Three-minute quick read on Usual Protocol: How to build RWA collateralized stablecoin USD0?

The holy grail of the cryptocurrency industry has always been to achieve currency status. Since the birth of Bitcoin, the dream of realizing currency attributes has been continuously pursued. Interestingly, what truly realizes the large-scale payment properties of encryption is no longer BTC, which was originally born, but stablecoins. Stablecoins are the first use case of RWA. Whether it is stablecoins backed by legal currency or algorithmic stablecoins regarded as the crown jewel, they are all competing for the Holy Grail. USDT dominates the market with its total market capitalization, USDC is famous for its compliance, and the rising star algorithmic stablecoin USDe has the celebrity halo blessing and continuous brand cooperation integration to carve out a world.

Stablecoins are also profit printers. The profits of USDT issuer Tether alone in the first quarter of this year exceeded US$4.52 billion, setting a record high. For comparison, Tether's net profit in 2023 is only US$6.2 billion. You can imagine how exaggerated its profit margin growth is.

There is no shortage of new players on the money-making track. Stablecoin startup Usual Labs completed US$7 million in financing in April this year, led by IOSG and Kraken Ventures, with participation from GSR, Mantle, StarkWare, etc. Usual Labs subsequently launched the stablecoin USD0 at the end of May.

What are Usual Labs?

Usual Labs is a stablecoin startup that is building the DeFi protocol Usual Protocol. Its core product is the stablecoin USD0. In Usual’s view, the problem with the traditional financial system is that profits from customers’ deposits flow into the banks’ own pockets, transferring risks to the public. Stablecoins backed by fiat currencies are not perfect, and the centralized players behind them have the same structural problems as traditional banking.

How does Usual Protocol work?

When users deposit assets, they will receive synthetic assets of Liquid Deposit Token (LDT). LDT represents the initial value of their deposit in the Usual protocol. LDT can be freely traded in a permissionless manner and is backed 1:1 by the original assets deposited into the protocol. LDT provides holders with permanent withdrawal rights, allowing them to redeem the underlying asset at any time under normal circumstances.

In this way, users can use LDT to pry open the door to profit leverage, such as providing liquidity or issuing Liquid Bond Tokens (LBT). LBT is to lock LDT for a period of time. LBT provides liquidity, transferability and composability, promoting seamless integration and transactions within DeFi. Users participating in the interaction will also receive Usual’s governance tokens.

What are the characteristics of stable currency USD0?

The stable currency USD0 is the most important product on the Usual protocol, and it is also the first LDT on the protocol. Its name comes from the Usual equivalent of central bank currency (M0), hence the name USD0. Unlike stablecoins such as USDT and USDC, USD0 is supported by ultra-short-term real assets (RWA) at a ratio of 1:1.

Due to the reserve requirements of some banks, stablecoins backed by legal tender are also at risk. Last year’s Silicon Valley Bank incident showed the systemic risks of DeFi caused by insufficient collateral in traditional commercial banks.

USD0 is considered from many aspects. Government bonds are chosen first as their best option due to their high liquidity and safety. Secondly, in order to ensure the stability of the asset, the issuer must use assets with extremely short maturity periods to provide collateral for the stablecoin to ensure that holders receive a high level of security. This strategy prevents being forced to liquidate at a discount in the event of large redemptions, while also protecting against volatile events that could reduce the value of the collateral.

Usual has now integrated Hashnote, and those waiting for confirmation include Ondo, Backed, M^0, Blackrock, Adapt3r, and Spiko. It is foreseeable that its flow will be greatly enhanced after the integration is completed. sex.

Usual token distribution: 90% belongs to the community

Currently, the official has not released the detailed rules of token economics, but it has clarified the use of its Usual token, which mainly includes governance and utility. Usual is designed with a deflation mechanism, so early adopters can get more tokens. As TVL increases, fewer Usual tokens are distributed.

In addition, Usual holders have control over the treasury. When acting as a governance token, holders can participate in the decision-making process. Staking tokens can also earn benefits while supporting the security of the protocol, and more.

Unlike other protocols that allocate 50% of the total tokens to VCs and consultants, Usual allocates 90% of the total tokens to the community, and members of its internal team will not allocate more than 10% of the circulating supply. quantity. This further demonstrates the spirit of "decentralization" in the community amid today's growing wave of calls for "fairness."

Summary

Usual In the stablecoin track with legal currency support and algorithm support, choose RWA support to redesign the stablecoin USD0. There is huge room for imagination in the stablecoin market. You may wish to patiently observe what kind of market performance USD0 will have in the future.

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