Author: 0xjs@Jinse Finance
"Of The People, By The People, For The People" is the most famous speech by U.S. President Lincoln.
"Of the people, by the people, for the people" is the slogan of the Three Principles of the People by Dr. Sun Yat-sen.
Once these ideas were proposed, they firmly occupied the minds of the people.
In the crypto industry, "user sovereignty, community ownership" is also the case. Those crypto projects that did not consider users and communities due to first-mover advantages and various other factors will eventually face challenges.
In the recent market downturn, a stablecoin protocol Usual that targets USDT/USDC has performed well, attracting attention from the crypto community.
What is Usual?
According to the official document, Usual is a secure and decentralized fiat stablecoin issuer, aggregating an ever-growing pool of RWA tokens (mainly tokenized U.S. Treasuries) from Hashnote, BlackRock, Ondo, Mountain Protocol, M^0, and others, converting them into permissionless, on-chain verifiable, and composable stablecoin USD0. And it redistributes ownership and governance rights through the governance token USUAL.
In a nutshell, Usual aims to be the on-chain Tether.
Usual is targeting two key issues of USDT/USDC: user ownership and bank bankruptcy risk.
First, user ownership. USDT and USDC are the top two stablecoins by market cap, with USDT exceeding $140 billion and USDC exceeding $42 billion. According to data publicly disclosed by Tether, Tether's annual profit in 2024 could reach $10 billion. Circle's annual profit could reach $3 billion. However, the profits generated from the assets provided by crypto users are all taken by Tether and Circle, and users have no equity. Usual, on the other hand, will not privatize the profits generated by USDT and USDC like Tether and Circle, but will redistribute the power and profits to the community (Of The People, By The People, For The People). 100% of Usual's revenue flows into the treasury, of which 90% is distributed to the community through governance tokens.
Second, bank bankruptcy risk. A large portion of USDT and USDC is guaranteed by commercial banks, which brings risks to security and stability due to partial bank reserves. Usual introduces a new stablecoin issuance model, with 100% of the stablecoin's underlying assets collateralized by short-term U.S. Treasuries, not tied to the traditional banking system, and far from the risk of bank bankruptcy.
Usual is mainly targeting these two gaps of Tether/Circle.
In other words, Usual can be seen as a "vampire attack" on USDT/USDC, just like the "vampire attack" of Sushi on Uniswap in the DeFi summer of 2020.
So how does Usual implement it?
Analysis of Usual's Working Mechanism
Usual is mainly composed of five core tokens: stablecoin USD0, LST token USD0++, governance token USUAL, staked governance token USUALx, and contributor token USUAL*.
USD0: USD0 is Usual's stablecoin. Users can exchange USDC or USYC for USD0 at a 1:1 ratio.
USD0++: USD0++ is the LST token generated by staking USD0. Holding USD0++ can earn USUAL token rewards.
USUAL: USUAL is Usual's governance token.
USUALx: Staking USUAL can earn USUALx, and users holding USUALx can activate governance rights and receive USUAL rewards. USUALx can vote on the governance of the Usual protocol, such as supporting future collateral sources.
USUAL*: USUAL* is the founding token of the Usual protocol, distributed to investors, contributors, and advisors, and endowed with different privileges than the USUA token.
The following diagram illustrates Usual's product and user flow:
The following details are described below.
Minting of USD0
USD0 tokens can be minted through Usual in two ways:
Direct minting: By depositing eligible RWA into the protocol, users can receive an equivalent amount of USD0 at a 1:1 ratio.
Indirect minting: By depositing USDC into the protocol, users can receive USD0 at a 1:1 ratio. In this method, third-party "Collateral Providers" (CPs) provide the necessary RWA collateral, allowing users to obtain USD0 without directly holding RWA. In the initial launch of the protocol, all orders below 100,000 USD0 will be redirected to the secondary market liquidity.
The above diagram uses USYC as the first collateral source for USD0, with Hashnote's USYC currently being the first collateral for Usual. USYC is the on-chain representation of the Hashnote International Short Duration Yield Fund (SDYF), which primarily invests in reverse repurchase agreements and short-term U.S. Treasuries.
USD0++
USD0++ is the liquidity staking token (LST) of USD0. It is a composable token representing staked USD0, functioning like a liquid savings account. For each USD0 staked, Usual mints new USUAL tokens and distributes them as rewards to users.
The staking period for USD0++ is 4 years, and users can cancel the staking at any time or sell USD0++ on the secondary market at the current price. Users who cancel the staking early will need to burn their accumulated USUAL rewards. A portion of the burned USUAL will be distributed to USUALx holders.
USD0++ has two parts of earnings: 1. USUAL token rewards - USD0++ holders can receive daily USUAL token rewards; 2. Base interest guarantee - USD0++ holders can receive earnings at least equivalent to the yield on the USD0 collateral (risk-free yield). But users must lock their USD0++ for a specified period. At the end of this period, users can choose to receive the rewards in the form of USUAL tokens or the risk-free yield of USD0.
USUAL
USUAL serves as the primary reward mechanism, incentive structure, and governance tool. The core idea behind its design is that USUAL tokens are actually minted as a proof of earnings and are directly linked to the protocol's revenue. USUAL is distributed daily to different categories of participants.
