Author: Frank, PANews
The stablecoin sector is bustling, and according to incomplete statistics from PANews, there have been 30 stablecoin projects officially announcing funding since the second half of this year. Usual, as a decentralized stablecoin project backed by U.S. treasury bonds, officially announced its Series A financing of $10 million led by Binance Labs and Kraken Ventures on December 23. In a market landscape already occupied by established giants like DAI and USDe, is there still room for new entrants in the stablecoin space? Does the rising TVL suggest it will become another blockbuster stablecoin? This article from PANews will explore Usual's core potential and risks from the perspectives of its underlying operational logic and profit distribution design.
Using short-term treasury bonds as collateral, all profits are shared with the community.
From an operational logic perspective, Usual is no longer operated by a centralized institution but is governed by the on-chain community. Additionally, in terms of profit distribution, Usual allocates 100% of the generated profits to the protocol treasury to feedback to the community, while 90% of the token distribution goes 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 the collateral assets are the most critical factors ensuring asset safety and the stability of the stablecoin. Currently, Usual issues a stablecoin product called USD0, which is special in that it does not use traditional collateral like cash or gold, but instead chooses ultra-short-term treasury bonds (T-Bills) with only a few weeks to a few months of maturity, which have extremely high liquidity and stability, as collateral assets. This is because they are backed by national credit and are considered a 'risk-free return' category, thereby reducing dependence on commercial banks. Ultra-short-term treasury bonds have advantages in credit and liquidity, which is why Usual claims to be an RWA stablecoin issuer.
However, there is a key point here: if one directly purchases ultra-short-term treasury bonds or other low-risk products, lower risks can indeed be achieved. However, PANews learned from Usual's official documents that Usual itself does not directly purchase U.S. treasury bonds but invests the collateral funds into a pre-packaged treasury bond/reverse repo product (USYC) through cooperation with Hashnote.
In other words, Usual does not personally buy treasury bonds or conduct reverse repos, but rather entrusts the collateral assets to the due diligence partner Hashnote for management. Although Hashnote is also a regulated partner with registered entities in the Cayman Islands and the United States, the asset types involved in their cooperation are almost risk-free ultra-short-term treasury bonds. However, this model may not necessarily have a lower risk than those working with commercial banks like Tether. Nevertheless, Usual's goal is to let the community collectively vote on future collateral asset providers, not necessarily always relying on Hashnote. Recently, Usual announced a partnership with Ethena and BlackRock's tokenization platform Securitize to use BUIDL and USDtb as collateral, after which the collateral assets for USD0 will no longer be limited to USYC.
'USD0++' creates a new gameplay of lock-up + circulating notes + exit game.
To encourage users to mint and use USD0, Usual has launched USD0++ as an incentive, along with a designed game mechanism. USD0++ is a staked version of USD0, allowing users to earn yields by staking USD0 and the official governance token USUAL. As of December 25, the annualized yield of USD0++ exceeded 64%, having previously surpassed 80%. This high yield has attracted a significant amount of funds into the minting of USD0.
However, the design of USD0++ differs from other LSTs, with a unified maturity date of June 30, 2028, resulting in a four-year lock-up period. During this time, users can continuously earn USUAL token rewards, but this does not mean they must keep their funds locked for four years. USD0++ itself is a transferable token that can be traded on the secondary market, allowing holders to 'liquidate' or transfer even before maturity.
Additionally, Usual has designed three exit mechanisms: USUAL Burning Redemption; Price Floor Redemption; Parity Arbitrage Right.
Notably, the USUAL Burning Redemption requires users to return a portion of the USUAL rewards to redeem when they wish to burn for redemption (the amount returned is dynamically adjusted).
Furthermore, the Usual white paper mentions that the USD0++ model can be replicated to other assets (such as ETH0++, dUSD0++, etc.), meaning this unique LST mechanism is not limited to fiat stablecoins but can also be extended to other collateral or cross-chain ecosystems.
