Binance Labs bets on stablecoins again, can Usual become the next "hit"?

Author: Frank, PANews

The stablecoin sector is bustling. According to incomplete statistics from PANews, there have been 30 stablecoin projects that officially announced financing since the second half of this year. Usual, a decentralized stablecoin project backed by U.S. Treasury bonds, also announced its Series A financing on December 23, led by two major exchanges, Binance Labs and Kraken Ventures. In a market landscape dominated by established giants like DAI and USDe, is there still room for newcomers in the stablecoin space? Does the rising TVL indicate that it will become another blockbuster stablecoin? This article by PANews will explore Usual's core potential and risks from the perspectives of its underlying operational logic and yield distribution design.

Short-term Treasury Bonds as Collateral, All Earnings Shared with the Community

From an operational perspective, Usual is no longer run by a centralized entity but is governed by the on-chain community. Additionally, in terms of yield distribution, Usual allocates 100% of the generated earnings to the protocol treasury to benefit the community, while 90% of the tokens are distributed to the community and 10% to the team and investors.

The core issuance mechanism of stablecoins is the collateral mechanism, especially for fiat-backed stablecoins, where the collateral assets are the most critical factors ensuring asset safety and the stability of the stablecoin. The stablecoin product currently issued by Usual is USD0. What makes this stablecoin special is that it does not use traditional collateral such as cash or gold, but instead chooses U.S. ultra-short-term Treasury bonds (T-Bills) with maturities ranging from a few weeks to a few months, which have high liquidity and stability as collateral assets. This is because they are backed by national credit and are considered a "risk-free return" category, thereby reducing reliance on commercial banks. Ultra-short-term Treasury bonds have advantages in terms of credit and liquidity, which is why Usual claims to be an RWA stablecoin issuer.

However, there is a crucial point here: if one were to directly purchase ultra-short-term Treasury bonds or other low-risk products, it would indeed achieve lower risk. However, PANews learned from Usual's official documentation that Usual does not directly purchase U.S. Treasury bonds but instead invests the collateral funds into a "packaged" Treasury/repurchase product (USYC) through a partnership with Hashnote.

In other words, Usual does not personally buy Treasury bonds or operate repurchase agreements but entrusts the collateral assets to the due diligence-verified partner Hashnote for management. Although Hashnote is also a regulated partner with registered entities in the Cayman Islands and the U.S., and the asset types involved in their cooperation are almost risk-free ultra-short-term Treasury bonds, this model may not necessarily present a lower risk compared to Tether's collaboration with commercial banks. However, Usual has proposed the goal of allowing the community to vote on future collateral asset providers, which may not always rely solely on Hashnote. Recently, Usual announced partnerships with Ethena and BlackRock's tokenization platform Securitize, using BUIDL and USDtb as collateral, meaning that the collateral assets for USD0 will no longer be limited to USYC.

"USD0++" Creates a New LST Gameplay of Locking, Circulating Notes, and Exit Games

To encourage users to mint and use USD0, Usual launched USD0++, an incentivized version of USD0, while also designing a game mechanism. USD0++ is the staked version of USD0, allowing users to earn rewards by staking USD0 and the official governance token USUAL. As of December 25, the annualized yield of USD0++ exceeded 64%, previously peaking above 80%. This high yield has attracted significant funds into the minting of USD0.

However, the design of USD0++ differs from other LSTs. USD0++ has a unified maturity date of June 30, 2028, resulting in a four-year lock-up period. During this time, users can continuously earn USUAL token rewards, but this does not mean that users must lock in their funds for the entire four years. USD0++ itself is a transferable token that can be bought and sold in the secondary market, allowing holders to "liquidate" or transfer even before maturity.

Additionally, Usual has designed three exit mechanisms: USUAL Burning Redemption; Price Floor Redemption; Parity Arbitrage Right.

Notably, the USUAL Burning Redemption requires users to return a portion of their USUAL rewards to redeem (the returned amount is dynamically adjusted).

Furthermore, Usual's white paper mentions that the USD0++ model can be replicated for other assets (such as ETH0++, dUSD0++, etc.), indicating that this unique LST mechanism is not limited to fiat-backed stablecoins but can also be extended to other collateral or cross-chain ecosystems.

