Stablecoin developer Usual faces backlash after changing redeem function

Stablecoin developer Usual is under scrutiny after changing the 1:1 payment mechanism for its staking token USD0++, which provides returns tied to the USD0 stablecoin.

USD0++, the staked version of Usual’s USD0 stablecoin, fell to $0.92 (8% below its previous redemption value) after new early exit options triggered selling and disrupted the largest Curve pool.

USD0++ is not a stablecoin. It is a staked version of USD0 designed to lock funds for four years while earning USUAL tokens as rewards. Previously, USD0++ could be redeemed at a 1:1 ratio with USD0, but now users have to choose between two exit options: a conditional exit, which is redeemed at a 1:1 ratio but loses some of the accrued rewards, or a gradual exit starting at $0.87 an unconditional exit with a floor price. rising to $1 in four years.

For this reason @usualmoney the team had been claiming for a few weeks that USD0++ could be redeemed for 1:1 USD0, so all was well.

Today they stopped using 1:1 function without any prior announcement to trap farmers and protect their TVL.

USD0++ is currently trading at $0.92. Please send this… pic.twitter.com/aZNArIQoy0

— CBB (@Cbb0fe) January 10, 2025

The changes turned USD0++ into a hybrid of a bond and yield farming instrument. High-risk users can stake USD0 up to USD0++ to collect USUAL tokens at high returns, while more conservative holders can lock their funds for four years to earn a fixed 4% annual return.

As a result, the design of the system creates trade-offs. While USD0 holders sacrifice return for stability, USD0++ holders lock up funds and hope that USUAL rewards compensate for their lost returns, and USUAL stakers earn returns from others as they bet on the token’s price increase.

Recent updates have made USD0++ riskier and less attractive; long lock-up periods and varying redemption rules have made it less attractive than more liquid options; This led to a sell-off as traders and yield farmers tried to exit, causing the largest Curve pool to become unbalanced and push the USD0++ price below $1.

As of press time, Usual Labs, the company behind the Usual protocol, has not made any public statement about the USD0++ price changes. In 2024, Usual Labs raised $7 million from investors including IOSG Ventures, Kraken Ventures, GSR, Mantle, Starkware, and Flowdesk, with a commitment of $75 million in total value locked for $0.