Original author: @hmalviya9, founder of dyorcryptoapp

Original translation: Ismay, BlockBeats

Editor's note: The stablecoin sector is seeing an increasing number of competitors. Since early December, from launching on Binance to officially announcing a partnership with BlackRock, Usual has shown remarkable performance in the market with its innovative economic model and high return potential. Today, USUAL broke $1.2, reaching an all-time high. This article provides an in-depth analysis of the $USUAL tokenomics, yield mechanisms, and potential risks, aiming to give readers a comprehensive understanding to help them make informed decisions in the rapidly evolving crypto market. Understanding its core mechanisms is key, whether considering investment or observing market trends.

The following is the original content:

$USUAL is one of the most important releases in this cycle, showing promising initial performance. So, should you buy it or ignore it?

A few months ago, while researching new stablecoins, I began to pay attention to USUAL. What makes USUAL unique is its clear narrative: on-chain Tether, distributing yields to token holders. Tether has earned over $7.7 billion in profits this year alone, which is almost more than BlackRock.

If USUAL can achieve this goal, even just 10% of it would mean a profit of $770 million. And the best part is that 90% of the revenue will be distributed to token holders and stakers in the form of $USUAL.

Yields are paid in $USUAL, so every time someone stakes USDO (their stablecoin), $USUAL tokens are continuously issued.

USDO is a stablecoin backed by U.S. Treasury bonds, generating income through the bonds, which is distributed in the form of $USUAL and USDO.

USUAL Money mentions that when the cash flow of $USUAL reaches a certain target, they plan to control the issuance of $USUAL, ensuring that the ongoing issuance rate is lower than the revenue growth rate. Initially, the issuance will be high, but over time, it will gradually decrease.

In addition to governance and staking token $USUAL, USUAL also offers two other types of tokens.

USDO++: This is the liquidity token you receive after staking USDO. USDO holders need to stake USDO for four years to mint USDO++. USDO++ holders will receive 45% of the $USUAL issuance.

Whenever new USDO++ is minted, USUAL will issue new $USUAL tokens. This is a core component of their flywheel mechanism. The protocol's TVL (Total Value Locked) will also track the value of USDO++ minted in the protocol.

The higher the TVL, the more revenue the protocol generates, and ultimately this revenue will be paid to USDO++ holders in the form of $USUAL tokens.

The issuance rate of $USUAL will decrease with more user adoption, thereby reducing the number of tokens issued per dollar locked.

This reduction will enhance the yield of each token, thus naturally driving up the price of $USUAL.

Higher USDO++ annual percentage yield (APY) will attract more people to stake USDO. The current annual percentage yield is about 80%, so we may see the TVL rise in the coming days. The current TVL is approximately $900 million, with 87.47% of USDO staked as USDO++.

USUAL also has a staking token called USUALx, which provides three forms of yield: USDO rewards from revenue, 10% of $USUAL issuance, and 50% revenue sharing from the unlock module.

When USDO++ holders decide to unlock before maturity, the protocol will also initiate the $USUAL destruction mechanism.

They need to destroy a portion of the $USUAL supply in order to unlock operations.

As mentioned in the USUAL Money whitepaper, we indeed face two significant product risks:

$USUAL (the main reward token) market price directly affects the yields in the ecosystem, including rewards and liquidity incentives related to USDO++. A significant price drop could harm the ecosystem's competitiveness and user attractiveness. There is also the risk of vicious inflation due to its inflationary nature.

To this end, the DAO can adjust the minting rate to regulate the issuance, thereby mitigating this risk and ensuring the stability and sustainability of the economy.

USDO++: These locked tokens lack a costless arbitrage mechanism to maintain their peg, which could lead to price fluctuations. However, this risk has been minimized through strong liquidity in the secondary market, liquidity provision incentives, and early redemption mechanisms. Additionally, the price floor redemption mechanism limits extreme volatility, ensuring stability and market efficiency.

Overall, as long as the price of $USUAL remains attractive, the protocol can attract more demand for USDO and USDO++. The greater the demand for its stablecoin, the more revenue will ultimately be generated, which will be distributed to USDO++ holders, USUALx holders, and other participants.

Currently, the annual percentage rate (APR) of USUALx is about 28,000%, which may attract early demand and create early market enthusiasm.

However, in the long term, the key lies in how the USDO peg mechanism stabilizes and how long $USUAL can continue to attract demand.

In terms of tokenomics: about 90% of the tokens are allocated to the community, with approximately 64% used for inflation rewards, which will be adjusted based on dynamic demand. Currently, about 12.4% of the tokens have entered circulation.

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