The defining event for Usual Protocol wasn't the launch — it was the redemption mechanic change in January 2025. Before then, USD0++ traded at parity with USD0, both backed 1:1 by tokenized US Treasuries (mostly Hashnote USYC). Users assumed USD0++ was a 4-year-locked version with the same $1 floor.
On January 9-10, 2025, Usual announced a dual redemption mechanism: holders could exit early at a floor of $0.87, or wait for full $1.00 redemption at maturity. The market read it as a unilateral haircut. USD0++ collateral on Pendle and Curve immediately repriced to $0.89-$0.92. Multimillion-dollar liquidation cascades hit users who had borrowed USDC against USD0++ at the assumed peg. By January 13, Usual flipped on the revenue switch (redirecting ~$5M monthly of T-bill yield to community holders) trying to stabilize the situation.
Twelve months later, the supply data tells the recovery story. USD0++ was approximately $1.4B in December 2024. Q1 2026 it's roughly $450M. That's two-thirds of supply gone and not coming back — at least not into the same product. USD0 (the non-locked version) held up better, sitting around $850M in Q1 2026. Combined ecosystem TVL: ~$1.3B versus the ~$1.9B peak.
I run a tiny USD0 position (~1-2% of stablecoin allocation) and have stayed out of USD0++ entirely since the depeg. Below is what the realized supply, backing, and Pills economics actually look like, and where Usual still has a use case in 2026 — versus where it's just a worse version of competitor products.
The Supply Math Across the Depeg Window
Usual ecosystem TVL evolution:
| Period | USD0 supply | USD0++ supply | Combined |
|---|---|---|---|
| Q4 2024 peak (December) | ~$0.55B | ~$1.40B | ~$1.95B |
| Q1 2025 (post-depeg) | ~$0.78B | ~$0.55B | ~$1.33B |
| Q2-Q3 2025 | ~$0.82B | ~$0.48B | ~$1.30B |
| Q1 2026 | ~$0.85B | ~$0.45B | ~$1.30B |
The mix shift is the part I find most informative. Pre-depeg, USD0++ was roughly 70% of supply because the locked yield-bearing format was where the Pills incentives concentrated. Post-depeg, USD0 (unlocked, simpler) is 65% of supply. Users actively rotated out of the locked format and into the more flexible one — even though Pills accumulation favors USD0++.
That rotation pattern is the structural read: users no longer trust locked redemption mechanics to remain stable across protocol governance changes. The 4-year lock on USD0++ stopped being a productive commitment device once holders saw the floor could move.
What Actually Happened January 9-13, 2025
The factual sequence (not the narrative):
- January 9, 2025: Usual announces conditional redemption — early exit at $0.87 floor, or wait until 4-year maturity for $1.00.
- January 10: USD0++ market price drops to $0.89-$0.92 on Curve and Pendle as the floor gets priced in.
- January 11-12: Liquidation cascades hit users with USDC borrowed against USD0++ at parity assumptions. Pendle PT/YT positions on USD0++ repriced violently.
- January 13: Usual activates the "revenue switch" — redirecting Treasury bill yield (~$5M monthly at the time) to USD0/USD0++ holders directly rather than just protocol treasury.
- Late January through February: USD0++ supply contracts from ~$1.4B to ~$0.55B as users redeem at floor or hold to maturity.
The community framing converged on "unilateral floor decision without sufficient governance process." Usual's framing converged on "necessary mechanism to align protocol economics with reality of locked vs unlocked redemption." Both can be true. What's relevant for positioning today is what the market did after, not which framing wins.
The Q1 2026 Backing Composition
USD0 backing breakdown:
| Backing component | Value | Share |
|---|---|---|
| Hashnote USYC (tokenized T-bills) | ~$0.70B | 52% |
| Other tokenized treasury products | ~$0.40B | 30% |
| USDC reserves | ~$0.15B | 11% |
| Other RWA collateral | ~$0.10B | 7% |
Approximately 89% of backing routes through tokenized treasury or compliant alternatives. The backing transparency improved meaningfully post-depeg — Usual now publishes monthly attestations and dashboard breakdowns that didn't exist (or weren't surfaced clearly) before January 2025.
Backing composition is the part that's actually fine. The product was never under-collateralized. The depeg was a mechanism design issue, not a backing issue. Distinction matters for risk evaluation: if you trust the backing dashboard and the redemption mechanic stays stable, USD0 functions as a tokenized treasury product earning the underlying T-bill yield (~4.0-4.3% gross).