Overall, the design of USD0++ is intended to encourage users to hold long-term, accumulating USUAL tokens during the lock-up period and sharing growth dividends with the protocol. The unified maturity date reduces users' tendency for short-term speculation. At the same time, USD0++ is a transferable 'note', also retaining a certain level of liquidity. Finally, a withdrawal game mechanism is adopted; if users exit early, they need to burn USUAL or repurchase through an arbitration mechanism, setting an 'exit cost' to protect the protocol from a run and safeguard the rights of those who remain.
USUAL's dynamic minting mechanism, with high early incentives.
In addition to adopting decentralized operations 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 rather dynamically minted daily based on a series of formulas and parameters, and distributed among different 'savings, liquidity, and rewards' pools.
This dynamic formula consists of several factors: d: global allocation rate (0.25), equivalent to the reciprocal of the 4-year target issuance cycle. Supplyt++: current total supply of USD0++ (locked scale). Pt: main market price of USD0++ (1 dollar pegged to 1). Mt: 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. In general, the characteristics of this issuance mechanism include the following points: 1. Gradually 'reduce production' as the scale of USD0++ increases. 2. Adjust according to market interest rate fluctuations; when the FED or market interest rates rise and the project's actual earnings increase, the system will moderately increase the token issuance to provide participants with more USUAL rewards; conversely, it will reduce production. 3. DAO can manually intervene, allowing for 'manual adjustments' in extreme market conditions or inflationary pressures to ensure the protocol's long-term stability. 4. Early incentives and later scarcity; during the launch phase, the supply of USD0++ is relatively low. If the market interest rate or reward mechanism is set high, there will be a phenomenon of 'early minting rate' being high, attracting early participants. Over time, as TVL and interest rates dynamically change, the minting rate will stabilize or decrease, forming a process similar to 'halving' or 'production reduction.'
In summary, the USUAL issuance mechanism attempts to find a self-regulating balance between 'expansion of stablecoin scale, increase in real returns' and 'value appreciation for token holders,' thereby incentivizing early users and ensuring later scarcity and fairness. This issuance model shares similarities with the former Terra, except that Usual has only applied this design to governance tokens and not to the issuance of stablecoins.
TVL has tripled within the month, ranking in the top five of the industry.
Currently, there are multiple projects in the decentralized stablecoin sector. What opportunities does Usual still have in this field? PANews has conducted a data comparison of the currently mainstream decentralized stablecoins.
In terms of issuance volume, the largest decentralized stablecoin currently 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 growth speed, USD0's TVL has reached $1.56 billion (as of December 25). On December 1, Usual's TVL was only $490 million and has tripled in less than a month, currently ranking in the top five of decentralized stablecoins.
This rapid growth may be attributed to the high-yield flywheel model, with Usual's annualized yield at 64%, the highest among several stablecoin comparisons. If this yield can be maintained, it is very likely to grow into the next decentralized stablecoin giant.
Moreover, Usual's greatest advantage may also come from the minimal risk of collateral assets. Other decentralized stablecoins typically use fiat stablecoins and mainstream crypto assets as collateral, while Usual's use of ultra-short-term U.S. treasury bonds has a significantly lower risk coefficient.
On Usual's homepage, 'Becoming Bigger than BlackRock' is displayed as the vision at the top, indicating Usual's ambitions. Compared to industry leader Tether, Usual and other decentralized stablecoins still have a long way to go. The circulating supply of USUAL tokens is 473 million, with a market cap of approximately $676 million. Based on current revenue levels, the average profit distribution per token is about $0.125. From the token economic model's design perspective, this shares similarities with the recently popular Hyperliquid. Both have certain profit-making capabilities and claim from the outset to return the vast majority of income to the community in the form of tokens.
Recently, Usual has been frequently associated with Binance, from listing and airdrops to Binance Labs announcing a lead investment of $10 million in Usual's Series A financing on December 23. This excitement evokes memories of Binance Labs' early investment and support for Terraform Labs, which ultimately became a failed case. Will today's Usual become another rising star in stablecoins for Binance Labs?
