The Complex Game of USUAL Protocol: Coexisting Gains and Risks

The USUAL protocol is a financial product based on the yield of U.S. Treasury bonds, but its operation has sparked considerable controversy. The protocol has issued a total of 5 tokens, including the governance token USUAL, the stablecoin USD0, the 4-year Treasury bond token USD0++, the staked version USUALX, and the USUAL* exclusive to the team and investors.

The protocol claims to provide users with a stable return of 4% on US Treasury bonds, with no permission or minimum investment restrictions. However, to attract more users, the protocol has introduced a mining mechanism for USUAL tokens that offers returns of up to 70%. Users can mint USD0++ at a 1:1 ratio and receive USUAL tokens as rewards.

Although the yield is tempting, USD0++ is actually a government bond token with a 4-year lock-up period, currently valued at approximately $0.84. To alleviate user concerns, the protocol once allowed for a 1:1 redemption of USDC and established multiple vaults on the Morpho platform, fixing the oracle price of USD0++ at $1.

This practice leads some users to have the illusion that USD0++ can be redeemed at a price of 1 dollar at any time. Some advanced users even started to engage in leveraged operations to amplify their profits. However, high leverage also means high risk.

Not long ago, the protocol suddenly closed the USD0++ 1:1 redemption channel, reducing the redemption price to $0.87. This move effectively withdrew about $260 million from a total locked value (TVL) of nearly $2 billion. According to the protocol's statement, these funds will be allocated to USUAL stakers (USUALX holders).

It is worth noting that there is a token named USUAL* that is only available to investors and the team. USUAL* not only enjoys all the rights of USUALX but also has additional privileges. The team and investors collectively hold over 60% of the USUAL* shares, allowing them to gain substantial benefits from the protocol.

The reason for the measures taken by the protocol parties may be to maintain operations. The continued decline in USUAL prices could lead to a massive sell-off by users, triggering the protocol's "death spiral." By implementing a profit-sharing mechanism and imposing a "head tax" on TVL, the project parties aim to stabilize USUAL prices, increase annual yield, and attract new capital inflows.

However, this practice is actually at the expense of some participants' interests. USD0++ holders were taxed 13%, leveraged traders suffered huge losses, and liquidity providers on the Pendle platform were also affected.

For investors who have not yet participated in USUAL, it is advisable to remain cautious. Users who have already participated may need to choose between stop-loss and continued participation. However, it is important to note that even without losing money, long-term participation may face significant opportunity costs. In the cryptocurrency market, which lacks effective regulation, investors should remain vigilant at all times and carefully assess project risks.