Introduction

This article provides an in-depth analysis of the USD0++ depegging incident that occurred in January 2025 within the Usual protocol. It reviews the background and responses surrounding the token’s price drop to $0.89, explains the mechanisms behind USD0, USD0++, and the USUAL token, and compares USD0++ with Luna to highlight their fundamental differences. The article also discusses community governance controversies and the potential risks and outlook for the protocol, uncovering Usual’s unique value and future potential in the RWA DeFi space.

Recently, USD0++, issued by the Usual protocol, sparked heated discussion across the market due to extreme price volatility. As a DeFi project centered around Real World Assets (RWA), Usual has gained attention within the industry for its innovative stablecoin mechanism. However, on January 9, 2025, the price of USD0++ suddenly dropped, hitting a low of $0.89. This led some users to worry whether it might repeat the catastrophic collapse of Luna. This article takes a deep dive into the background of the USD0++ depegging event, Usual protocol’s response strategies, and its future development prospects, aiming to offer investors a comprehensive and objective analytical perspective.

Source: USUAL official website https://app.usual.money/

Introduction to the Usual Protocol and USD0/USD0++

The Usual protocol aims to bring Real World Assets into DeFi. At its core is a stablecoin system backed by U.S. Treasury securities, designed to offer users both a stable store of value and sustainable yield opportunities. Its product ecosystem includes the following key components:

• USD0: A stablecoin pegged 1:1 to the U.S. dollar, backed by overcollateralized ultra-short-term U.S. Treasury securities. Unlike traditional 1:1 pegged stablecoins, USD0’s overcollateralization means the total value of Treasuries held by the protocol exceeds the circulating supply of USD0, providing an added layer of stability.
• USD0++: A liquid staked derivative of USD0. Users receive USD0++ by staking USD0, with an initial lock-up period of four years. As staking rewards, users earn USUAL tokens. USD0++ is not a stablecoin; its price is subject to market supply and demand. To address this, the Usual protocol designed a redemption mechanism allowing users to exchange USD0++ back into USD0. The initial setting was a hardcoded redemption price of $1, meaning 1 USD0++ could be redeemed for 1 USD0. Additionally, USD0++ can be freely traded on secondary markets.
• USUAL and USUALx: USUAL is the native token of the Usual protocol, but not a direct governance token. By staking USUAL, users receive USUALx, which grants community governance rights. Holders of USUALx can participate in protocol upgrades, parameter adjustments, and treasury management decisions.

This design integrates the reliability of stablecoins with the yield potential of DeFi: USD0 provides stability through its USD peg, USD0++ generates returns via staking, and USUAL/USUALx establishes a closed-loop ecosystem of incentives and governance.

Review of the USD0++ Depegging Incident

On January 9, 2025, the price of USD0++ began to decline, reaching a low of $0.89 on secondary markets. The imbalance in the USD0++ to other stablecoin ratios within the Curve pool further intensified market panic. The following day (January 10), the Usual protocol announced an adjustment to the redemption mechanism, replacing the previous fixed $1 redemption rate with a new minimum floor price of $0.87. This change broke user expectations of a 1:1 redemption and was interpreted by some as a “unilateral breach of contract” by the protocol, triggering an even larger wave of sell-offs.

To address the crisis, the Usual protocol quickly implemented the following measures:

• Redemption Mechanism Adjustment: A dual exit option was introduced. Users could either choose an unconditional exit by redeeming USD0++ at the current market price (below $1), or opt for a conditional exit—waiting for the 4-year lock-up to expire to redeem at $1, though this requires forfeiting a portion of USUAL token rewards.
• 1:1 Early Unlock Option: To ease liquidity pressure, users were offered the option to exit early at a 1 USD0++ to 1 USD0 rate, but they would have to forgo both accrued and future USUAL rewards.
• Revenue Distribution Activation: The protocol initiated a revenue-sharing mechanism, disbursing approximately $5 million monthly. This includes interest from U.S. Treasuries and transaction fees, which are used to buy back USUAL tokens and subsidize the Curve pool, aiming to strengthen ecosystem stability.

It is worth noting that despite the sharp volatility in USD0++’s price, USD0 remained consistently pegged 1:1 to the U.S. dollar and was not directly affected. However, the price of the USUAL token dropped by 18.7% in the aftermath of the event, reflecting the market’s concerns about the protocol’s future.

