; and Parity Arbitrage Right.
One notable aspect is the USUAL Burning Redemption, where users need to return part of their USUAL rewards to redeem when they want to burn and redeem (the returned quantity is dynamically adjusted).
Furthermore, Usual's white paper mentions that the USD0++ model can be replicated to other assets (such as ETH0++, dUSD0++), indicating that this unique LST mechanism is not limited to fiat stablecoins and can also extend to other collateral or cross-chain ecosystems.
Overall, the design of USD0++ aims to encourage users to hold long-term, accumulating USUAL tokens during the lock-up period and sharing growth dividends with the protocol. The unified maturity date reduces users' tendency for short-term speculation. At the same time, USD0++ is a transferable 'note' that retains a certain degree of liquidity. Finally, an exit game is adopted; if one exits early, they must burn USUAL or repurchase through an arbitration mechanism, establishing an 'exit cost' to protect the protocol from a run and safeguard the rights of those who remain.
USUAL's dynamic minting mechanism offers high early incentives.
In addition to adopting decentralized operations and introducing RWA assets as collateral, Usual's governance token USUAL also has a unique token economic model. Unlike other fixed or one-time issuance methods, USUAL adopts a dynamic minting model for token issuance.
USUAL tokens are not minted all at once, but are dynamically minted every day based on a series of formulas and parameters, and distributed to different 'deposit, liquidity, and reward' pools.
This dynamic formula consists of multiple factors: d: global distribution rate (0.25), equivalent to the reciprocal of the 4-year target issuance cycle. Supplyt++: the total supply of USD0++ at present (locked scale). Pt: the main market price of USD0++ (taken as 1 when pegged to $1). Mt: dynamic minting rate, determined by several factors (supply, interest rates, growth, etc.).
Each factor is calculated based on several other formulas, and the specific calculation process will not be elaborated here. Overall, the characteristics of this issuance mechanism include the following points: 1. Gradually 'reducing production' as the scale of USD0++ increases. 2. Adjusting according to market interest rate fluctuations; when the FED or market interest rates rise and the project's actual returns are higher, the system will moderately increase the token issuance to provide participants with more USUAL rewards; conversely, it will reduce production. 3. DAO can intervene manually to perform 'manual adjustments' under extreme market conditions or inflationary pressures, ensuring the long-term stability of the protocol. 4. Early incentives and later scarcity; during the launch phase, the supply of USD0++ is relatively low, and if market interest rates or reward mechanisms are set high, there will be a high 'early minting rate' phenomenon, attracting pioneers to participate. As time progresses, with dynamic changes in TVL and interest rates, the minting rate will stabilize or decrease, forming a process similar to 'halving' or 'production reduction'.
In summary, the issuance mechanism of USUAL attempts to find a self-regulating balance between 'the expansion of stablecoin scale and real returns' and 'the value appreciation of token holders', thereby incentivizing early users while ensuring future scarcity and fairness. This issuance model has similarities with the former Terra, but Usual has only applied this design to governance tokens and has not adopted this model for the issuance of stablecoins.
TVL has tripled within the month, ranking in the top five of the industry.
Currently, there are multiple projects in the decentralized stablecoin space. What opportunities does Usual still have in this arena? PANews conducted a data comparison of the currently mainstream decentralized stablecoins.
In terms of issuance volume, the largest decentralized stablecoin currently is Ethena USDe at $5.91 billion, followed by USDS and DAI. However, these projects have been running for a long time, and in terms of development speed, USD0's TVL has reached $1.56 billion (data as of December 25). On December 1, Usual's TVL was only $490 million, having tripled in less than a month; USD0's market cap has now ranked in the top five of decentralized stablecoins.
This rapid growth may be attributed to the high-yield flywheel model, with Usual's annualized yield at 64%, the highest among several stablecoin yield comparisons. If this yield can continue to be sustained, it is very likely to grow into the next decentralized stablecoin giant.
Moreover, Usual's greatest advantage may also come from the minimal risk of its collateral assets. Other decentralized stablecoins generally use fiat stablecoins and mainstream crypto assets as collateral, while Usual's use of ultra-short-term U.S. treasury bonds has significantly lower risk.
On Usual's homepage, 'Becoming bigger than BlackRock' is displayed as the vision at the top, reflecting Usual's ambition. Compared to industry leader Tether, Usual and other decentralized stablecoins still have a long way to go. USUAL's circulating supply is 473 million tokens, with a market cap of approximately $676 million. Based on current revenue levels, the average profit distribution per token is about $0.125. From the design of the token economic model, this has similarities with the recently popular Hyperliquid. Both have certain profitability and claim to return most of their income to the community in the form of tokens.
Recently, Usual has been frequently associated with Binance, from listing and airdrops to Binance Labs announcing a $10 million Series A investment in Usual on December 23. This excitement inevitably brings to mind Binance Labs' early investment and support for Terraform Labs, although that investment ultimately became a failed case. Can today's Usual become another rising star for Binance Labs in the stablecoin space?
