USD0++ update: Usual introduces dual exit mechanism

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by Giorgi Kostiuk

2 years ago

On January 9, Usual announced a major update to its USD0++ protocol, introducing a dual exit mechanism.

Introduction of the dual exit mechanism

Usual introduced a dual exit mechanism to improve the long-term sustainability of the USD0++ token. The new mechanism offers two options: a conditional exit, allowing 1:1 redemption but with forfeiting some accrued rewards, and an unconditional exit, which provides an immediate cash-out at a lower price with gradual increase to $1 over four years.

This is another example of how things can go wrong with fully hardcoded and immutable price feeds.Stani Kulechov

Market reaction

The updates to the exit mechanism led to sharp market fluctuations, with USD0++ falling to $0.89 before stabilizing at $0.92. The changes also resulted in sudden shifts in liquidity on platforms like Curve Finance and Pendle, potentially triggering multimillion-dollar liquidations.

Comparison of USD0 and USD0++

USD0++ is the staked version of USD0, a stablecoin designed for stability and liquidity. Unlike USD0, USD0++ functions as a bond-like financial instrument. Users lock USD0 into USD0++ and earn yield in USUAL tokens, but this comes with a mandatory four-year lock-up period.

The use of a dual exit mechanism is aimed at improving the long-term prospects of USD0++, although current changes have led to market volatility.

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