Written by: 0xjs@Jinse Finance
"Of The People, By The People, For The People" is the most famous speech by U.S. President Lincoln.
"Of The People, By The People, For The People" is the famous slogan of Dr. Sun Yat-sen's Three Principles of the People.
These ideas, once proposed, firmly occupy the minds of the people.
In the crypto industry, the same applies to 'user sovereignty, community ownership.' Projects that overlook users and the community due to first-mover advantages and other factors will eventually face challenges.
In the recent downturn, a stablecoin protocol targeting USDT/USDC, Usual, has performed excellently, drawing the attention of the crypto community.
What is Usual?
According to official documentation, Usual is a secure and decentralized fiat stablecoin issuer, aggregating a growing number of RWA tokens (mainly tokenized U.S. Treasury bonds) from Hashnote, BlackRock, Ondo, Mountain Protocol, M^0, etc., transforming them into permissionless, on-chain verifiable, composable stablecoin USD0. It redistributes ownership and governance rights through the governance token USUAL.
In summary, Usual aims to be the on-chain Tether.
Usual targets two key issues with USDT/USDC: user ownership and the risk of bank bankruptcies.
1. User Ownership. USDT and USDC are the top two stablecoins by market cap, with USDT exceeding $140 billion and USDC over $42 billion. According to publicly available data from Tether, Tether's profits could reach $10 billion for the entire year of 2024. Circle's annual profit could reach $3 billion. However, all the earnings generated by the assets provided by these crypto users are taken by Tether and Circle, and users have no rights. Usual will not privatize the profits generated by USDT and USDC like Tether and Circle; instead, it redistributes power and profits back to the community (Of The People, By The People, For The People). 100% of Usual's protocol income flows into the treasury, with 90% distributed to the community through governance tokens.
2. Risk of Bank Bankruptcy. A significant portion of USDT and USDC is backed by commercial banks, which introduces risks of safety and stability due to partial reserves. Usual introduces a new stablecoin issuance method, with its underlying assets 100% collateralized by short-term U.S. Treasury bonds, decoupled from the traditional banking system, thus avoiding risks of bank bankruptcies.
Usual primarily targets these two gaps of Tether/Circle.
In other words, Usual can be considered a 'vampire' attack on USDT/USDC, similar to the 'vampire' attack by Sushi on Uniswap during the DeFi summer of 2020.
How does Usual achieve this?
Analysis of Usual's operational mechanism
Usual consists of five core tokens: the stablecoin USD0, the LST token USD0++, the governance token USUAL, the staking governance token USUALx, and the contributor token USUAL*.
USD0: USD0 is Usual's stablecoin. Users can exchange USD0 for USD0 at a 1:1 ratio using USDC or USYC.
USD0++: USD0++ is the LST token generated by staking USD0. Holding USD0++ can earn USUAL token incentives.
USUAL: USUAL is Usual's governance token.
USUALx: Staking USUAL earns USUALx; users holding USUALx can activate governance rights and earn USUAL rewards. USUALx can vote on governance matters related to the Usual protocol, such as future supported collateral sources.
USUAL*: USUAL* is the founding token of the Usual protocol, allocated to investors, contributors, and advisors, endowed with different privileges compared to the USUA token.
The following diagram illustrates Usual's product and user flow:
The following will elaborate on this.
Minting of USD0
USD0 tokens can be minted through Usual in two ways:
Direct minting: By depositing eligible RWAs into the protocol, users receive an equivalent USD0 at a 1:1 ratio.
Indirect minting: By depositing USDC into the protocol, users receive USD0 at a 1:1 ratio. In this method, a third party known as a collateral provider (CP) provides the necessary RWA collateral, allowing users to obtain USD0 without directly holding RWA. At the start of the protocol, all orders below 100,000 USD0 will be redirected to secondary market liquidity.
The above image uses USYC, the first collateral source for USD0, as an example. Currently, Usual's first collateral comes from Hashnote's USYC. USYC is the on-chain representation of Hashnote International Short Duration Yield Fund (SDYF), which primarily invests in reverse repos and short-term U.S. Treasury bonds.
USD0++
USD0++ is a liquid staking token (LST) for USD0. It is a composable token representing staked USD0, similar in function to a liquid savings account. For each staked USD0, Usual mints new USUAL tokens and distributes them as rewards to users.
The staking period for USD0++ is 4 years, and users can cancel staking early or sell USD0++ on the secondary market at the current price. Users who cancel staking early will need to destroy their accumulated USUAL earnings. A portion of the destroyed USUAL will be allocated to USUALx holders.
USD0++ has two sources of income: 1. USUAL token incentives, wherein USD0++ holders can receive daily USUAL token earnings; 2. Basic interest guarantee, where USD0++ holders can earn at least the yield corresponding to USD0 collateral (risk-free return). However, users must lock their USD0++ for a specified period. At the end of this period, users can choose to receive rewards in the form of USUAL tokens or risk-free earnings in USD0.
USUAL
USUAL serves as the main reward mechanism, incentive structure, and governance tool. The core idea of its design is that USUAL tokens are effectively minted as proof of earnings and are directly linked to the income of the protocol's treasury. USUAL is distributed daily to different categories of participants.
