After introducing the 'income switch' mechanism, the circulation of Usual will be influenced by the following factors:



1. Circulation may decrease (locking increases)


• More tokens staked as USUALx:


The activation condition for the income switch is that over 50% of USUAL tokens must be staked as USUALx. Currently, the staking ratio is 36.53%, and this mechanism will incentivize more holders to stake USUAL to participate in high-yield distribution, thereby reducing the number of circulating tokens in the market.


• Staking incentive mechanism:


After the income switch is activated, USUALx holders can receive a share of the protocol income each month (e.g., USD0 rewards) and enjoy potential high APY returns. This will further drive staking demand, leading more tokens to be locked.



2. Short-term liquidity decreases


• Staking cycle restricts circulation:


According to the mechanism, only users who hold USUALx for the entire month can receive the month's earnings, so holders may tend to stake long-term, reducing short-term trading or selling behavior, leading to decreased market liquidity.


• Reverse effect:


Although long-term staking reduces circulation, if some holders terminate staking early due to earnings cycle rules, it may lead to short-term fluctuations in circulation.



3. Market demand may increase (supply and demand impact)


• Increase in demand for USUAL:


The income distribution mechanism attracts more investors to purchase USUAL and participate in staking, especially as protocol revenue grows and the appeal of high APY increases, leading to higher market demand for USUAL.


• Supply and demand imbalance may drive up prices:


As more tokens are staked, the market circulation decreases, and the supply-demand imbalance may drive up the price of USUAL, further boosting market demand.



4. Long-term effects: gradual release or stabilization


• Earnings attract long-term holders:


Income distribution and high APY may encourage holders to hold USUALx for the long term, reducing the volatility of market circulation.


• Unlocking mechanism linked to income growth:


As protocol revenue increases, more participants may gradually unlock tokens to realize earnings, but if total earnings can continue to grow, the impact of this unlocking behavior on market circulation will be minimal.



Summary


• The income switch mechanism will significantly reduce the circulation of USUAL in the short term, as more tokens will be staked.


• As protocol revenue grows and the high APY becomes attractive, the demand for USUAL in the market may increase, further exacerbating the decline in circulation.


• In the long term, this mechanism helps stabilize market liquidity and promotes the value of USUAL through income distribution and token locking.



This mechanism may create a situation of 'low circulation and high demand', thus positively impacting the price of USUAL.