USUALx
USUALx is the staked form of USUAL, and holding USUALx can activate governance rights and earn 10% of the newly issued USUAL, to promote long-term participation of USUAL holders in the Usual ecosystem. Users can unstake USUALx at any time, but will need to pay a 10% fee on the unstaked amount.
USUAL*
USUAL* is the founding token of the Usual protocol, distributed to investors, contributors, and advisors, to provide funding for the creation of the protocol, and endowed with specific rights different from the USUAL token, but it has no liquidity.
USUAL* holders have two permanent rights: 1. USUA token distribution right: USUAL* holders have the right to receive 10% of all minted USUAL tokens, with the remaining 90% distributed to the community. 2. Fee distribution right: USUAL* holders will also receive one-third of all fees generated from USUALx staking withdrawals.
In the early stages of the protocol, USUAL* holders are granted majority voting rights to ensure compliance with the roadmap and facilitate effective decision-making during the launch phase. Over time, governance will transition to a decentralized model centered around USUALx. However, this transition will not affect the permanent economic rights of USUAL* holders.
From the above, it can be seen that USD0++, USUALx, and USUAL* are closely related to the issuance and distribution of USUAL.
Through the distribution of USUAL, it not only incentivizes users to exchange USDC for USD0 and stake it into USD0++, but also incentivizes users to stake their USUAL into USUALx, and through the 10% USUAL incentive given to USUAL*, the interests of Usual's team, VCs, and the community are long-term aligned.
The Ingenious USUAL Token Issuance and Distribution Mechanism
The USUAL token issuance strategy is different from other crypto projects, mainly in its token issuance and distribution mechanism.
First, on token issuance. The maximum supply is 4 billion USUAL over 4 years. USUAL adopts a dynamic supply adjustment mechanism, with the issuance rate adjusted based on the TVL growth priced in USD0++ and the yield rate supporting the USD0 assets, and an upper limit is set to prevent over-issuance. As the supply of USD0++ increases, the minting rate will decrease, which helps create scarcity and reward early participants.
The issuance model of Usual is designed as deflationary, with an inflation rate lower than Bitcoin. The inflation rate has been calibrated to be below the growth of protocol revenue, ensuring that the token issuance rate does not exceed the economic expansion rate of the protocol.
Now let's talk about the distribution. The figure below shows the distribution of USUAL:
As mentioned in the previous section, USUAL* is a special token model designed for the team and VCs, which allows the internal team, VCs, and advisors to obtain 10% of the USUAL issuance through two permanent economic rights, and they will receive it synchronously with the entire community within 4 years, with the first year being in a locked state. The remaining 90% is fully distributed to the Usual community.
The result of this design is that USUAL avoids becoming a widely criticized low-circulation, high-FDV VC token, and ensures the alignment of interests between the team, VCs, and the community.
At the same time, the USUAL token issuance is linked to the protocol revenue, and its supply increases with the growth of the protocol revenue. Therefore, unlike other DeFi projects where VC and early adopters quickly sell the tokens, the Usual token model incentivizes long-term holders.
Where does Usual's super high yield come from?
One of the main reasons for Usual's rapid recent development is its super high yield.
On December 20, 2024, the APY of USD0++ reached 94%, and the APY of the governance token USUAL's staking token USUALx reached 2200%, with corresponding APRs of 66% and 315% respectively. On December 19, 2024, the APY of USUALx reached as high as 22000%, with a corresponding annualized yield rate (APR) of 544%.
Where does this high yield come from?
Currently, Usual's first collateral comes from Hashnote's USYC. USYC is the on-chain representation of Hashnote International Short Duration Yield Fund (SDYF), which mainly invests in reverse repurchase agreements and short-term U.S. Treasuries. According to Hashnote's website, the total return of USYC over the past 5 months was only 6.87%.
Clearly, the yield of the underlying assets is not sufficient to support the super high yields of USD0++, USUALx, and the related LPs on Curve and LSTs on Pendle. The high yields are mainly derived from the incentives of the USUAL token.
Conclusion: The Usual Flywheel
As a killer application in the crypto space, stablecoins are expected to have a bright future, and the stablecoin market may reach $1 trillion by 2025 as the U.S. regulatory landscape becomes clearer under the Trump administration.
According to Usual's plan, Usual will further diversify the USD0 assets in the future, and the collateral will come from other U.S. debt RWA projects such as BlackRock and Ondo. As the U.S. regulation relaxes, on-chain U.S. Treasuries will likely see large-scale development by 2025. According to U.S. Treasury data, the size of short-term U.S. Treasuries exceeds $2 trillion. By 2025, Usual's RWA collateral market may rival that of Tether.
From the analysis above, we can see that Usual, by targeting real problems (on-chain Tether, short-term U.S. Treasuries) and through a sophisticated token economic design (USD0, USD0++, USUAL, USUALx, and USUAL*), has formed the Usual flywheel:
Usual stablecoin market expectation ——> USUAL price increase ——> High yield ——> Massive minting of USD0 and staking of USUAL ——> Increase in protocol revenue, USUAL locked and minting reduced ——> USUAL scarcity ——> USUAL price increase ——> High yield ——> Massive minting of USD0 and staking of USUAL ——> Increase in Usual stablecoin market share.
The Usual flywheel has already started spinning. Since the listing of USUAL on Binance, the market cap of its stablecoin USD0 has increased by nearly $1 billion in less than a month, currently reaching $1.38 billion.
