Authors:
Usual Protocol (@usualmoney)
Created: 2024-11-28
Abstract
We propose the SAFE DAO to allocate a portion of its treasury to our innovative savings product, USD0++: a claim-bearing, liquid staking version of the USD0 stablecoin with a 4-year maturity.
Proposal types
Other SEPs
Proposal details
Key Information
Expected APY
The expected annual percentage yield (APY) for USD0++ is variable, driven by the secondary market value of $USUAL. Currently, yields range between 30% and 50%.
With the upcoming introduction of the BYG mechanism, USD0++ will provide guaranteed access to at least the risk-free rate (RFR) generated by the USD0 collateral. This ensures a stable and competitive baseline return, while still offering the potential for higher yields tied to $USUAL’s market performance.
There will be a premium from the underlying RWA yield via equity/token distribution, more details below.
Underlying Asset(s):
- USD0 (locked into a smart contract).
- USD0 is backed, always mintable and redeemable 1:1 with USYC token.
- USYC is a tokenized Money Market Fund issued by Hashnote and composed of Reverse Repos.
Transaction Limits: Minimum & Maximum
- No minimum or maximum transaction size.
Current AUM Overview:
- Total Supply: $458M in USD0
- Breakdown: $417M allocated to USD0++
$USUAL will be listed on most major exchanges with the primary one being Binance. It currently trades at roughly $1.3b FDV.
This allocation offers SAFE DAO several benefits:
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Treasury diversification with exposure to risk-free returns from underlying real-world assets (RWA).
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Enhanced upside potential, maximizing value from secure, stable investments.
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Governance opportunities, empowering SAFE DAO to actively participate in shaping the Usual Protocol’s future.
USD0++ represents a strategic addition to SAFE DAO’s treasury, balancing security with growth potential.
Security Audits:
Usual employs a multi-phased audit strategy to ensure the highest level of protocol security.
V0 Deployment: July 2024
Phase 1 (Nov-Dec 2023): vCISO Program led by Spearbit, with security research by Stermi, a former Maker and Morpho auditor.
Phase 2 (Jan-Feb 2024): Smart contracts audit conducted by Bailsec, with an unrevealed lead researcher.
Phase 3 (Feb-Mar 2024): Audit review by Bailsec.
Phase 4 (April 2024): Second vCISO Program led by Spearbit, with D-Nice as the security researcher.
Phase 5 (May-Jun 2024): Codebase simplification and two phases of audits by Cantina for permissioned and permissionless smart contract launches, involving lead security researcher xmxanuel and others.
Phase 6 (June 2024): Public competition and bug bounty program to further enhance security.
V1 Deployment: November 2024
Phase 1: External Audit by Spearbit (October 2024)
Comprehensive review of USUAL v1, including the token contracts and newly implemented distribution features.
Phase 2: External Audit by Halborn (November 2024)
In-depth security assessment of the v1 architecture and contracts, ensuring robustness and compliance.
Phase 3: Public Competition by Sherlock (November 2024)
Engaging the wider community through a public bug bounty competition, fostering decentralized security testing.
Phase 4: Implementation Audit by Spearbit (November 2024)
Thorough validation of the implementation process for the contracts, ensuring proper deployment and alignment with the design specifications.
Purpose and Background
Products
TL;DR: Usual is centered around three core products: - Usual Stablecoin: Designed for payments, trading counterparty. - Usual LST: A yield-generating product for saving and collateral usage. - Usual Governance Token: Empowering holders with decision-making authority within the protocol. (earn staking, use gauges, unlock features, etc)
I- TLDR: USD0, Usual Stablecoin
- Currently $458M TVL
- Not productive like USDC/USDT, fully compliant with regulations.
- 100% backed by short term T-Bill, not exposed to banks and counterparty risk limited to the Money Market Fun behind.
- Composable, Permissionless & Transparent
USD0 is Usual’s USD-pegged stablecoin, designed to serve as a payment method, trading counterparty within the protocol. It offers a superior alternative to USDC and USDT while complying with US and EU regulations. This institutional-grade stablecoin is accessible to retail investors and DeFi users alike.
Technical Overview
USD0 aggregates US Treasury Bill tokens to create a secure, bankruptcy-remote asset, unlinked from traditional bank deposits. It is fully transferable and permissionless, allowing for seamless integration into the DeFi ecosystem.
Key Features and Benefits
- Permissionless & Composable: Ensures easy integration and use across DeFi platforms.
- Transparency and Trust: Real-time reserve transparency is provided by each fund administrator, offering complete visibility.
- Enhanced Security: Fully collateralized by US Treasury Bills and repos, removing risks associated with commercial banks.
- Unified Liquidity: Consolidates liquidity from diverse deposits, backed by cash equivalents from multiple issuers, resulting in a deconcentrated collateral base.
