The Edge Podcast - The Vision for Usual

In this episode of The Edge Podcast, which took place on September 20, 2024, DeFi Dad and Nomatic hosted Pierre Person and Adli Takkal Bataille to discuss Usual’s vision for decentralized stablecoins, navigating a low-yield environment, future product launches, regulatory challenges, and more! Read our notes below to learn more.

Background

DeFi Dad (Host) – Host of Edge Podcast

Nomatic (Host) – Co-Host of Edge Podcast

Pierre Person (Guest) – Co-Founder at Usual

Adli Takkal Bataille (Guest) – Co-Founder at Usual

Usual – a secure and decentralized Fiat Stablecoin issuer that redistributes ownership and governance through the $USUAL token

Rise of Usual: Redefining Stablecoins and the Future of Decentralized Finance

DeFi Dad talks about Usual, the protocol behind the $USD0 stablecoin. He describes Usual as an up-and-coming stablecoin juggernaut offering a decentralized fiat-backed stablecoin with U.S. Treasury bill yield. DeFi Dad draws comparisons between Usual and a DAO-controlled version of Tether.
DeFi Dad highlights Usual’s impressive achievement of attracting about $200 million in deposits for their $USD0 stablecoin just a month after launch, especially noteworthy given the challenging market conditions of the summer.
Adli Takkal Bataille explains the motivation behind Usual, acknowledging the utility of earlier stablecoins like Tether but emphasizing the need for evolution. He argues that while Tether served a crucial role in providing a USD exit in the crypto world, the infrastructure has changed. Adli stresses that Usual aims to realign the fiat-backed stablecoin model with crypto’s fundamental ethos of shared ownership and creating valuable common goods.
Adli elaborates on Usual’s goals, stating they are trying to build a stablecoin that is neutral, decentralized, and profitable. He critiques existing stablecoins like Tether and USDC for their lack of decentralization and neutrality, citing their links to specific exchanges (Bitfinex and Coinbase, respectively).
Adli highlights the importance of creating a stablecoin infrastructure that is fully decentralized, profitable, and neutral, without ties to any specific exchange or DAO. He stresses the need for incentives and tokenomics to create a self-sustainable system where people can be owners and decision-makers.
DeFi Dad asks Pierre to discuss the current size of the stablecoin market and its potential for growth.
Pierre Person provides insight into the stablecoin market, stating it currently weighs about 150 billion dollars in market cap. He highlights that stablecoin companies are among the most profitable in both crypto and traditional finance, noting that Tether has generated more revenue than some of the biggest traditional banks.
Pierre argues that the value generated by stablecoins should belong to the users rather than centralized companies. He predicts that the stablecoin market will grow to trillions in value, potentially replacing traditional commercial money systems.
Pierre explains that stablecoins are essentially a form of commercial money, offering a more efficient way to exchange value compared to traditional banking systems. He envisions a future where all commercial money and value exchanges between individuals will be conducted through stablecoins, estimating the potential market to be worth over 10 trillion in liquidity.

Usual’s Role as an On-Chain Aggregator of T-Bill Tokens: Simplifying Liquidity and Optimizing User Experience

Nomatic asks if it’s fair to describe Usual as an on-chain aggregator of different US Treasury Bill tokens. He inquires about the sources of these T-bill collaterals and Usual’s criteria for selecting them.
Pierre explains that over the past two years, various tokenizers have emerged in the crypto space, offering T-bill tokens. He mentions protocols like Ondo and even BlackRock as issuers of these tokens.
Pierre describes how Usual acts as an aggregator, currently using one collateral but planning to integrate others like BlackRock in the future. He highlights that this approach aims to offer a stablecoin that improves upon $USDT and $USDC.
Pierre highlights the importance of using T-bills as collateral, noting that it eliminates the fractional reserve risk associated with bank deposits, as seen during the SVB bankruptcy that affected Circle’s $USDC.
Pierre positions Usual and $USD0 as a bridge between real-world asset liquidity and DeFi, aiming to unify fragmented liquidity and provide a direct link to real-world assets.
DeFi Dad shifts to rapid-fire questions, asking about the minimum amount required to mint $USD0 and whether smaller amounts involve swapping rather than minting.
Adli explains that Usual has implemented a smart routing system to abstract complexities from the user experience. The system chooses the best execution strategy, whether minting or using the secondary market, based on current conditions.
Adli clarifies that there’s no primary market minting under 20,000 $USD0 for gas optimization reasons. He notes that the collateral contract is permissioned for users with at least 100,000 $USD0.
Adli highlights Usual’s focus on simplifying the user interface, abstracting complexities while still providing necessary information about transaction routes.

