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$USUAL is one of the most important releases of this cycle, with a very promising initial performance, so should you buy it or ignore it?
A few months ago, when I was researching new stablecoins, I started to pay attention to USUAL. The unique thing about USUAL is its clear story: on-chain Tether, distributing profits to token holders. Tether has earned over $7.7 billion in profits so far this year, which is almost more than Blackstone.
If USUAL can achieve this goal, even just 10% of it, it will mean $770 million in profits. And the best part is that 90% of the revenue will be distributed to token holders and stakers in the form of $USUAL.
The earnings are paid in $USUAL, so every time someone stakes USDO (their stablecoin), $USUAL tokens will be continuously issued.
USDO is a stablecoin backed by US Treasuries, generating income from Treasuries, and this income is distributed in the form of $USUAL and USDO.
USUAL Money mentioned that when $USUAL's cash flow reaches a certain target, they plan to control the issuance of $USUAL to ensure a sustainable issuance rate lower than the growth rate of revenue. Initially, the issuance will be higher, but over time, the issuance will gradually decrease.
In addition to governance and staking the $USUAL token, USUAL also provides two other tokens.
USDO++: This is the liquidity token you receive after staking USDO. USDO holders need to stake USDO for 4 years to mint USDO++. USDO++ holders will receive a 45% share of the $USUAL issuance.
Whenever new USDO++ is minted, USUAL will issue new $USUAL tokens. This is a core part of their flywheel mechanism. The protocol's TVL (Total Value Locked) will also track the value of the USDO++ minted in the protocol.
The higher the TVL, the more revenue the protocol generates, and ultimately this revenue will be paid to USDO++ holders in the form of $USUAL tokens.
The $USUAL issuance rate will decrease as more users adopt it, reducing the number of tokens issued per dollar locked. This decrease will increase the earnings per token, naturally driving the price of $USUAL upwards.
Higher USDO++ APY will attract more people to stake USDO. The current APY is around 80%, so we may see TVL rise in the coming days. The current TVL is around $900 million, with 87.47% of USDO already staked as USDO++.
USUAL also has a staking token called USUALx, which provides three forms of rewards: USDO rewards from revenue, 10% of the $USUAL issuance, and 50% fee sharing from the unlocking module.
When USDO++ holders decide to unlock before maturity, the protocol will also trigger a $USUAL burning mechanism. They need to burn a portion of the $USUAL supply to perform the unlocking operation.
As mentioned in the USUAL Money whitepaper, we do face two serious product risks:
The market price of $USUAL (the primary reward token) directly impacts the rewards in the ecosystem, including rewards and liquidity incentives related to USDO++. If the price drops significantly, it may impair the competitiveness and user attraction of the ecosystem. Due to its inflationary nature, there is also a risk of hyperinflation.
To address this, the DAO can adjust the minting rate to regulate the issuance, ensuring the stability and sustainability of the economy.
USDO++: These locked tokens lack a cost-free arbitrage mechanism to maintain their peg, which could lead to price volatility. However, this risk has been minimized through strong secondary market liquidity, liquidity provider incentives, and early redemption mechanisms. Additionally, a price floor redemption mechanism limits extreme volatility, ensuring stability and market efficiency.
Overall, as long as the price of $USUAL is attractive, the protocol will be able to attract more demand for USDO and USDO++. The greater the demand for its stablecoins, the more revenue it will ultimately generate, and this revenue will be distributed to USDO++ holders, USUALx holders, and other participants.
Currently, the APY for USUALx is around 28,000%, which may attract early demand and create initial market hype.
However, in the long run, the key is how the USDO peg mechanism is stabilized and how long $USUAL can continue to attract demand.
In terms of token economics: around 90% of the tokens are allocated to the community, with approximately 64% used for inflationary rewards, which will be adjusted dynamically based on demand. Currently, about 12.4% of the tokens are in circulation.
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