UIP-7: Early Redemption fees Redistribution

Overview

This proposal is the natural continuation of UIP-6, finalizing the redistribution of USUAL tokens collected from Early Redemption fees. As approved by the community, the 134 million USUAL will be distributed fairly and transparently:

• 67M USUAL to USUALx holders
• 67M USUAL to USUAL* holders

Of this amount, the first 47 million per group corresponds to the Early Redemption fees referenced and approved in UIP-6. This portion will be distributed using a Time-Weighted Average Position (TWAP) system over the coming weeks, rewarding stakers based on the size and consistency of their positions since January 19, 2025.

The remaining 20 million per group has been accrued after the passage of UIP-6 due to continued Early Redemption activity. This newer tranche will be distributed closer to the end of the redistribution period, based on loyalty criteria, with emphasis on holders who maintained exposure and retained previously distributed rewards.

This two-phase structure ensures that:

• The protocol proceeds in full alignment with prior governance decisions (UIP-6).
• Loyal, long-term stakers are appropriately recognized throughout the period.

Proposed Measures

1. Redistribution in USUALx

Following UIP-4 and UIP-5, redistribution will happen in USUALx. Each user can then choose to stay staked or unstake (paying the associated fee) based on what works best for them, keeping things aligned with earlier governance votes.

2. TWAP-Based Redistribution of 47M USUAL

The first 47 million USUAL per group (as referenced and approved in UIP-6) will be redistributed using a TWAP mechanism, factoring in how much and how long each user has held since January 19, 2025, when the Early Redemption mechanism was introduced. It directly reflects long-term commitment and avoids reliance on arbitrary snapshots or single-moment balances.

2.a. TWAP Formula

Allocation = (Your TWAP / Total TWAP) × Distribution Amount

2.b. Snapshot accuracy

TWAP is calculated using daily balance tracking, giving a clear, accurate record of each eligible account’s activity since Early Redemption began on January 19.

2.c. Rolling Window System

Each distribution uses a rolling TWAP window, meaning the calculation period updates for each drop. This structure both rewards early holders and gives new participants a fair path to future allocations.

• First Drop: Measures TWAP from January 19 up to the day before the drop.
• Subsequent Drops: The window shifts forward (e.g. starts 10 days after the prior drop) and ends the day before the next one.

For example: If the first drop is on April 15, TWAP is calculated from January 19 to April 14. If the second drop occurs on April 25 , its TWAP period might run from January 29 to April 24.

This rolling approach ensures:

• Long-term holders continue to be rewarded
• Short-term opportunism is disincentivized
• New participants can still qualify for future drops

Note: For a detailed breakdown of the distribution framework and rationale behind key design choices, please refer to the supporting documentation: https://dub.sh/EJQcf5Z

3. Rolling Distribution Until June 2025

TWAP-based distributions will take place periodically from the approval of this proposal until the end of June 2025, fully aligned with the timeline defined in UIP-6. There will be no pre-announced dates or amounts, in order to prevent opportunistic positioning and ensure fairness across all participants.

This rolling format allows the protocol to maintain fairness across time.

4. Separate Redistribution of 20M Additional USUAL Based on Loyalty

Since UIP-6 was published, an additional 20 million USUAL per group has been accrued via continued Early Redemption activity, increasing the total to 67M per group.

This newly accrued portion will be distributed closer to the end of the redistribution period (June 2025, as per UIP-6), based on loyalty and long-term alignment.

This approach is intended to reward participants who maintained consistent exposure and, crucially, chose not to sell rewards already distributed, reinforcing the protocol’s commitment to aligned participation.

5. Ongoing Daily Distribution of Future Fees

Moving forward, all new USUAL collected from Early Redemption and USUALx unstaking fees will be automatically distributed daily to USUALx stakers via the protocol’s reward system. This ensures that rewards from future activity flow directly to the community.

6. Exclusions

As with the USD0 distributions from the Revenue Switch, it is not technically feasible to send USUALx tokens to holders whose positions are locked within smart contracts, such as Pendle or Uniswap LP contracts. These contracts cannot receive tokens directly, and therefore, will be excluded from the TWAP calculation.

In addition, the protocol treasury’s USUALx holdings will also be excluded from the redistribution process, in line with prior governance decisions and to ensure fair distribution to community participants only.

Motivations

1. Execute Redistribution: This proposal finalizes the distribution process defined in UIP-6. No changes are required to proceed.
2. Honor Long-Term Commitments: The TWAP system fairly rewards holders based on their sustained participation since the implementation of Early Redemption, avoiding arbitrary snapshots or last-minute accumulation strategies.
3. Ensure Fairness and Resilience: The rolling TWAP window prevents opportunistic behavior and protects long-term integrity. Early stakers are rewarded and new participants still earn their share.
4. Prioritize Loyalty to the End: The loyalty-based allocation of the additional 20M USUAL per group ensures that long-term holders who remained aligned throughout the distribution period (including those who chose not to sell received rewards) are appropriately recognized.

The distribution plan has been carefully designed and validated through internal modeling, and aligns with past governance. This proposal is ready for execution.

Voting Procedure

Eligibility

• Both USUALx and USUAL* holders are eligible to vote, with each group holding a 50/50 voting share on this proposal.

Voting Mechanism

• The proposal will be decided by a simple majority vote. The option receiving the highest number of votes will determine the outcome

Vote Options

• Yes – Approve the final redistribution method and timeline for previous Early Redemption fees
• No – Reject the proposed approach
• Abstain – Participate in the vote without expressing a preference

Voting Period

• The vote will be open for 24 hours, as this proposal is a direct continuation of UIP-4, UIP-5, and UIP-6, all of which have already established the redistribution itself and the intended timeline.

Proposed by

Usual Labs Core Contributors

2025-04-16