Stablecoin developer Usual introduced a major update to its USD0++ protocol on Jan. 9, unveiling dual exit mechanisms aimed at enhancing the token's long-term sustainability.
Stablecoin developer Usual introduced a major update to its USD0++ protocol on Jan. 9, unveiling dual exit mechanisms aimed at enhancing the token's long-term sustainability.
However, this announcement led to immediate market disruption, with the USD0++ stablecoin dropping to a low of $0.89 before stabilizing at around $0.92—approximately 8% below its intended $1 peg.
The dual exit system offers users two redemption options: a “conditional exit,” which allows for 1:1 redemption at the $1 peg but requires users to forfeit a portion of accrued rewards, and an “unconditional exit” at a current floor price of $0.87, which is set to rise gradually to $1 over four years.
The abrupt changes to the protocol's official documentation have left many users scrambling for clarity.
Stani Kulechov, founder of Aave, commented on the situation in a post on X, emphasizing the risks associated with immutable price feeds. His remarks reflect broader concerns within the community regarding the implications of the new redemption mechanisms.
The update led to significant volatility in the market, with liquidity providers on platforms such as Curve Finance and Pendle reportedly experiencing sudden shifts that resulted in hundreds of millions in USD0++ leaving the DeFi ecosystem. This exodus raised fears of multimillion-dollar liquidations.
In response to community concerns, Usual’s decentralized autonomous organization (DAO) announced it would cover any potential bad debt in non-migrable markets up to the current amount.
USD0++, the staked version of USD0, is designed as a collateralized, dollar-pegged token fully backed by real-world assets like U.S. Treasury bills. However, it now imposes a four-year lock-up period, complicating immediate access for users.
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