Usual Protocol Revenue Switch Activation Announced Amid USD0++ Depegging From $1

The Usual Protocol Revenue Switch Activation has begun, introducing a $5 million monthly revenue-sharing model to stabilize the ecosystem after USD0++ sharply depegged from its $1 peg. This early activation addresses community concerns and reinforces confidence in the decentralized finance (DeFi) project.

On January 9, USD0++ saw a steep decline to $0.89, later stabilizing at $0.92. The drop followed the introduction of a new floor price mechanism and dual exit options that blindsided investors. To address the turbulence, Usual Protocol fast-tracked its revenue switch, beginning January 13, to distribute real-world asset earnings and protocol revenues to the community.

What Is the Usual Protocol Revenue Switch Activation?

The Usual Protocol Revenue Switch Activation allows for weekly distributions of approximately $5 million in monthly revenues, derived from real-world assets such as US Treasury bills and protocol operations. Under current conditions, the projected annual return exceeds 50%.

This initiative highlights the tangible value of USUAL, the balance of its economic model, and the income generated by the protocol, the Usual Protocol team announced on X (formerly Twitter).

The team also plans to roll out a 1:1 Early Unstaking feature next week. This feature lets users redeem USD0++ at the $1 peg but requires them to forfeit a portion of accrued rewards as a penalty.

USD0++, a bond-like financial instrument backed by real-world revenue streams, depegged due to governance updates that reduced its redemption value to a new minimum floor price of $0.87.

These adjustments caused multimillion-dollar liquidations on platforms like Curve Finance and Pendle, further shaking investor confidence.

Stani Kulechov, founder of Aave, criticized the update on X: This is a textbook example of how hardcoded and immutable price feeds can lead to problems.

Curve Finance founder Michael Egorov offered insights into USD0++ mechanics, explaining its discount: USD0++ should likely have a discount. However, the change caught many off guard, and some protocols hardcoded price oracle for USD0++ to 1.0.

DeFi researcher Ignas raised concerns about governance, stating: Where was the DAO vote? The whitepaper specifies that the DAO reserves the authority to set this price floor. USUALx holders needed to vote on this.

The Usual Protocol Revenue Switch Activation signals a shift in how DeFi projects can stabilize their ecosystems. By sharing protocol earnings, Usual Protocol aims to restore trust and highlight the value of its ecosystem.

USD0, a stablecoin with a $1.57 billion market cap, is pegged to the US dollar and backed by real-world assets. Users can stake USD0 to convert it into USD0++, locking funds for four years and earning yields in the protocol’s native token, USUAL.

The team emphasized that the revenue switch is more than a temporary fix: Our revenue-sharing model demonstrates the income-generating potential of real-world asset backing. This is the future of stablecoins, Usual Protocol said in a statement.

New Mechanisms and Community Backlash

While the revenue switch offers a path to stability, the rapid introduction of dual exit mechanisms and floor price adjustments blindsided the community. Liquidations surged, and liquidity on platforms like Curve Finance took a hit.

In response to criticisms, Usual Protocol acknowledged the need for improved governance transparency.

Although these changes align with our vision, we regret any confusion caused and are committed to ensuring future updates are better communicated, the team shared in a follow-up post.

As the Usual Protocol Revenue Switch Activation takes effect, its success depends on community acceptance and market performance. The weekly distributions could help regain investor trust, but governance transparency and communication remain areas for improvement.

Michael Egorov emphasized the long-term nature of the changes: The introduction of 4-year Treasury backing is innovative but requires user education. The immediate impact is challenging, but the long-term outlook aligns with DeFi’s promise of sustainable income streams.

DeFi expert Ignas echoed the sentiment, urging users to focus on the protocol’s potential: While the rollout faced hurdles, the revenue-sharing model has merit. Usual Protocol could set a new standard for real-world asset integration in DeFi.

The Usual Protocol Revenue Switch Activation is a bold step toward stabilizing the ecosystem and restoring community trust. With weekly $5 million distributions and innovative exit mechanisms, the protocol aims to redefine stablecoin functionality. However, governance transparency and effective communication will be critical for long-term success.

As the revenue switch takes shape, all eyes are on Usual Protocol Revenue Switch Activation, to deliver on its promises while navigating the challenges of a dynamic DeFi landscape. Get more from The Bit Gazette