The usual protocol to activate the ‘income switch’ after USD0++ degrees

Standard Protocol, a decentralized finance (DeFi) stablecoin issuer, responded to community feedback on Friday, January 11, after its reserve stablecoin USD0++ dropped from $1.

On January 9, USD0++ fell to $0.89 before reaching $0.92, following the introduction of a new floor price mechanism and exit options.

The protocol team has introduced a series of measures to address user concerns and stabilize the ecosystem, including early activation of the “revenue switch”.

As of January 13th, the revenue converter allows the standard protocol to share revenue from real-world assets and protocol operations with the community. The group projects close to $5 million in monthly revenue, which translates to an annual percentage return of more than 50% in current terms. These broadcasts take place every week.

“This initiative aims to highlight the tangible value of USUAL, the scale of the economic model and the revenue generated by the protocol,” the USUAL protocol posted on X.

The team also confirmed that the “1:1 Early Unstaking” feature will be activated next week, which will allow users to stake USD0++ per $1 peg but require them to forfeit a portion of their accumulated rewards as a penalty.

Related: Ripple's RLUSD stablecoin to list ‘soon' on multiple exchanges – Exec

USD0++ degrees

Normal Labs earlier on Friday changed the USD0++-led code, lowering the redemption value from $0.995 to the new minimum floor price of $0.87. This change blindsided many investors and developers who were based on the assumption that USD0++ would always be one-to-one with USD0, the stable coin.

The update USD0++ introduced dual exit mechanisms to adapt a bond-like financial instrument backed by real-world income streams. Users now have two options – a “conditional withdrawal” for 1:1 redemption at a $1 peg, which requires the loss of accumulated rewards, or an “unconditional withdrawal” at a floor price of $0.87 for immediate cashout, which will gradually increase. $1 over four years.

These changes have resulted in multi-million dollar liquidity and liquidity changes on platforms such as Curve Finance and Pendle.

USD0, a stablecoin with a capitalization of $1.57 billion, is pegged to the US dollar and fully backed by real-world assets such as US Treasury bills. Users can earn money for converting USD0 into USD0++, a bond-like token that locks in funds for four years and generates a yield on the protocol's native token, USUAL.

Community response

Stany Kulekov, founder of the DeFi platform Ave, criticized the update to X, calling it an example of how hard-coded and immutable price feeds can lead to problems.

Michael Egorov, founder of Curve Financial, highlighted the mechanics of the USD0++, noting that it is backed by 4-year Treasury bills, resulting in a discount rate. “USD0++ should be discounted,” he said, adding that the change had many concerned. “This was unexpected for many, so some protocols have hardcoded the code from USD0++ to 1.0,” Egorov said.

Diffie researcher Ignas questioned the management process behind the update.

The white paper states that ‘The DAO has the authority to set this price floor, allowing USD0++ holders to exchange their tokens for USD0 below the standard 1:1 redemption ratio'. Where was the DAO vote? USUALx holders should have voted on this,” Ignas pointed out.

Cointelegraph reached out to Standard Labs for comment but did not receive a response prior to publication.

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