Usual Stability Loan (Euler)
Overview
USL functions similarly to MakerDAO’s D3M or Frax’s AMOs: a protocol-controlled mechanism intended to stabilize the bUSD0 peg while enabling predictable borrowing.
Users deposit bUSD0 as collateral and borrow USD0 at a low, predictable rate. Because the USL oracle is hardcoded to 1:1, liquidations are driven by interest accrual, not secondary-market price moves.
Key advantages
Liquidity injection: unlocks substantial liquidity for bUSD0 holders by enabling borrowing against locked positions.
Peg stabilization: when bUSD0 trades below $1, USL enables arbitrage loops that create natural buy pressure toward parity.
Attractive yields: users can benefit from the discount-to-par on bUSD0 and leverage opportunities.
Increased DAO revenue: borrowing interest/fees flow to the DAO, increasing income per USUAL token.
No undercollateralization risk (protocol-level): only USD0 not backing bUSD0 can be allocated to the lending vault, enforced by smart contracts.
No DAO solvency risk: bUSD0 collateral remains locked; if a borrower defaults, the protocol seizes and burns the bUSD0, creating no bad debt.
High predictability: users can lock a fixed rate and estimate a liquidation date in advance.
USL on Euler: vault design and parameters
USL is deployed on Euler as an ungoverned vault. In this context, “ungoverned” means core parameters are immutable after deployment. The DAO’s governance control is limited to the oracle router.
LTV
0.83
Users can borrow up to 0.83 USD0 per 1 bUSD0
LLTV
0.9999
Liquidation threshold: triggers when debt reaches 99% of collateral value
Oracle
Hardcoded at 1:1
1 bUSD0 is always valued at 1 USD0, regardless of market price
Interest rate
Fixed
Initially 5% APR; later reduced to 1.5%, then replaced by a 50 bps base fee
Market type
Ungoverned
Parameters immutable once deployed
Why the oracle is hardcoded at 1:1
Each bUSD0 is backed by exactly 1 USD0 locked in the protocol and redeemable 1:1 at maturity (June 2028). For this reason, USL values bUSD0 at par (1 bUSD0 = 1 USD0) regardless of secondary-market price.
Implication: liquidations are driven by borrowed amount + accrued interest/fees, not by bUSD0 market volatility.
Liquidation mechanics and timeline
Liquidation occurs when the position’s debt reaches the 0.99 LLTV against collateral value (at the hardcoded 1:1 oracle).
At the initial configuration (5% fixed rate, 0.83 LTV), a borrower would not reach the 0.99 LLTV for approximately 3.8 years—which was intended to be safely beyond the bond maturity date (June 2028). This gives borrowers exceptional predictability regarding if/when liquidation could occur.
How the leverage loop works
USL enables an iterative leverage strategy (“looping”) that increases exposure:
Lock 1 USD0 into 1 bUSD0 (1:1 conversion)
Borrow 0.86 USD0 against the 1 bUSD0 (83% LTV)
Buy some bUSD0
Borrow again USD0 against bUSD0
Repeat to increase exposure
Collateral safety guarantee (protocol constraints)
USL can only lend USD0 sourced from the DAO treasury, not USD0 that is already backing bUSD0. This is enforced at the smart-contract level and prevents the protocol from lending out assets required to maintain bond backing.
If a borrower defaults, the protocol seizes the bUSD0 collateral and burns it, preserving full collateralization for all remaining USD0.
Zero-coupon bond evolution (UIP-11)
USL underwent a major change following UIP-11, the “Disinflation Shock” governance proposal implemented in two phases (December 2025 and January 2026). After UIP-11, bUSD0 positions in USL were restructured as pure zero-coupon bonds.
What changed
USUAL emissions on USL positions
Active (41.6% of daily emissions)
0% (fully eliminated)
Yield source for USL borrowers
USUAL rewards + leverage
Discount-to-par only (zero-coupon)
Interest rate model
Fixed 5% APR
1.5% APR
Daily USUAL to USL
~1,139,094 USUAL/day
0 USUAL/day
Zero-coupon mechanics (discount-to-par)
With USUAL rewards removed, the yield within USL comes entirely from bUSD0 converging to face value at maturity:
At a floor price of $0.92 with ~2.75 years to maturity (June 2028), the implied yield is approximately 2.9% APR (unleveraged).
With maximum leverage (approximately 15× under the revised parameters).
This change reframed USL from a “farm-and-dump” dynamic into a fixed-income-style product where returns primarily come from convergence to par, which is a familiar model for traditional finance participants.
Summary
Platform
Euler (ungoverned vault)
Collateral
bUSD0 (bonded USD0)
Borrow asset
USD0
LTV
0.88
LLTV (liquidation)
0.9999
Oracle
Hardcoded 1:1 (bUSD0 = USD0)
Max theoretical leverage
~5.88×
Current borrowing fee
50 bps (reducible to 10 bps for USUAL holders/lockers)
USUAL emissions (post-UIP-11)
0% (pure zero-coupon model)
Bond maturity
June 11, 2028
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