Overall, the design of USD0++ aims to encourage users to hold long-term, accumulate USUAL tokens during the lock-up period, and share growth dividends with the protocol. The unified maturity date reduces users' short-term speculation tendencies. At the same time, USD0++ is a circulating "note," retaining a certain level of liquidity. Finally, an exit game is employed, where early exits require burning USUAL or repurchasing through an arbitration mechanism, setting an "exit cost" to protect the protocol from run risks and safeguard the rights of remaining participants.

USUAL Dynamic Minting Mechanism, High Early Incentives

In addition to adopting decentralized operations and introducing RWA assets as collateral, Usual's governance token USUAL also features a distinctive token economic model. Unlike other fixed or one-time issuance methods, USUAL employs a dynamic minting model for token issuance.

USUAL tokens are not minted all at once but are dynamically minted daily based on a series of formulas and parameters, distributed to different "savings, loans, liquidity, and rewards" pools.

This dynamic formula consists of multiple factors: d: global allocation rate (0.25), equivalent to the reciprocal of the four-year target issuance cycle. Supplyt++: the total supply of USD0++ at present (locked scale). Pt: the main market price of USD0++ (1 dollar pegged at 1). Mt: the dynamic minting rate, determined by several factors (supply, interest rates, growth, etc.).

Each of these factors is calculated based on other formulas, and the specific calculation process will not be elaborated here. Overall, the characteristics of this issuance mechanism include: 1. Gradually "reducing production" as the scale of USD0++ increases. 2. Adjusting according to market interest rate changes; when the FED or market interest rates rise and the project can obtain higher actual returns, the system will moderately increase the token issuance volume, allowing participants to receive more USUAL rewards; conversely, it will reduce production. 3. DAO can intervene manually; in extreme market conditions or inflationary pressures, "manual adjustments" can be made to ensure the long-term stability of the protocol. 4. Early incentives and later scarcity; during the launch phase, the supply of USD0++ is relatively low, and if market interest rates or reward mechanisms are set high, there will be a phenomenon of "high early minting rates" to attract early participants. Over time, as TVL and interest rates dynamically change, the minting rate will gradually stabilize or decrease, forming a process similar to "halving" or "reduction."

In summary, USUAL's issuance mechanism attempts to find a self-regulating balance between "stablecoin scale expansion, real yield enhancement" and "value appreciation for token holders," thereby incentivizing early users while ensuring later scarcity and fairness. This issuance model bears similarities to the former Terra, except that Usual has applied this design solely to governance tokens and has not adopted this model for stablecoin issuance.

TVL Triples in a Month, Ranking in the Top Five of the Industry

Currently, there are multiple projects in the decentralized stablecoin sector. What opportunities still exist for Usual in this space? PANews conducted a data comparison of the currently mainstream decentralized stablecoins.

In terms of issuance volume, the largest decentralized stablecoin is Ethena USDe at $5.91 billion, followed by USDS and DAI. However, these projects have been operational for a long time. In terms of development speed, USD0's TVL has reached $1.56 billion (as of December 25). On December 1, Usual's TVL was only $490 million, which has tripled in less than a month, and USD0's market cap has now ranked among the top five decentralized stablecoins.

This rapid growth may be attributed to the high-yield flywheel model, with Usual's annualized yield at 64%, the highest among several stablecoins. If this yield can be maintained, it is very likely to grow into the next decentralized stablecoin giant.

Moreover, Usual's greatest advantage may also stem from the minimal risk of its collateral assets. Other decentralized stablecoins generally use fiat-backed stablecoins and mainstream crypto assets as collateral, while the U.S. ultra-short-term Treasury bonds used by Usual have a significantly lower risk coefficient.

On Usual's homepage, "Become Bigger than BlackRock" is displayed as a vision at the top, showcasing Usual's ambition. Compared to industry leader Tether, Usual and other decentralized stablecoins still have a long way to go. The circulating supply of USUAL tokens is 473 million, with a market cap of approximately $676 million. Based on current revenue levels, the average profit distribution per token is about $0.125. From the design of the token economic model, this aspect is similar to the recently popular Hyperliquid. Both have inherent profitability and claim to return the vast majority of their income to the community in token form from the outset.

Recently, Usual has been frequently associated with Binance, from listing and airdrops to Binance Labs announcing a $10 million Series A financing round for Usual on December 23. This buzz inevitably evokes memories of Binance Labs' early investment and support for Terraform Labs, although that investment ultimately became a failed case. Will today's Usual become another rising star in stablecoins for Binance Labs?