Minting, Peg Stability, and Tokenomics of USD0 and USD0++ in Usual Protocol

DeFi Dad asks about the minting process for larger amounts (hundreds of thousands or millions of dollars) and whether the app indicates if the user is minting or swapping.
Adli explains that the app displays the routing information (Paraswap or Usual counter) before the transaction. For larger amounts, users go directly to the primary market to avoid unbalancing the pool.
Pierre adds that for large amounts, someone provides the collateral if the user is using USDC. The process takes a few seconds, and users receive $USD0 close to a 1:1 ratio with $USDC, depending on $USDC’s current market price.
DeFi Dad inquires about what happens if $USD0 falls below its peg. Adli clarifies that anyone registered for the $USYC collateral can redeem, following the restrictions of the initial collateral token. He mentions that Usual has contracts with market makers to monitor and maintain the peg.
Adli highlights that Usual successfully passed a stress test during a recent market correction, with only a 30 basis point deviation. He highlights the permissionless nature of interactions with the smart contract.
Pierre adds that users can redeem the collateral 24/7, allowing for efficient arbitrage and peg maintenance.
DeFi Dad asks about the mechanics of $USD0++. Pierre explains that $USD0++ is a token that wraps $USD0, locking it for four years. It functions like a liquid bond, tradable on the secondary market, with significant liquidity on Curve.
Pierre describes $USD0++ as a “DeFi T-bill” that will offer users the ability to claim yield in Usual tokens or at least the risk-free yield (around 6% currently). He positions it as a potential collateral for DeFi products.
Pierre explains the rationale behind the four-year lock, citing alignment with other tokenomics models like $CRV. He highlights the importance of linking token distribution to protocol revenue to ensure real value.
Pierre stresses the significance of transparency in tokenomics to avoid unfair dilution and ensure a sustainable model. He positions $USD0++ as a key component in conceptualizing Usual’s tokenomics.
DeFi Dad draws a comparison between Usual Money and Tether, noting that $USD0 is analogous to $USDT, while $USD0++ has no counterpart in Tether’s system. He suggests that $USD0++ represents an opportunity for users to earn yield that would typically be reserved for Tether’s private ownership.

Usual: Strategy, Integrations, and Tokenomics Updates

DeFi Dad asks about current yield opportunities for $USD0 and $USD0++, mentioning a new Origami vault for looping strategies.
Adli explains that Usual is building integrations to allow for diverse activities and combinations. He mentions partnerships with protocols like Origami and Morpho that will distribute their tokens to users of Usual’s products.
Adli highlights that they’re focusing on $USD0++ first because $USD0 usage requires more network effect and liquidity. He mentions various strategies users can employ, including buying YT tokens on Pendle for greater exposure to Usual.
Adli reveals that Usual has about 20 integrations in development, including multi-chain usage and potentially becoming a gas token on one chain.
Adli discusses their strategy of first encouraging users to lock $USD0 and use it as collateral before expanding into trading pairs and payment solutions. He mentions potential integrations with GnosisPay and merchant apps.
Pierre outlines the pre-launch phase, stating that 7.5% of the token supply will be distributed through an airdrop before the end of the year. He announces plans for a Token Generation Event (TGE) in mid-November, 2024.
Pierre explains that the current points system will transition to a period where $USD0++ and its integrations will yield Usual tokens. He highlights that their tokenomics have been designed over two years to create upside potential for early participants.
Pierre hints at future products beyond the stablecoin that will increase the profitability of the DAO, describing it as a common pot where users can earn ownership of the structure.
Adli describes Usual’s approach as delegating stablecoin profits to collective intelligence, expressing belief that this collective approach can yield better profits and vision. He stresses the importance of developing a good governance system, with the token at the heart of the project.
DeFi Dad asks how Usual plans to handle a potential return to a low-yield environment for T-bills.
Adli says that even low yields are better than nothing, but outlines several strategies Usual could employ:
- Exploring other bond products like corporate bonds for higher yields
- Optimizing yield from the collateral by providing liquidity to T-bill markets
- Launching new products backed by staked stablecoins ($USDC, $GUSD, $FRAX)
- Creating USD0 backed by liquid staking tokens (LRTs, LSTs)
Adli highlights that Usual’s model allows for fair distribution of governance tokens based on underlying yields, and that the project has multiple ways to optimize yields and grow.
Pierre expands on Usual’s vision, describing it as potentially becoming a “decentralized banking protocol” or a “decentralized BlackRock,” offering various financial services beyond just stablecoins.
Pierre mentions plans for a DeFi stablecoin backed by yield-bearing stablecoins, which could unify fragmented DeFi liquidity and provide another revenue source.

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Show Information

Medium: YouTube (Video)
Show: The Edge Podcast
Show Title: What If Tether Was Owned By Its Users? The Vision for Usual
Show Date: September 20, 2024