In-depth Analysis of Usual Project: The Truth Behind USD0++ Decoupling and Cycle Loan Get Liquidated

Recently, the de-pegging incident of the USD0++ stablecoin issued by Usual has sparked heated discussions in the market and panic among users. This article will systematically analyze Usual's product logic, economic model, and the reasons for the de-pegging of USD0++ from the perspective of DeFi product design.

Usual Product System

Usual mainly includes 4 types of tokens:

1. USD0: Stablecoin
2. USD0++: Bond Token
3. USUAL: Project Token
4. USUALx: Governance Token

USD0 stablecoin

USD0 is a fully collateralized stablecoin that uses RWA assets as collateral. Currently, it is mainly minted using USYC and M as collateral.

Users can mint USD0 in two ways:

1. Directly mint RWA assets
2. Indirectly mint through RWA providers using USDC

USD0++ Bond Token

USD0++ holders can receive two parts of the profit:

1. The returns corresponding to the underlying RWA assets
2. Daily income distribution of newly added USUAL tokens

USD0 can be staked 1:1 to mint USD0++, with a default lock-up period of 4 years.

USUAL and USUALx tokens

USUAL can be obtained by staking USD0++ or purchasing from the secondary market.

USUAL can be staked in a 1:1 ratio to mint governance tokens USUALx. Holders of USUALx can receive 10% of the additional USUAL issuance rewards.

Analysis of the USD0++ Depegging Event

On January 10th, Usual officially announced the modification of the USD0++ redemption rules:

1. Conditional Redemption: 1:1 redemption, but requires giving up part of the USUAL earnings.
2. Unconditional Redemption: No earnings deducted, but the minimum redemption ratio is 87%

This action has caused panic among users, leading to a sharp drop in the price of USD0++.

Possible motives behind it

1. Accurate Get Liquidated Cycle Loan

Many users use USD0++ as collateral to lend USDC on Morpho, and then use USDC to mint USD0++ in a loop, creating high leverage.

The liquidation line for USD0++/USDC on Morpho is 86%, just below the 87% floor price set by Usual. This may be to get liquidated on the loop lending positions while avoiding systemic bad debts in Morpho.

2. Save USUAL Coin Price

Through a conditional redemption mechanism, users are encouraged to stake USUAL to obtain USUALx, reducing the circulation of USUAL in an attempt to curb the downward trend of the coin price.

Exposed Issues

1. Users reacted strongly to the changes in rules because they did not carefully read the project documentation.

2. The project team's decision-making is too centralized, lacking community participation.

3. DeFi projects are continuously learning from past experiences, but there are still hidden dangers to user asset safety.

Overall, this incident exposed some issues with governance and user participation in DeFi projects, but it also reflects the industry's continuous development and self-correction. We should maintain confidence in the industry while also increasing caution in participating in DeFi.