Usual is a new stablecoin protocol that passed $1 billion in market capitalization yesterday less than four months post launch. Today it reached $1.15 billion, becoming the seventh largest stablecoin. Until this week, Usual’s stablecoin was entirely backed by Hashnote, a tokenized money market fund (MMF) from the founders of DRW. Yesterday Usual said it would start diversifying the reserves to include Ethena’s new USDtb stablecoin, which in turn is backed by BlackRock’s BUIDL money market fund. Today Usual announced a third element of its reserves, UsualM, an extension of the $M stablecoin.
The M^0 protocol underpins the semi-decentralized stablecoin $M. Rather than relying on a single issuer, there can be many issuers that invest the assets in Treasuries only. M^0 shares revenues from the reserves with issuers and earners, with Usual counting as an earner in this case. Usual gets a special version of $M, the UsualM, with additional functionality such as permissioned unwrapping, blacklisting and pausing capabilities.
$M deliberately doesn’t have this functionality at its core because of its decentralized roots. It doesn’t want to provide an external kill switch. But those that want to build on top of the M^0 protocol, such as Usual, can add these features.
They are also free to customize it in other respects, including branding, convertibility features and yield distribution.
“Extending $M into UsualM to support $USD0 marks a pivotal step in advancing our vision for stablecoins,” said Pierre Person, CEO of Usual. “M^0’s cutting-edge infrastructure enables us to create a stablecoin that prioritizes transparency, security, and adaptability while aligning with the needs of our community. With UsualM, we’re not just introducing another stablecoin—we’re redefining how digital dollars can generate meaningful value and impact.”
What’s different about Usual?
The range of stablecoins is expanding quickly, and Usual is yet another flavor.
There’s a good reason for Usual rocketing to $1 billion so quickly. Currently it’s showing a projected annualized yield of almost 80%. Is this the Terra stablecoin all over again? It’s a very different design and is fully fiat backed.
That yield can best be described as a mix of the normal yield you’d get on Treasuries plus a cut of the future earnings of the stablecoin. Or rather a cut in the future value of the protocol. Given Tether earned $7 billion in the first nine months of this year, that’s got people excited. It’s the future earnings bit that is boosting the projected yield.
Usual has three coins. USD0 is a straight stablecoin aiming to be worth $1. Most of the earnings on the reserves go to the protocol, rather than a centralized issuer such as Circle or Tether. Holders of the Usual token have some rights to the protocol earnings.
In addition to USD0 there is also USD0++. Essentially USD0 is locked up for four years for staking, which currently accounts for 87% of the total stablecoin issuance. It is the projected yield on USD0++ that is sky high because those that stake also earn Usual tokens giving them a right to future earnings. Rather than measuring future earnings, it’s about the increase in the Usual token price. The token was listed on November 19 at 35 cents and is currently worth $1.21.
Some stablecoins such as USDC and Tether are designed for payments. Others such as the DAI (now USDS) were designed for DeFi. Both $M and Usual’s coins fall into the DeFi camp, although that doesn’t stop them from being used for payments.
Both the DeFi and payment stablecoin sectors are currently seeing masses of experimentation and innovation. That will probably accelerate in 2025.
