In-depth Analysis of Usual: The Truth Behind USD0++ Depegging and Cycle Loan Get Liquidated

Recently, the USD0++ stablecoin issued by Usual losing its peg has sparked heated discussions in the market and led to user panic. After the project was listed on mainstream exchanges last November, its price soared over 10 times. Its stablecoin issuance mechanism and token model, based on real assets (RWA), are quite similar to projects like Luna and OlympusDAO from the last bull market. Additionally, with French Member of Parliament Pierre Person backing it, Usual attracted significant attention.

However, a series of recent events have brought Usual down from its pedestal. On January 10, Usual officially announced changes to the early redemption rules of USD0++, causing USD0++ to break its peg to around 0.9 dollars. As of January 15, USD0++ is still hovering around 0.9 dollars.

The Product Logic of Usual

The Usual product system mainly includes four types of tokens: stablecoin USD0, bond token USD0++, project token USUAL, and governance token USUALx. Its product logic can be divided into three layers:

Layer 1: Stablecoin USD0

USD0 is a stablecoin backed by equivalent collateral, using RWA assets as collateral. Currently, most USD0 is minted by USYC, with some using M as collateral. Users can mint USD0 in two ways:

1. Directly mint RWA assets
2. Transfer USDC to the RWA provider, who will mint it on your behalf.

Second layer: Enhanced Treasury Bond USD0++

USD0++ holders can share the interest from the underlying RWA assets, as well as 45% of the daily newly minted USUAL tokens. USD0 can be staked 1:1 to mint USD0++, with a default lock-up period of 4 years. USD0++ is similar to a tokenized 4-year floating rate bond.

Layer 3: Project Token USUAL and USUALx

Users can obtain USUAL by staking USD0++ or purchasing from the secondary market. USUAL can be staked 1:1 to mint the governance token USUALx.

Analysis of the Depegging Event

On January 10th, Usual announced a modification to the USD0++ redemption rules, providing two options:

1. Conditional Redemption: Ratio 1:1, but requires part of the USUAL earnings.
2. Unconditional Redemption: No earnings deducted, but the redemption ratio is reduced to a minimum of 87%.

This modification has caused panic in the market, leading to a significant sell-off of USD0++, resulting in a decoupling.

The "Conspiracy Theory" Behind It

1. Precision Liquidation Cycle Loan: An unconditional redemption floor price of 87%, which is slightly higher than the 86% liquidation line of the Morpha lending platform. This may be aimed at liquidating the USD0++/USDC cycle loan positions on Morpha to address the mining arbitrage issue.

2. Low-cost market rescue: The conditional redemption mechanism aims to empower the USUAL token, reduce circulation, and attempt to reverse the downward trend.

Exposed Issues

1. Users did not read the documentation carefully when participating in DeFi projects.
2. The project's decision-making is too centralized, lacking community governance.
3. The industry is constantly evolving, and newcomers are learning from the mistakes of their predecessors.

Despite the fact that the Usual incident exposed many issues, it also reflects the continuous progress of the industry. We should not lose confidence in the entire industry, but rather focus on the awareness of decentralization among project parties and users, as well as the issue of asset security.