USD0++ Early Redemption Mechanism

Context

USD0++ is a Liquid Staked Token representing USD0 locked until maturity (June 30, 2028). This system encourages long-term commitment by allowing users to earn USUAL tokens while generating yield for the protocol and USUAL holders.

While users can sell USD0++ on the secondary market, they can also exchange 1 USD0++ for 1 USD0 at any time by providing a specific amount of USUAL tokens. This mechanism reduces the total supply of USUAL, enhancing its valuation and increasing staking rewards for holders.

Additionally, exiting USD0++ into USD0 can enable arbitrage, allowing a more efficient and liquid market for USD0++.

How Does It Work?

  1. Direct Redemption

Users can exchange 1 USD0++ for 1 USD0 at any time by returning a specific amount of USUAL tokens.

  1. Calculation of Required USUAL

The amount of USUAL required by the redeeming user depends on:

  • Daily Rewards Rate: The current daily USUAL rewards rate per USD0++.

  • USD0++ Redemption Activity vs DAO Target: The weekly redemption activity across the protocol, calculated on a rolling 7-day basis compared to a weekly redemption target (0.3% of USD0++ supply).

  • Max Duration Cost: The max days chargeable based on the current daily rewards rate (set to 180 days).

  1. Distribution of Required $USUAL.

Once returned, $USUAL is either burn or allocated within the ecosystem as follows:

  • 33% burned: Reduces the total supply of $USUAL.

  • 67% allocated to $USUALx and $USUAL*: Rewards long-term commitment.

Ultimately, as more redemptions (USD0++ unstaking) occur, the cost in $USUAL is meant to increase until it reaches a capped 180 days of USUAL at the current rewards rate. Therefore, the cost differs in different scenarios, which can further be depicted by the following example:

  • Example: If a user redeems 500,000 USD0++, at a minimum, he will need to return 9,000 USUAL (11% of the max cost of 81,000) if the net weekly redemption for USD0++ are 0 or less.

Evolution and Automation

Over time, this process will become fully automated as in determined by the community, ensuring smooth and responsive management. As for distribution of $USUAL to USUALx and USUAL*, just like the $USUAL contributed through $USUALx unstaking, the DAO team will redistribute them at regular intervals via a disperse system until the mechanism is fully established. Overall, the mechanism can be improved and community input will be sought to enhance the product.

Why Is This Mechanism Beneficial?

  1. For Users: It provides a guaranteed exit option, even during secondary market volatility.

  2. For the Ecosystem: Burning USUAL reduces its total supply, increasing its value for remaining holders and USUALx stakers.

  3. For the Protocol: It balances supply and demand of USD0++ while fostering long-term user commitment.

This mechanism offers flexibility for users while ensuring the stability and sustainable growth of the Usual protocol.

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