UIP-6: Maximizing Value for USUALx Holders

TL;DR

Problems to Solve

• Unfair arbitrage is draining value from the protocol through early redemption, resulting in an estimated $11.1M annual revenue loss for USUALx and reducing USUALx value by approximately 22%.
• USD0++ secondary market price, early redemption mechanism and floor price are misaligned.
• USUALx holders deserve better rewards, especially those who have stayed committed through recent volatility, however the distribution of USUAL collected through the early redemption mechanism must not lead to TVL leakage.

Solutions Proposed

• Raise USD0++ floor from $0.87 to $0.92 matches market price, restores healthy liquidity, and eases exits.
• Redistribute 47M USUAL tokens collected to date from early redemptions to USUALx holders before the end of Q2 2025 to reward long-term holders and reinforce alignment.
• Adapt Unlock Time (UT) for early redemption with USD0++ floor from 6 months to 2 years blocks harmful arbitrage and protects long-term value.

This proposal keeps value in the hands of committed USUALx holders instead of leaking to arbitrage, while directly strengthening USD0++ stability and securing long-term cash flows. By voting Yes to this proposal, you prevent the erosion of your USUALx tokens and put back USD0++ on a growth trajectory— backing a more profitable and resilient protocol far more attractive to future investors.

Arbitrage Analysis

Since its implementation, the USL has stabilized the USD0++ price between $0.95 and $0.97 through strategic liquidity injections and optimized fixed-rate arbitrage.

However, early redemption revealed a weakness leveraged by a minority of actors solely and excessively arbitraging USD0++, generating marginal profits while causing an estimated annual shortfall of $11.1 million for the protocol. Specifically, this represents an annual loss of $0.044 per USUALx token, equivalent to a 22.2% value reduction.

Here is the dedicated analysis: https://dub.sh/YJm2sqN

Proposed Measures

1. Increase the USD0++ floor price from $0.87 to $0.92

   • Objective: Reduce USD0++ volatility and optimize secondary market liquidity.
   • Direct Benefits: Enable all holders, large or small, to exit smoothly by raising the USD0++ floor price in line with the secondary market price, enhancing the associated liquidity.

2. Redistribute the 47M USUAL tokens collected from early redemption to USUALx holders before end of Q2 2025.

• Objective: Strengthen USUALx incentives with a fair 47M token distribution
• Direct Benefits: Reallocating USUAL tokens from early redemption incentivizes long-term holding. A separate proposal, to be presented by June 15, will detail the specific parameters and execution of the redistribution, contingent on this proposal's approval.

3. Adjust the Unlock Time (UT) for early redemption from 6 months to 2 years.
   • Objective: Eliminate abusive arbitrage, restore a healthy balance between dollar-based unstaking (floor) and token-based unstaking via USUAL, and better align UT dynamics with the updated floor price.
   • Direct Benefits: Secure reliable cash flow for USUALx and boost the USUAL token value, benefiting current holders, USD0++ yield, and new investors.

Expected Positive outcomes

1. Protocol cash flows will be preserved, USUALx value and USD0 yield protected. The current system allows arbitrage that drains $11.1M of revenue annually from the protocol, reducing USUALx value by 22.2% per year. Raising the UT and raising Floor price to 0.92 prevent further loss and stabilize returns for holders. More value for USUALx mean also more yield and attractiveness for USD0++. The USD floor may be triggered more frequently, reducing long-term USD0++ volatility and increase DAO treasury if TVL is redeemed. Renewed confidence could unlock participation from liquid funds and institutional investors.
2. Restart the growth engine: Aligning the USD0++ floor with the secondary market strengthens liquidity and prevents value leakage, while full USL extension fuels cash flows and drives new investor demand.
3. Immediate benefits for long-term holders. Following community feedback and in line with the whitepaper, 47M USUAL tokens collected from early redemptions will be redistributed to USUALx holders before end of Q2, rewarding those who stay committed.

Voting Procedure

Eligibility

Holders of USUALx and USUAL* tokens each have an equal 50/50 voting share on this proposal.

Voting Mechanism

This 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 proposed measures.
• No – Reject the proposed measures.
• Abstain – Participate in the vote without expressing a preference.

Voting Period

The vote will be open for 3 days. Please find the precise timeline on Snapshot UI.

Proposed by

Usual Labs Core Contributors

2025-04-03