What are USD0 and USD0++?
USD0 is a type of stablecoin whose value is fully backed by US Treasury bonds. Users can pledge USD0 and convert it into USD0++. USD0++ is a passive income key of the entire protocol, and users who lock it can receive $USUAL tokens as rewards from the protocol.
However, the pledge period for USD0++ is 4 years, during which no interest will be generated. It functions more like a “zero-coupon bond” rather than a stablecoin. Users must wait until the maturity date to redeem it at a price of $1. Because the early team provided an unconditional 1:1 exit guarantee, this potential long-term lock-in condition caught many early players off guard.
In the current market environment, if calculated with a 4% annualized return, the fair present value of USD0++ should be approximately $0.855.
What is the new “Dual Exit Mechanism”?
In order to improve the economic model and eliminate the unsustainable practice of “freeloading,” the protocol has decided to charge exiting players and introduce new exit options:
Conditional Exit:
Users can redeem USD0++ at a 1:1 ratio but need to give up some of the accumulated USUAL rewards. This mechanism is expected to launch next week and may require burning USUAL tokens to activate.
Unconditional Exit:
Users can redeem USD0++ at the current fixed price, which is currently set at 0.87 and will gradually increase to 1 over time, but they must wait for 4 years.
After the introduction of the new exit mechanism, panic (due to many people’s fear of the bottom price of 0.87) and the withdrawal of funds by DeFi players using leverage mining have caused a large amount of USD0++ to be sold in the market. This imbalance in the proportion of USD0++ in the Curve liquidity pool has caused the price to deviate.
From the current situation, there doesn’t seem to be a shortage of reserves for USD0 itself, and the likelihood of systemic risk is relatively low. However, it remains to be seen when major holders will be willing to enter the secondary market to fill the gap between the market price and the anchor price of USD0.