Strengths:
1. Decentralization and Participatory Governance: Usual proposes an innovative approach, where governance token holders have control over the issuance of the stablecoin and the making of crucial decisions, such as risk policies and liquidity incentives. This ensures that users can directly influence the actions of the protocol, promoting a more democratic and decentralized governance.
2. Secure Collateralization Model and Bankruptcy-Free: Usual avoids the risks associated with the traditional banking system, which operates on a fractional reserve basis. By using short-term securities as collateral, it offers a safer solution, which can increase users’ confidence in the stability of the stablecoin. In addition, the strict risk policy and insurance fund add layers of protection for users.
3. Fair Value Redistribution: Usual’s value redistribution model is focused on giving the majority of benefits to users and ecosystem participants. The protocol distributes 100% of the value and control through its governance token, allowing users to become owners of the system and make decisions about the future of the treasury and revenues.
4. Early Adopter Incentives and Transparency: By providing governance tokens as rewards, Usual provides significant incentives to early adopters, ensuring that those who venture early into the ecosystem see a substantial return. Transparency in the distribution process also fosters trust in the model.
Weaknesses:
1. Complexity and Early Adoption: Usual’s proposal is innovative, but it may also be complex for many DeFi users. Integrating an on-chain stablecoin with decentralized governance and a differentiated collateralization strategy may be difficult for a wider audience to understand and adopt, especially considering that the stablecoin market is already dominated by large players like Tether and Circle.
2. Reliance on Long-Term Economic Models: Usual’s success depends on creating a sustainable economic model and gaining adoption from a significant user base. While the focus on redistributing ownership and value to users is promising, execution needs to be very well balanced to avoid long-term financial issues such as lack of liquidity or unexpected revenue fluctuations.
3. Regulatory Risk: The on-chain stablecoin model, with decentralized governance and an alternative collateralization structure, may attract regulatory attention. Depending on the jurisdiction, authorities may question the legality or viability of a system so distinct from traditional stablecoins. This could create uncertainty in the long term.
4. Competition from Established Players: Usual enters a highly competitive market where companies like Tether and Circle dominate. The already established trust in these players may hinder the adoption of Usual, especially if the model does not demonstrate security and stability from the outset.
Summary about Usual:
Usual is an on-chain stablecoin proposal that seeks to solve typical problems of centralized stablecoins, such as profit concentration and the risk associated with the traditional banking system. Its innovation lies in decentralized governance, where token holders have full control over the protocol, including risk policies and decisions about the collateral used. Usual also stands out for avoiding fractional reserves, using short-term assets as collateral and implementing a strict risk policy. The proposal is to redistribute 100% of the value generated to the community, offering a fairer and more transparent model.
However, the complexity of the model and its reliance on growing adoption could be obstacles to its expansion. Furthermore, the stablecoin market is already dominated by big names, which could make it difficult for it to compete. Usual’s success will depend on its ability to attract and engage users while maintaining the security and transparency of the system.
In short, Usual is an innovative proposal that aims to transform the stablecoin and DeFi ecosystem, offering a fairer and more decentralized alternative to existing solutions.
