Red-Hot DeFi Platform Usual Faces Backlash as Protocol Update Triggers Sell-Off

Usual Protocol’s Yield-Generating Token Triggers Selloff After Unannounced Redesign

DeFi Protocol’s Governance Token Plummets 17% as Investors Express Frustration

The decentralized finance (DeFi) protocol, Usual, faced backlash from its community after a sudden redesign of its yield-generating token triggered a selloff on secondary markets. The protocol’s USD0++ token, which represents a locked-up version of its $1-anchored stablecoin USD0, fell briefly below 90 cents on decentralized marketplace Curve. The protocol’s governance token, USUAL, plummeted as much as 17% throughout the day before recovering some of the losses.

Unannounced Redesign Sparks Controversy

The selloff was caused by an unexpected change in the redemption mechanism of USD0++ token introduced by the team on Thursday, catching investors and liquidity providers off guard. The redesign, known as the "dual-path exit" feature, allows investors to redeem their locked-up tokens early at a 0.87 USD0 floor price, or at par, by giving up a part of the rewards earned in the form of the protocol’s USD0 and USUAL tokens.

Risk of DeFi Products

The episode serves as a lesson for crypto investors about the potential risks of DeFi products that entice users with high-yields via token incentives and rewards flywheels. "Users who are taking risk need to know what the exact rules are and be able to trust that they won’t change, otherwise it can result in market panic," said Rob Hadick, general partner at venture capital firm Dragonfly.

USD0++ Token’s Price in Free Fall

As of recent, the USD0++ token traded at 0.91 USD0 in the Curve pool, while the protocol’s total value locked (TVL), a key DeFi metric, dropped below $1.6 billion.

FAQs

Q: What is the dual-path exit feature?
A: The dual-path exit feature allows investors to redeem their locked-up tokens early at a 0.87 USD0 floor price, or at par, by giving up a part of the rewards earned in the form of the protocol’s USD0 and USUAL tokens.

Q: Why did the redesign cause controversy?
A: The redesign was unannounced, catching investors and liquidity providers off guard, which led to frustration and criticism within the DeFi community.

Q: How did the redesign affect the protocol’s governance token?
A: The protocol’s governance token, USUAL, plummeted as much as 17% throughout the day before recovering some of the losses.

Q: What is the total value locked (TVL) of the protocol?
A: The total value locked (TVL) of the protocol is currently below $1.6 billion.

Q: What is the current price of the USD0++ token?
A: The current price of the USD0++ token is 0.91 USD0 in the Curve pool.

Conclusion

The recent events surrounding Usual Protocol’s yield-generating token serve as a reminder of the potential risks associated with DeFi products that offer high-yields via token incentives and rewards flywheels. As the DeFi market continues to evolve, it is crucial for investors to remain vigilant and aware of the potential risks and challenges that come with these products.