Recently, the RWA+ stablecoin dual narrative project Usual has seen its price continuously rise since launching on Binance's Launchpool, attracting a lot of market attention.
So from the perspective of product logic and economic model, is Usual a worthwhile asset to participate in? The conclusion is: the USUAL token is not a target with long-term development potential. In the short term, it may have a good wealth creation effect due to the economic flywheel, but due to the design of the economic model mechanism, its price is difficult to push too high. Overall, both long-term and short-term investments are not very suitable. This article will conduct an in-depth analysis of the economic model and investment potential of the Usual project. (The project is Usual, and its project token is USUAL; they need to be distinguished.)
Recent market performance of Usual (Image source: Binance)
Product details
Usual is an RWA+ stablecoin project, and both of these tracks are market hotspots in this cycle, highly favored by major VCs in the industry. Usual has currently raised a total of $18.5 million led by Kraken, Binance Labs, and IOSG.
Usual financing details (Image source: Rootdata)
The Usual project has a total of three types of tokens: USD0, USD0++, and project token USUAL. The three-tier product logic of Usual revolves around these three types of tokens, layer by layer, with a simple and clear overall structure.
First layer: Stablecoin USD0
USD0 is the project's base stablecoin, and users can mint USD0 using various crypto assets. Currently, there are many types of tokens that support minting, mainly divided into three categories:
Stablecoins: including USDT, USDC, DAI, etc.
RWA assets: such as Ondo, etc.
Blue-chip crypto assets: such as ETH, WBTC, and tokens from well-known projects like CRV, UNI, MKR, etc.
In addition, users can also mint USD0 by depositing real assets, such as US Treasury bonds.
Second layer: Staking certificate USD0++
After holding and minting USD0, users can generate USD0++ by staking USD0 at a rate of 1:1. USD0++ can be considered the liquidity certificate of USD0 on the Usual platform, similar to stETH on Lido, and can be traded in the secondary market.
USD0++ is the liquidity certificate for staking, and there must be an incentive mechanism to attract user participation. Currently, the real-time annualized yield (APY) of USD0++ is 57%, and its income sources include:
Basic yield: Since part of USD0 is supported by US Treasury bonds, holders of USD0++ will receive interest from these bonds as basic yield.
Additional income: On top of the basic yield, holders of USD0++ will also receive additional income distributed in the form of USUAL tokens.
Because the income composition is basic treasury bond income + additional income, USD0++ is also referred to as 'T-Bil' (enhanced treasury bond).
It is important to note that USD0++ can be obtained not only by staking USD0, but also by staking USUAL. This is a very important point in its economic model, which will be analyzed later.
USD0++ can be obtained by staking either USD0 or USUAL.
Third layer: Project token USUAL
USUAL is produced by holding USD0++ in the second layer. The produced USUAL can be restaked to obtain USD0++, and governance tokens USUALx can also be minted. Every time new USUAL is minted, holders of USUALx will receive 10% of it. This means that in the token distribution mechanism of USUAL, a portion of rewards is specifically allocated to holders of USUALx (i.e., stakers of USUAL), which is a typical feature of short-term economic models. Staking USUAL has a four-year lock-up period. If investors want to unstake early, they must burn a certain percentage of tokens to withdraw.
In addition to the main product logic mentioned above, users can also provide liquidity for USD0/USD0++ and USD0/USDC on the Curve platform. Currently, the annualized yield (APY) for these two types of liquidity is 58% and 33%, respectively.
So, to summarize, the entire product logic of Usual is as follows:
Analysis of the USUAL token economic model
Basic information
Basic information about the USUAL token
In the distribution of Usual tokens, only 10% is allocated to investors, while the remaining 90% is used for ecological construction. This is a major highlight of Usual and one of its key selling points. Objectively speaking, this distribution ratio effectively prevents excessive sell pressure from the team and early holders, adding significant value to Usual's token economic model. Especially this year, as an industry trendsetter, Binance has listed a series of early-stage tokens with high team distribution ratios, causing many tokens to rapidly drop in price after launch, raising suspicions of collusion between project parties and VCs to extract short-term profits from the market.
This practice is acceptable if done occasionally, but if it continues over the long term, users will no longer purchase VC tokens out of market inertia, ultimately leading to the embarrassing situation of 'VCs and retail investors not taking over from each other,' resulting in the crypto market falling into a 'tragedy of the commons.' Recently, some project teams have also foreseen this crisis and started to consciously reduce the allocation ratio of VCs and teams in their economic models.
In addition to Usual, the recently popular on-chain DEX project Hyperliquid has also adopted a similar strategy, airdropping most of the tokens to the community while empowering the tokens, benefiting users without any financing, effectively preventing VC sell pressure. After the Hyperliquid airdrop, instead of the anticipated drop, the token price surged over tenfold.
In-depth research
There are two flywheels in the economic model of USUAL.
First, users stake stablecoins or USD0 to hold USD0++, which can yield USUAL tokens as staking incentives. The rewarded USUAL tokens can then be restaked as USD0++ to form a closed loop. This flywheel involves three tokens: USD0, USD0++, and USUAL, but we can simplify by removing USD0. Why?
The biggest application scenario for users purchasing USD0 is actually staking it in Usual to exchange for USD0++, while other application scenarios, such as adding liquidity for USD0 in Curve, actually only account for about 10% of the total. In addition, of the 57% APY of USD0++, only a small part is basic treasury bond income, while most of it is provided in the form of USUAL tokens. Therefore, we can simplify this part of the logic as depositing other assets and exchanging for USD0, which is equivalent to directly purchasing USUAL on the market.
