Usual Protocol Introduces ‘Revenue Switch’ to Stabilize Ecosystem After USD0++ Depegs

Usual Protocol Introduces ‘Revenue Switch’ to Stabilize Ecosystem After USD0++ Depegs

Usual Protocol, a decentralized finance (DeFi) stablecoin issuer, has activated a revenue-sharing model to stabilize its ecosystem following a significant depegging event involving its staked stablecoin, USD0++. The move comes in response to growing community concerns after the stablecoin dropped below its $1 peg earlier this week.


USD0++ Depegs and Protocol's Response

On January 9, USD0++ fell to as low as $0.89 before recovering slightly to $0.92, following a code update that introduced a new floor price mechanism. This sudden drop raised alarms among investors who had relied on the stablecoin's value being tethered to the US dollar. In response, Usual Protocol's team rolled out a series of measures, including the early activation of a “revenue switch,” to address user concerns and stabilize the situation.


Revenue Switch and Community Earnings

Starting on January 13, Usual Protocol will begin sharing its earnings from real-world assets and protocol operations with its community. The protocol estimates monthly revenues of approximately $5 million, which would translate into an annual return of over 50% under current conditions. These revenue distributions will occur on a weekly basis, providing immediate returns to the community and reinforcing the protocol's commitment to stability.


"This initiative aims to highlight the tangible value of USUAL, the balance of its economic model, and the income generated by the protocol," Usual Protocol posted on X.


Early Unstaking Feature

Alongside the revenue-sharing initiative, Usual Protocol is also activating a "1:1 Early Unstaking" feature next week. This option will allow users to redeem their USD0++ at the original $1 peg. However, users will need to forfeit a portion of their accrued rewards as a penalty for taking early redemption. This feature provides users with an exit strategy while ensuring the protocol’s long-term stability.


USD0++ Code Update and Exit Mechanisms

Earlier on January 11, Usual Protocol altered the code governing USD0++, reducing its redemption value from $0.995 to a new minimum floor price of $0.87. This update blindsided many investors who had assumed that USD0++ would always be redeemable one-to-one for the stablecoin USD0, pegged to the US dollar.


The protocol introduced two new exit options to align USD0++ with its vision of a bond-like financial instrument backed by real-world revenue streams. The "conditional exit" allows users to redeem USD0++ at the $1 peg, but with the penalty of forfeiting their accrued rewards. The "unconditional exit" offers immediate cash-out at the $0.87 floor price, which will gradually rise to $1 over the next four years.


These changes have led to multimillion-dollar liquidations and shifts in liquidity across DeFi platforms such as Curve Finance and Pendle.


Community Backlash and Criticism

The update has sparked criticism within the DeFi community. Stani Kulechov, founder of the Aave protocol, called the changes an example of how immutable price feeds can lead to unforeseen issues. Michael Egorov, founder of Curve Finance, also weighed in, noting that the backing of USD0++ by four-year Treasury bills made a discount likely. "USD0++ should likely have a discount," Egorov stated, adding that the change was unexpected for many in the community. "Some protocols hardcoded price oracle for USD0++ to 1.0."


Ignas, a DeFi researcher, questioned the governance process behind the update. "The whitepaper specifies that the DAO reserves the authority to set this price floor, allowing USD0++ holders to exchange their tokens for USD0 at a rate below the standard 1:1 redemption ratio. Where was the DAO vote? USUALx holders needed to vote on this," Ignas pointed out.


Moving Forward

Usual Protocol has yet to respond to requests for comment from Cointelegraph. However, the introduction of the revenue switch and the early unstaking feature represent significant steps toward stabilizing the protocol in the wake of the depegging event. As the protocol works to regain the trust of its users and stabilize its ecosystem, it will be crucial to monitor how these changes impact the broader DeFi market and the USD0++ stablecoin’s value in the coming weeks.

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