Source: https://coinmarketcap.com/currencies/usd0-liquid-bond/

USD0++ vs. Luna: Fundamental Differences, Divergent Fates

The USD0++ depegging incident inevitably brings to mind the collapse of UST and Luna in the Terra ecosystem in 2022. While there are similarities in incentive structures and market panic dynamics, the underlying logic and risk models differ significantly—leading to completely different outcomes:

• Asset Backing: UST was an algorithmic stablecoin with no real asset backing, relying entirely on market confidence and a mint/burn mechanism involving Luna to maintain its peg. Once confidence collapsed, it spiraled into a “death spiral.” In contrast, USD0 is backed by tangible collateral such as USYC (issued by Hashnote) and BUIDL (issued by BlackRock), ultimately underpinned by U.S. Treasury securities. With a current collateralization ratio of 100.47%, USD0 has a solid foundation of value. Thus, even if USD0++ experiences price fluctuations, USD0 remains stable.
• Yield Source: Terra’s yields stemmed from Luna issuance and ecosystem expansion—an unsustainable model of “illusory growth.” Usual, by contrast, generates real income through Treasury interest and protocol fees, a portion of which is distributed to USD0++ stakers and USUAL holders. This makes its yield model more sustainable.
• Risk Model: UST was essentially a “castle in the air,” built on faith. USD0++, however, has U.S. Treasuries as a “safety net.” In extreme cases, Usual could liquidate Treasury assets to repay USD0 holders, preventing systemic collapse.

Therefore, the USD0++ depegging incident is more a case of short-term market panic rather than a collapse of protocol fundamentals—completely different from Luna’s systemic meltdown. Their price trajectories underscore this distinction: in May 2022, UST fell from $1 to $0.045 in just 48 hours—a 95% drop—while Luna plunged from $80 to near zero, wiping out both token value and user confidence almost instantly.

Source: https://coinmarketcap.com/currencies/terra-luna/

Community Disputes and Reflections on Governance Transparency

During this incident, Usual introduced a previously unspecified floor price rule for USD0++ redemption directly into its official documentation—without adequate community consultation—sparking widespread controversy. Many users saw this “unilateral action” as lacking transparency and damaging trust. This highlights a fundamental challenge for DeFi projects: balancing decentralized governance with decision-making efficiency.

Source: https://x.com/Cbb0fe/status/1877568763597386236

Nevertheless, the controversy has become an opportunity for Usual to improve. The team has pledged to enhance community communication, including implementing proposal voting and expanding forums to improve governance transparency. If this proactive stance materializes, it could help restore trust and lay the foundation for long-term growth.

Risks and Prospects of the Usual Protocol

Potential Risks

• USUAL Price Volatility: As the native token, USUAL is highly sensitive to market sentiment. Its price fluctuations may undermine the appeal of USD0++.
• Asset Management Risks: While U.S. Treasuries are considered low-risk, operational risks remain in areas such as asset allocation and custody. Sudden market disruptions could also impact the protocol.

Positive Factors

• Treasury-Backed Stability: Overcollateralization offers a solid foundation for USD0, enhancing its resilience to risk.
• Sustainable Yield: Monthly revenue distribution of $5 million provides long-term incentives for USUAL holders, strengthening the protocol’s ecosystem.

Future Outlook

The USD0++ depegging incident was triggered by a sudden and unexpected change in the redemption mechanism, highlighting the inherent risks and complexities in DeFi. It served as an early-stage “stress test” for the Usual protocol. Unlike Luna, Usual is underpinned by U.S. Treasuries and real yield, providing a more robust foundation against market volatility.

Following the market turmoil, Usual swiftly released a new roadmap. Future developments include the creation of a USD0++ Vault, with the first vault focusing on sUSDe. This will allow users to deposit USD0++ and earn yields from USD0++ and sUSDe, opening up new yield farming opportunities. Long-term plans also involve launching new synthetic assets such as ETH0 and BTC0, and building a dedicated Layer 2 tailored for USUAL token use cases. The roadmap also features a more sophisticated revenue-sharing system, encompassing an upcoming yield optimizer and a suite of fixed-rate, fixed-term products based on USD0, USD0++, and USUAL.

Conclusion

The USD0++ depegging incident was a wake-up call for Usual, prompting introspection and growth. With the Treasury-backed USD0 and the innovative USD0++ mechanism, Usual is making a meaningful attempt to balance stability and yield. While governance controversies have temporarily shaken confidence, the protocol’s rapid response and commitment to improvement reflect its underlying potential. For investors focused on DeFi and RWA, Usual remains a project worth watching closely.