By simplifying USD0, this flywheel becomes: users can purchase USUAL and stake it as USD0++ to receive USUAL as an incentive, then stake it again as USD0++, forming a closed loop of 'USUAL-USD0++-USUAL'. In the article (on the problem of misaligned incentives in the crypto market and the criteria for evaluating sustainable token economic models), we analyze and point out that if a token has a staking incentive mechanism and the staking and incentive tokens are of the same type, it is usually a standard short-term project economic model design. Here, both the staking and incentive tokens are USUAL, which is exactly this case.
Why? Let's analyze the operating mechanism of the USUAL economic flywheel in detail. Since the staking and incentive tokens are both USUAL, the staking yield is calculated as staking yield = USUAL price x USUAL issuance amount, and the issuance of USUAL depends on the staking rate. Therefore, when the price of USUAL rises, the staking yield will rapidly increase due to the combined effect of price and issuance amount. This increase in yield will attract more users to purchase USUAL and participate in staking, further driving up the staking yield.
Thus, in a cyclical manner, the price of USUAL and the staking yield will show an accelerating upward trend. This is a typical short-term Ponzi-type project economic flywheel. During the last bull market, there were many projects with this economic model, such as OlympusDAO, whose price once achieved a hundredfold increase, with staking yields even exceeding 10,000%.
However, the flaw of this model is that once the price of USUAL falls, the staking yield will also significantly decrease due to the combined effect of the price and issuance amount, triggering panic among users and leading to massive sell-offs of USUAL, resulting in a 'death spiral' of 'the more it falls, the faster it falls.' Therefore, projects with such flywheel effects experience not only rapid price increases but also equally severe declines. Due to the often exceptionally strong downward trend, it is difficult to rescue the market, and the price often drops to zero after reaching a peak. OlympusDAO was once flourishing but ultimately turned out to be a flash in the pan.
Source of the image: (on the problem of misaligned incentives in the crypto market and the criteria for evaluating sustainable token economic models)
Let's analyze the second flywheel in the product — users stake USUAL to obtain USUALx and again receive USUAL as a reward. The structure of this flywheel is almost identical to the previous one, except that there is no USD0 and USD0++ to neutralize the effect, which makes the price curve steeper. The real-time APY for USD0++ is 57%, and the real-time APY for USUALx is as high as 410%. Of course, it is foreseeable that when Usual starts to decline, the sharp drop effect brought by this flywheel will be even stronger than the first.
Thus, the staking incentive mechanism in the USUAL economic model determines that it is a project with short-term rapid rises and falls, and its initiation requires a powerful initial liquidity to ignite it. Finding the source of this strong initial liquidity becomes our second key point in evaluating USUAL's investment potential.
Usual is led by Binance Labs, and the initial issuance ratio of the USUAL token is 12.37%, of which Binance's Launchpool accounts for 7.5%, exceeding half of the initial issuance amount. This indicates that USUAL is likely a strong token dominated by Binance. The question then becomes: is Binance willing to provide initial liquidity for the USUAL flywheel? The probability is high that they are willing. Based on our expectations for the bull market in 2025, with ample market liquidity and the current market cap of USUAL being around $600 million, Binance should be motivated to drive the flywheel and then choose the right time to exit.
Under-damping mechanism
In our assessment criteria for token economics, there is a very important indicator: whether the token has an 'under-damping mechanism.' The under-damping mechanism refers to the economic model of the token being able to slow down its trend of change, regardless of whether the price goes up or down. The most classic example of this mechanism is Ethereum. When the Ethereum ecosystem is active, the price of ETH tends to rise, and at this time, Ethereum gas fees increase, suppressing some users from buying and participating, thus inhibiting further price increases; when the ecosystem is quiet, the price of ETH falls, and at this time, gas fees decrease, attracting users to participate and preventing further price declines.
This token economic model with an under-damping mechanism can stabilize the token price, avoiding excessive fluctuations due to market sentiment, and truly increase the token price through project revenue and user consensus growth. The under-damping mechanism is a key feature for a project with long-term development potential, as explained in (on the problem of misaligned incentives in the crypto market and the criteria for evaluating sustainable token economic models).
USUAL has an under-damping mechanism, and its issuance amount is dynamically adjusted based on TVL (Total Value Locked): when TVL increases, the issuance amount of USUAL decreases; when TVL decreases, the issuance amount of USUAL increases.
The relationship between the issuance of USUAL and TVL
When TVL rises, users receive more income from the increased treasury bonds, and the price of USUAL will also increase. Thus, the issuance amount is reduced to lower the yield and heat; conversely, when TVL falls, user income will also decrease, and the project will issue more USUAL to increase yield and heat. In this way, the popularity of Usual can be regulated within a moderate range, avoiding overdrawing long-term development potential due to short-term market sentiment.
The investment potential and risks of USUAL.
From the analysis of the economic model above, we can see that the staking incentive mechanism of USUAL is a short-term flywheel, but it is not fully designed according to a short-term project economic model, adding an under-damping mechanism that neutralizes the sharp rise effect of the short-term flywheel. Additionally, since it is built on real assets, it will not have the astonishing increases and APYs like OlympusDAO.
Therefore, USUAL's economic model has neither too much potential for long-term development nor high short-term yields from the flywheel, making it somewhat unsatisfactory and giving a sense of being a 'chicken rib.' Additionally, Usual has a risk: currently, the proportion of USD0 in external markets like Curve is far lower than its proportion staked in the Usual project. If there is a large-scale withdrawal, the external market may not be able to cope, potentially leading to price decoupling.
In summary, whether we are looking for an asset suitable for long-term holding or a target for quick short-term high returns, USUAL is not a good choice. However, if one can participate early, it should be possible to achieve some profit.