- Innovative Mint Engine: Usual’s mint engine is unique, operating differently from traditional Collateralized Debt Positions (CDPs), to ensure a stablecoin that is 100% efficient and fully backed by collateral.
- Peg Protection: A robust collateral controller is in place to maintain peg stability, ensuring security and reliability for all users.
II- TLDR USD0++, a LST for RWA
- $417M TVL currently (87% of USD0’s TVL)
- USD0++ is a staked version of USD0 for 4 years, functioning as LST with USD0 as a principal
- Yield Distribution: USD0++ distributes yield in the form of coupons paid daily in $USUAL tokens. This yield is variable, depending on the $USUAL token price in the secondary market.
- Floor Yield: USD0++ offers a minimum yield in USD0, equivalent to at least the risk-free yield.
Key Features of USD0++
- Liquidity and Composability: USD0++ maintains liquidity and composability within DeFi via “claim-bearing” logic.
- USD0++ Yield: Holding USD0++ unlocks access to yield mechanisms, allowing users to claim yield in either $USUAL tokens or $USD0, corresponding to the risk-free yield. After the $USUAL TGE, USD0++ holders will receive yield in the form of $USUAL governance tokens as a coupon. Holders can claim this yield at any time through the dApp, with distributions occurring daily. The yield fluctuates based on the market appreciation of $USUAL. The design of USD0++ and the $USUAL token aims to outperform the risk-free yield.
- Lock Time & Liquidity: USD0 can be staked through USD0++ for a 4-year period. You can either unstake early or sell your USD0++ on the secondary market at the current price at any time
- Flexible Redemption Options for USD0++:
- Secondary Market Redemption: USD0++ can be redeemed for USD0 on the secondary market at a price determined by supply and demand dynamics, ensuring market-driven liquidity.
- Floor Price Redemption: USD0++ can be redeemed for USD0 prior to maturity at a price established by the DAO’s designated floor price. This floor price is aligned with the yield generated by USD0’s collateral, ensuring that protocol earnings remain sufficient to uphold and defend the value of $USUAL.
- 1:1 Redemption with $USUAL Burn Mechanism: USD0++ holders can redeem their tokens 1:1 for USD0 before maturity by utilizing a burn mechanism. This involves burning an equivalent amount of $USUAL tokens corresponding to a maximum of six months’ worth of rewards in $USUAL. This method balances liquidity needs with the protocol’s sustainability.
- DAO-Triggered Arbitrary Redemption (PAR Mechanism): The DAO reserves the right to arbitrarily redeem USD0++ through the PAR (Protocol-Activated Redemption) mechanism. This involves unstaking USD0 collateral under conditions determined by the DAO, providing flexibility to respond to market dynamics or strategic considerations.
III- TLDR $USUAL, a Revenue-Based Token
$USUAL is a utility and governance token with several financial & utility key features:
- Disinflationary issuance: Issuance of $USUAL is tied to the TVL of staked USD0 (USD0++), creating scarcity as new TVL enters the system.
- Inflation correlated to future cash flow: $USUAL issuance is aligned with future cash flows. The inflation rate of $USUAL supply remains lower than the growth of revenue and treasury.
- Staking rewards: By staking $USUAL, holders activate governance rights and receive 10% of newly issued $USUAL, incentivizing long-term behavior.
- On-chain gauge mechanism: Directs and optimizes liquidity distribution within the protocol.
- Governance control & Treasury management: Provides token holders with the power to manage the protocol’s treasury and influence key financial decisions.
- USD0++ Early Unstaking: $USUAL can be burned to unlock staked stablecoins before the end of the lock-up period.
- Collateral management: Governance determines the collateral types and their respective weighting behind the stablecoin, ensuring stability and flexibility.
What is $USUAL?
$USUAL is the governance token powering the Usual protocol, uniquely designed with an intrinsic value tied directly to the protocol’s revenue model.
$USUAL drives the adoption and use of USD0, aligning incentives for contributors and fueling protocol growth. Its innovative distribution model sets the stage for new DeFi possibilities, accelerating ecosystem expansion and sustainable decentralization.
$USUAL isn’t just another governance token—it’s designed to give true ownership over the protocol and its treasury, backed by 100% of generated revenue. Issued in proportion to USD0++’s TVL, $USUAL is disinflationary, meaning that as the protocol’s revenue grows, fewer $USUAL tokens are issued. This model aligns early supporters’ interests by ensuring that $USUAL issuance is always tied to future cash flows, protecting long-term holders from dilution.
$USUAL Distribution
$USUAL tokens are distributed daily to liquidity providers, USD0++ holders, and staked $USUAL holders, all according to allocation rules approved by the DAO. Check into your dApp daily to claim your rewards in $USUAL—your slice of Usual’s growth and value.