USUALx
USUALx is the staking form of USUAL; holding USUALx activates governance rights and entitles holders to 10% of the total newly issued USUAL, thereby promoting the long-term participation of USUAL holders in the Usual ecosystem. Users can unstake USUALx at any time but must pay a 10% fee on the unstaked amount.
USUAL*
USUAL* is the founding token of the Usual protocol, allocated to investors, contributors, and advisors, aimed at funding the creation of the protocol and endowed with specific rights different from USUAL tokens, but it has no liquidity.
USUAL* holders primarily have two permanent rights: 1. USUA token distribution right: USUAL* holders are entitled to receive 10% of all minted USUAL tokens, while the remaining 90% is distributed to the community. 2. Fee distribution right: USUAL* holders will also receive one-third of all fees generated from the USUALx staking exit.
In the early stages of the protocol, USUAL* holders are granted majority voting rights to ensure adherence to the roadmap and promote effective decision-making during the launch phase. Over time, governance will transition to a decentralized model centered around USUALx. However, this transition will not affect the permanent economic rights of USUAL* holders.
As mentioned above, USD0++, USUALx, and USUAL* are closely related to the issuance and distribution of USUAL.
Through the distribution of USUAL, users are incentivized to exchange USDC for USD0 and stake it into USD0++, while also incentivizing users to stake the received USUAL tokens into USUALx. Additionally, by providing 10% USUAL incentives to USUAL*, the interests of the Usual team, VCs, and the community are long-term aligned.
The ingenious USUAL token issuance and distribution mechanism
The issuance of USUAL tokens adopts a strategy different from other crypto projects, particularly in its token issuance and distribution mechanism.
First, let's talk about token issuance. The maximum supply is 4 billion USUAL within 4 years. USUAL employs a dynamic supply adjustment mechanism; the emission rate will be adjusted based on the growth of TVL priced in USD0++ and changes in interest rates supporting USD0 assets, with a cap set to prevent over-issuance. As the supply of USD0++ increases, the minting rate will decrease, helping to create scarcity and reward early participants.
Usual's issuance model is designed to be deflationary, with USUAL's inflation rate lower than that of Bitcoin. The inflation rate is calibrated to remain below the growth of protocol income, ensuring that the speed of token issuance does not exceed the rate of economic expansion of the protocol.
Next, let's discuss the distribution situation. The following diagram shows the distribution of USUAL:
As mentioned in the previous section, USUAL* is a special token model designed by the team and VCs, through two permanent economic rights, allowing insiders like the team, VCs, and advisors to obtain 10% of USUAL issuance, with this being synchronized with the entire community over four years, while being locked during the first year. The remaining 90% is fully allocated to the Usual community.
The result of this design is that USUAL avoids becoming a widely criticized low-liquidity high-FDV VC token, ensuring consistency of interests among the team, VCs, and the community.
Meanwhile, the issuance of USUAL tokens is linked to protocol income, with its supply increasing as protocol income grows. Therefore, unlike other DeFi projects where VCs and early adopters quickly sell their tokens, Usual's token model incentivizes long-term holders.
Where does Usual's extremely high yield come from?
A major reason for the rapid development of USUAL recently is its extremely high yields.
On December 20, 2024, the APY for USD0++ reached 94%, while the APY for the staking token USUALx reached 2200%, with corresponding APRs of 66% and 315%, respectively. On December 19, 2024, the APY for USUALx reached an astounding 22000%, corresponding to an annualized yield of 544%.
Where does this high yield come from?
Currently, Usual's first collateral comes from Hashnote's USYC. USYC is the on-chain representation of Hashnote International Short Duration Yield Fund (SDYF), which primarily invests in reverse repos and short-term U.S. Treasury bonds. According to Hashnote's official website, the total yield of USYC over the past five months is only 6.87%.
Clearly, the yields of the underlying assets are insufficient to support the extremely high yields of USD0++, USUALx, and related LPs on Curve and LSTs on Pendle; their high yields primarily come from the incentives of USUAL tokens.
Conclusion: The Usual Flywheel
As a killer application in crypto, stablecoins are facing a broader market prospect with clearer U.S. regulations following Trump's administration; the stablecoin market could potentially reach a trillion dollars by 2025.
According to Usual's plans, in the future, Usual will also diversify the assets of USD0, with future collaterals coming from other U.S. Treasury RWA projects like BlackRock and Ondo. With the relaxation of U.S. regulations, on-chain U.S. Treasuries are expected to see significant development by 2025. According to data from the U.S. Treasury, the scale of short-term U.S. Treasuries exceeds $2 trillion. By 2025, Usual's RWA collateral market might rival that of Tether.
From the above analysis, it can be seen that Usual targets the real problems (on-chain Tether, short-term U.S. Treasuries) and creates the Usual flywheel through sophisticated tokenomics design (USD0, USD0++, USUAL, USUALx, and USUAL*).
Expectations for the Usual stablecoin market -> USUAL price increase -> high yields -> large-scale minting of USD0 and staking USUAL -> increase in protocol income, USUAL locked and minting reduced -> scarcity of USUAL -> USUAL price increase -> high yields -> large-scale minting of USD0 and staking USUAL -> increase in Usual's market share.
The Usual flywheel has already started spinning. Since its launch on Binance, the market capitalization of its stablecoin USD0 has increased by nearly $1 billion in less than a month, currently reaching $1.38 billion.
