Usual, a decentralized finance (DeFi) stablecoin issuer, unveiled a major update to its USD0++ protocol on Jan. 9, introducing dual exit mechanisms designed to improve the long-term sustainability of the token.
The changes are part of a broader strategy to align the staked stablecoin with its vision to transform USD0++ into a bond-like financial instrument backed by real-world revenue streams.
However, the announcement caused immediate market disruption, with USD0++ dropping as low as $0.89 before stabilizing around $0.92 — 8% below its $1 peg.
The dual exit system has left users scrambling to adapt to the new redemption options, facing a conditional or an unconditional exit and abrupt changes to the official documentation on the staked stablecoin’s floor price.
Stani Kulechov, founder of Aave, commented on the development in an X post, saying that this is another example of “how things can go wrong with fully hardcoded and immutable price feeds.”
Related: Ripple’s RLUSD stablecoin to list ‘imminently’ on more exchanges — Exec
Dual exit mechanism: A rock and a hard place
The dual exit mechanism was introduced on Jan. 9 and provides users with a “conditional exit,” which allows 1:1 redemption at the $1 peg but requires users to forfeit a portion of accrued rewards — effectively penalizing early withdrawals.
The other option is the “unconditional exit,” which offers an immediate cash-out at a floor price currently set at $0.87 but which will gradually rise to $1 over four years.
The change in direction by the DeFi stablecoin issuer was accompanied by an alteration of the protocol’s official documentation, raising questions among users.
Cointelegraph reached out to Usual for comments about the community concerns but received no response.
Related: Agora, Galaxy complete AUSD stablecoin’s first live transaction
Market fallout
The updated four-year vision and changes to redemption mechanisms triggered a market fallout resulting in severe volatility, with its new floor price of $0.87 — down from $0.9995, according to one X user’s post.
Liquidity providers on platforms such as Curve Finance and Pendle allegedly experienced sudden shifts, resulting in hundreds of millions of USD0++ leaving DeFi, potentially sparking multimillion-dollar liquidations.
According to the announcement, Usual’s decentralized autonomous organization will “cover any potential bad debt in non-migrable markets up to the current amount.”
Source: sana
Related: Philippine banks collaborate to launch PHPX stablecoin on Hedera
USD0 vs. USD0++
USD0++ is the staked version of USD0, a stablecoin designed for stability and liquidity, fully backed by real-world assets like US Treasury bills, and purposed for primary use as a collateralized, dollar-pegged token.
The staked version of USD0 functions as a bond-like financial instrument where users lock USD0 into USD0++ — earning interest (yield) through emissions of the protocol’s native token, USUAL.
However, USD0++ comes with the trade-off of a four-year lock-up period that is liable to fluctuate based on redemption mechanisms and is not immediately available without incurring penalties.
Magazine: Cypherpunk AI: Guide to uncensored, unbiased, anonymous AI in 2025