Ownership and Governance
$USUAL is the governance token of the Usual Protocol, representing ownership, governance rights, treasury management, and future revenues of the protocol. Unlike traditional revenue-sharing models or synthetic T-bills, Usual redistributes ownership of the protocol itself, not just the generated revenues. The $USUAL token is issued in a disinflationary manner, correlated with the Total Value Locked (TVL) of USD0++. The tokenomics of $USUAL are designed to increase Earnings Per Token (EPT) in line with the growth of the TVL of USD0++.
Ecosystem integrations
USD0++ is seamlessly integrated into the Usual ecosystem, which encompasses a wide array of DeFi protocols and platforms. Usual has already established integrations with Morpho, Pendle, Llamalend, Curve, Origami, PancakeSwap, Gyroscope/Balancer, Maverick, and FX Gauge, among others.
Smart Contract/Architecture
The smart contracts governing USD0++ and the broader Usual ecosystem have been rigorously audited by leading cybersecurity firms. Comprehensive audit reports and detailed findings are available in the documentation for review. Audits | Usual Docs
Usual is a permissionless protocol that incorporates a geo-blocking mechanism and a risk-based AML approach, managed through third-party monitoring of transactions. All assets issued by Usual are permissionless, providing broad accessibility while ensuring security through strong smart contract design.
USD0++ operates on a fully permissionless basis, allowing users to mint or redeem tokens without the need for identity verification or whitelisting. This approach ensures inclusivity and ease of access.
However, the primary market for redeeming USD0 is permissioned, with access to the underlying USYC collateral restricted to entities that have completed KYB/KYC processes.
Given the early stage of Usual, the protocol has maintained a degree of upgradability to adapt to evolving needs and address potential challenges as they arise.
The Usual Protocol is governed by a decentralized community of token holders, with no central authority exerting control over key aspects of the system. This governance structure ensures that all decisions are made transparently and in the best interest of the protocol’s users. The transition to full decentralization will begin at TGE and will be implemented progressively over time.
Risk Assessment
What is $USYC?
USYC is the on-chain representation of the Hashnote International Short Duration Yield Fund Ltd. (“SDYF”). SDYF invests primarily in reverse repo and U.S. Government backed securities.
Being invested in overnight repo means minimized market risk, duration risk, and credit risk – as good as being in a U.S. Treasury Money Market fund, but with the transaction speed, transparency, and composability of being an ERC-20.
USYC lets you earn short-term risk free returns. Assets are deployed in reverse repo, with some allocated to T-Bills, to ensure maximum liquidity and minimum duration risk.
Liquidity of USYC
- Atomic on-chain instant mint / redeem available.
- Onchain redemption available at any time but for limited size.
- Instant onchain redeem, usually around $15M in PYUSD and USDC
- Full $400M collateral onchain redemption available within 12-24 hours
- Onchain mint available only during “market hours”.
Safety
- No credit intermediaries.
- No loans to anyone.
- Fully regulated by CIMA.
- Direct access to segregated custodial account.
- Custodied at Bank of New York Mellon
On-Chain Information
Token Standard ERC-20
Available Networks Ethereum
Address 0x136471a34f6ef19fE571EFFC1CA711fdb8E49f2b
Providers
Custody: BNY Mellon
Prime Broker: Marex
Bank: Customers Bank
Auditor: Cohen and Co
Fund Admin: NAV Consulting
KYC / AML: NAV Consulting
LMO Consulting
Regulation
| US Region | CFTC US-CPO for Hashnote Feeder Fund | | — | — | | Non-US Region | CIMA SDYF and Hashnote Master Fund registered as Caymans Mutual Funds |
Risk Policy
At Usual, we uphold a strong risk management philosophy to ensure the stability and security of USD0, our stablecoin. It is crucial that USD0 remains fully backed by diverse collateral reserves, which helps maintain its 1:1 peg with the US dollar and supports capital preservation for holders. Our commitment to a low-risk profile is central to our strategy.
The foundation of our risk policy philosophy is based on diversifying our collateral holdings across money market funds and Real World Assets (RWA). This strategy helps mitigate risks associated with any single asset class and enhances the overall stability of USD0.
Our comprehensive risk management practices set us apart from competitors. We have a robust risk policy that includes regular risk assessments, stress testing, and scenario analyses to identify, assess, and mitigate potential risks effectively. We continuously review and update our risk management procedures to ensure they remain effective and relevant.
In the unlikely event that USD0 becomes undercollateralized, our well-funded insurance mechanism is designed to compensate holders, ensuring their interests are protected even under adverse conditions.
In conclusion, this document outlines the rigorous risk management measures we have implemented at Usual. By adhering to our detailed risk management practices and maintaining a diverse collateral base, we strive to keep USD0 as a low-risk product, preserving its 1:1 peg with the US dollar and protecting capital for holders.
Implementation
No additional code is required, a simple deposit of USDC into our dApp is required.
Open Questions
Looking forward to your comments.
Copyright
Copyright and related rights waived via CC0.
