Author: Frank, PANews
The stablecoin sector is bustling; according to incomplete statistics from PANews, there have been 30 stablecoin projects officially announcing financing since the second half of this year. Usual, as a decentralized stablecoin project collateralized by U.S. government bonds, also officially announced its Series A financing of $10 million 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 survival space for stablecoin newcomers? Does the rising TVL indicate it will become another hit stablecoin? This article from PANews will explore Usual's core potential and risks from the perspectives of its underlying operating logic and profit distribution design.
Short-term government bonds serve as collateral, with all earnings shared with the community.
From an operational logic perspective, Usual is no longer operated by a centralized institution but is governed by the community on-chain. Additionally, in terms of profit distribution, Usual allocates 100% of the generated profits to the protocol treasury to feedback the community, while 90% of the tokens are distributed 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 collateral assets are the key factors ensuring asset safety and the stability of stablecoins. The stablecoin product currently issued by Usual is USD0, which is special in that it does not use traditional collateral such as cash or gold, but rather chooses U.S. ultra-short-term government bonds (T-Bills) with a maturity of only a few weeks to several months, both highly liquid and stable, as collateral. This is because it is backed by national credit and regarded as part of the "risk-free return" category, thereby reducing reliance on commercial banks. Ultra-short-term government bonds have advantages in credit and liquidity, which is also why Usual claims to be an RWA stablecoin issuer.
However, there is a key point: if one directly purchases ultra-short-term government bonds and other low-risk products, it can indeed achieve lower risk. However, PANews learned from Usual's official documents that Usual itself does not directly purchase U.S. government bonds but invests the collateral funds into a packaged government bond/reverse repo product (USYC) through collaboration with Hashnote.
In other words, Usual does not directly purchase government bonds or operate reverse repos but entrusts the collateral assets to a due diligence partner, Hashnote, for management. Although Hashnote is also a regulated partner with registered entities in the Cayman Islands and the U.S., and the asset types they cooperate on are almost risk-free ultra-short-term government bonds, this model may not necessarily present an absolute risk reduction compared to Tether and other collaborations with commercial banks. However, Usual aims to let the community vote on future collateral asset providers and not be limited to using Hashnote indefinitely. Recently, Usual announced a partnership with Ethena and the tokenization platform Securitize of BlackRock to use BUIDL and USDtb as collateral. After this, the collateral assets for USD0 will no longer be limited to USYC.
"USD0++" creates a new play for locking, circulating notes, and exit games in LST.
To encourage users to mint and use USD0, Usual launched USD0++ for incentives, while also designing a launch game mechanism. USD0++ is a staking version of USD0, allowing users to earn rewards by staking USD0 and the official governance token USUAL. As of December 25, the annualized return rate of USD0++ exceeded 64%, having previously surpassed 80%. This high yield has attracted significant funds to participate in the minting of USD0.
However, the design of USD0++ differs from other LSTs; USD0++ has a unified maturity date of June 30, 2028, with a lock-up period of four years. During this time, users can continuously earn USUAL token rewards, but this does not mean they must keep their funds in for the full 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; Parity Arbitrage Right.
Notably, USUAL Burning Redemption requires users who wish to redeem by burning to return part of the USUAL rewards to redeem (the amount returned is dynamically adjusted).
Moreover, the Usual white paper mentions that the USD0++ model can be replicated for other assets (such as ETH0++, dUSD0++, etc.), indicating that this unique LST mechanism is not limited to fiat stablecoins and can be extended to other collateral or cross-chain ecosystems.
Overall, the design of USD0++ aims to encourage users to hold long-term, accumulate USUAL tokens during the lock-up period, and share growth dividends with the protocol. The unified maturity date reduces users' short-term speculation tendencies. At the same time, USD0++ is a transferable "note" that retains a certain liquidity. Finally, an exit game mechanism is employed where early exit requires burning USUAL or repurchase through an arbitration mechanism, setting an "exit cost" to protect the protocol from runs and safeguard the interests of those who remain.
USUAL dynamic minting mechanism, with higher early incentives.
In addition to adopting decentralized operation and introducing RWA assets as collateral, Usual's governance token USUAL also has a unique token economic model. Unlike other fixed issuance or one-time issuance methods, USUAL uses a dynamic minting model for token issuance.
The USUAL token is not minted all at once but is dynamically minted daily based on a series of formulas and parameters, and distributed to different "savings, liquidity, rewards" pools.
This dynamic formula is composed of multiple factors: d: global allocation rate (0.25), equivalent to the reciprocal of the four-year target issuance cycle. Supplyt++: the current total supply of USD0++ (locked scale). Pt: the main market price of USD0++ (1 is pegged at 1 dollar). Mt: the 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. Gradual "reduction" as the scale of USD0++ increases. 2. Adjustment according to market interest rate fluctuations; when the FED or market interest rates rise and the actual returns available to the project are higher, the system will moderately increase the token issuance to provide more USUAL rewards to participants; conversely, it will reduce production. 3. DAO can intervene manually; under extreme market conditions or inflationary pressures, "manual corrections" can be made to ensure the long-term robustness 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 phenomenon of high "early minting rates" attracting early adopters. Over time, with dynamic changes in TVL and interest rates, the minting rate will gradually stabilize or decrease, forming a process similar to "halving" or "reduction".
In summary, the issuance mechanism of USUAL attempts to find a self-regulating balance between "expansion of stablecoin scale, enhancement of real returns" and "value appreciation for token holders", thereby incentivizing early users while ensuring scarcity and fairness in the later stages. This issuance model is similar to that of the former Terra, except that Usual has applied this design only to the governance token and has not adopted this model for stablecoin issuance.
TVL tripled within the month, ranking in the top five in the industry.
Currently, there are multiple projects in the decentralized stablecoin sector. What opportunities still exist for Usual in this field? PANews has conducted a data comparison of currently mainstream decentralized stablecoins.
In terms of issuance volume, the largest decentralized stablecoin is Ethena USDe at $5.91 billion, followed by USDS and DAI. However, these projects have been running for a long time; in terms of development speed, USD0's current TVL has reached $1.56 billion (data as of December 25). On December 1, Usual's TVL was only $490 million, which has tripled in less than a month, making USD0 rank among the top five decentralized stablecoins.
This rapid growth may be attributed to the high-yield flywheel model, with Usual's annualized return rate at 64%, the highest among several stablecoin yield comparisons. If this return rate can be maintained, it is likely to grow into the next decentralized stablecoin giant.
Additionally, Usual's biggest advantage may come from minimizing the risk of collateral assets. Other decentralized stablecoins generally use fiat stablecoins and mainstream crypto assets as collateral, while Usual's use of U.S. ultra-short-term treasury bonds has a significantly lower risk coefficient.
On Usual's homepage, "Becoming Bigger than BlackRock" is displayed as a vision at the top, which also shows Usual's ambition. Compared with industry leader Tether, Usual and other decentralized stablecoins still have a long way to go. The circulation of USUAL tokens is 473 million, with a market value of approximately $676 million. Based on current income levels, the average profit distribution per token is about $0.125. In terms of token economic model design, this is similar to the recently popular Hyperliquid. Both share the commonality of having certain profitability and claiming to return the vast majority of income to the community in token form from the outset.
Recently, Usual has been frequently associated with Binance, including listings, airdrops, and on December 23, Binance Labs announced leading a $10 million Series A financing for Usual. This buzz inevitably reminds one of Binance Labs' earlier investment and support for Terraform Labs, although that investment ultimately became a failed case. Can today's Usual become another rising star in stablecoins for Binance Labs?
