jakiro
Usual’s USD0++ is currently trading below one dollar, but it is said to have been part of the plan.Before the decoupling incident, I was writing an article about Usual because it has received a lot of attention lately.It is one of the fastest growing stablecoin protocols, and has recently partnered with Ethena and made quite a bit of money for many YT miners on Pendle.However, if you ask people what Usual does, you tend to get all kinds of answers.“It provides you with RWA (real-world assets) benefits.” Then the natural question is: How is this different from Ondo?“Oh, it decentralizes RWA earnings”, well, then isn’t it too for Maker or Sky?Wait and wait.If you observe carefully,@usualmoney’s product is token, not any actual product.Essentially, if the user gets a risk-free interest rate higher than 4%, then the source of the benefits is the user themselves.But how did we get to this point?Why did a TVL deal with over a billion dollars suddenly collapse quickly?What exactly is the operating mechanism of Usual?
What do USD0 and USD0++ work?
USD0 is a Usual standard, non-yield stablecoin.There is not much to interpret here, butOnce you dig deeper into USD0++, things get interesting.Despite the similar names, USD0++ is not a stablecoin by nature.Initially, USD0++ can be converted to USD0 at a 1:1 ratio, which in turn can be converted to USD1.However, the project notes in its filing that this will change sometime in the first quarter of 2025, and that USD0++ will function more like bonds, with a lower limit of the effective price of US 4-year Treasury bonds, while payingThe actual base rate of return is zero.Naturally, the community believes that this change will be announced in advance and there will be some kind of process that allows users to exit if they no longer want to do liquidity mining or choose to continue holding for longer and accept the more that comes with it.High risk.Regardless of the change in the first quarter of 2025,As long as this change is announced, the value of USD0++ will drop sharply.Holders of USD0++ are no longer simply because of their dollar value, but because they believe the $USUAL tokens they will receive are worth locking for longer.
Conflict of interest
To facilitate liquidity mining, USD0 and USD0++ fund pools are deployed on multiple platforms including Morpho and Euler.Morpho’s risk management is outsourced to other managers, including MEV Capital, a big role in the story.MEV Capital’s reputation is already well known in some circles to be somewhat suspicious—they have previously caused investors to suffer losses and have covered it up through suspicious accounting methods.In addition, @AdliTB, one of the shareholders of MEV Capital, is also the co-founder of Usual, which clearly has a conflict of interest.MEV Capital’s role is to help lenders manage risks, rather than arbitrarily directing large amounts of money to Usual without restraint.To achieve this, MEV Capital uses a vault that hardcodes the value of USD0++ to $1.In other words, its Oracle actually assumes that the value of USD0++ is always $1, regardless of market price.Another well-known protocol that operates in a similar way is Anchor, which plays a key role in the UST crash.While there may be some reason to do so, it is irresponsible to adopt this approach on assets where liquidity will eventually be removed.Euler’s oracle operates using market prices, resulting in liquidation, while many Usual’s pools now seem to hold a lot of bad debts.
1 dollar becomes 80 cents: decoupling event
Compared to announcing liquidity mining users to exit, the Usual team actually chose to launch a “raid” on its users and all parties using Usual assets.According to @GauntletXYZ, Usual notified Gauntlet and other @MorphoLabs’s unconditional 1:1 redemption mechanism in the primary market was immediately terminated at 4:56 pm ET.At the same time, the team also released a public tweet announcing the change and stated that two new mechanisms will be introduced: a price protection mechanism with a base price of $0.87, and a 1:1 early debunk mechanism for USD0++Convert to USD0 and is expected to be open next week.
As soon as the news came out, USD0++ began to decouple, falling by several percentage points within a few hours.Since Euler’s oracle correctly calculated that the debt position was becoming unhealthy, Euler began liquidation.Prices continue to fall, and MEV Capital’s fund pool began to suffer as interest rates surged as borrowers withdraw money and traders took advantage of poor risk management to leverage when USD0++ prices rebounded for profit.
Why people buy and $USUAL’s pyramid supply structure
In my opinion, this situation and the possible fund-trapped explosion seemed highly likely at some point, but the team made changes in such extreme ways, without warning, and issued a shocking, extremely misleading and even completely false statements are incredible.
In reality, most people involved in Usual are actually liquidity mining their tokens, and the team knows it well.If they didn’t operate this way, one might reasonably think that they were trying to create a positive flywheel effect.However, this kind of announcement is clearly intended to catch users off guard and deprive them of the opportunity to choose between divestment or continue to participate, making this situation more like a “honeypot”.The team’s claim that “this change will happen some time in the first quarter” is both dishonest and outrageous.We’ve just entered the tenth day of a 90-day quarter, which is obviously intentionally caught off guard 2.Most people expect some warning in advance for such a big change.
Furthermore, the team obviously knows what to expect.This can be seen directly from Usual’s announcement:
“The USD0++/USDC Chainlink Oracle Morpho is encouraged to increase its health factor to achieve maximum safety during this volatility, during which arbitrage robots may not be able to effectively maintain the reserve price.”
To make up for and improve health factors, miners have to sell themUSD0++, which is no longer valuable support!
Although the team has begun to back down after facing a lot of opposition and even some miners posed legal threats, they have not fully acknowledged the inability to correctly convey the responsibility for the change in the basic attributes of USD0++.
Some general thoughts
Many smart people I know were surprised by this.I don’t think that arbitrary changes to the redemption rules for USD0++ can be considered an act of integrity without any reasonable warning, which may be illegal (absolutely in the United States, and in France), but that doesn’t necessarily meanWhat consequences will be.This should not be used to attack Morpho, the Morpho system is manager-centric.There is a manager who colluded directly with the agreement, which now instead strengthens the status of managers who have not colluded, which will further consolidate Morpho, whose model is designed for such events.Different methods do not mean wrong methods.
Overall, caution is required when pursuing returns and trading, especially in the crypto space.Do your own research, understand the team, if there is no good system to get the benefits (see @ethena_labs), then the source of the benefits is yourself, and if you are the source of the benefits, either participate in the game like Curve/Velo/Aero or completelyNot involved.Bad teams exist and they should be revealed and condemned.In my opinion, even if the team is not bad, the decision was executed terrible, even close to crime.However, the fields of encryption and DeFi are still wilderness in the west. Do your own research and there will always be fire wherever there is smoke.