The Pills Program Math
Pills are Usual's incentive points that convert to USUAL token at conversion epochs. Q1 2026 economics:
- Pills distribution rate: ~1.0-1.5B Pills weekly across the ecosystem
- USD0 holding rate: ~0.001-0.003 Pills per USD0 per day (varies by product mix)
- USD0++ holding rate: higher Pills accrual to compensate for lock
- Pills-to-USUAL conversion: variable, set by governance per epoch
Estimated effective Pills yield for USD0 holders works out to ~2-5% APY in USUAL token terms, depending on conversion rates and USUAL price. Combined with the underlying T-bill yield routed via the revenue switch, that's a stack of:
- Base T-bill backing yield: 4.0-4.3% (passed through revenue switch to holders)
- Pills incentive value: 2-5% (in USUAL token, market-dependent)
- Total estimated effective yield: 6-9%
That's competitive with sUSDS (~6-7%) and well below sUSDe (~10-13%). The yield isn't bad. The credibility tax is what's actually limiting supply growth.
The USUAL Token Trajectory
USUAL across Q1 2026 traded at $0.10-$0.18, materially below the late-2024 peak of $1.65. That's ~90% drawdown from peak.
Drivers:
- Pills-to-USUAL conversions diluting circulating supply
- Token unlock schedule continuing through 2026
- Lingering depeg controversy impact on speculative positioning
- Broader DeFi token sector compression (similar pattern across most DeFi governance tokens)
USUAL stakers earn ~8-15% APY in ecosystem rewards. The token economics support continued protocol operation but the price dynamics signal market skepticism about whether Usual reaches its original $5-10B TVL ambition.
Where USD0 Still Has a Use Case
Three scenarios where USD0 makes sense in 2026:
Pills accumulation positioning. If you believe USUAL token is undervalued post-depeg, accumulating Pills via USD0 holdings is a leveraged way to express that view. You earn the base yield while accumulating optionality on USUAL recovery.
RWA-backed stablecoin diversification. For allocators wanting tokenized treasury exposure across multiple providers (avoiding single-provider concentration), USD0 sits alongside Ondo USDY, Mountain Protocol USDM, and others. ~89% T-bill backing with monthly attestations meets that diversification criterion.
EU-compliant stablecoin positioning. Usual operates with French/EU regulatory positioning that some EU-based allocators prefer over US-domiciled alternatives. The compliance framing differs from USDC's regulatory profile.
What USD0 is *not* useful for: replacing USDC for treasury management, replacing sUSDS for yield-on-stablecoin allocation, replacing USDe for synthetic dollar exposure. In each of those use cases, established alternatives have larger float, deeper liquidity, longer track records.
Where USD0++ Specifically Should Stay Avoided
I would not hold USD0++ in 2026. Reasons:
- Floor price precedent. The $0.87 floor exists. Governance can adjust it again. Locked positions have downside risk uncorrelated with backing quality.
- Liquidity compression. USD0++ secondary market on Curve and Pendle is materially thinner post-depeg. Exit liquidity is constrained.
- Better alternatives for locked yield exposure. Pendle PT positions on sUSDe, sUSDS, or USDC offer fixed-yield exposure without single-protocol governance risk.
The Pills bonus on USD0++ versus USD0 isn't large enough to compensate for these factors at current Pills/USUAL valuations.
My Current Usual Positioning
For my own stablecoin allocation:
- USD0 position: ~1-2% of stablecoin allocation (~$3-7K range)
- Held for Pills accumulation and as RWA-backed diversification
- Sized small because credibility recovery is incomplete
- USD0++ position: zero
- USUAL token: zero (would consider at deeper discount but not at current pricing)
Bulk of stablecoin allocation operates across USDC (~50%), sUSDS (~25%), USDT (~15%), with the remaining 10% split across USDe, USD0, and minor experimental positions. This isn't a recommendation — sizing depends on individual risk tolerance and stablecoin allocation strategy.
Decision Framework
If you're considering USD0: size 1-3% of stablecoin allocation as RWA-backed diversification or Pills positioning. Don't size larger until USD0++ liquidity and Usual governance track record improve further.
If you're considering USD0++: the locked variant adds credibility risk for marginal Pills bonus. Use Pendle PT positions on alternative stablecoins for fixed-yield exposure instead.
If you're allocating to RWA-backed stablecoin sector broadly: USDC dominates. Diversification across Ondo USDY, Mountain USDM, and Usual USD0 makes sense at modest sizing for portfolio diversification but not as core position.
If you're long USUAL token: the protocol generates real T-bill backing revenue. Whether that translates to USUAL price recovery depends on supply dilution from Pills conversions, governance trajectory, and broader DeFi sector dynamics. Position carefully.
What I Watch For
USD0++ supply trajectory. If supply contracts further below $400M, signals continued user distrust. If supply recovers above $700M, signals credibility recovery in progress.
Governance pattern around redemption mechanics. Any future change to USD0 or USD0++ redemption mechanics will be heavily scrutinized. Stable governance pattern would support trust recovery.
Pills-to-USUAL conversion rates. If conversion rates stabilize and USUAL price holds, Pills incentive economics support sustainable user acquisition.
Major DeFi protocol re-integration of USD0++. Aave, Pendle, and other protocols reduced or paused USD0++ integrations post-depeg. Re-integration would signal institutional confidence return.
Comparable RWA stablecoin growth. If Ondo USDY, Mountain USDM, or other RWA-backed alternatives grow much faster than USD0, signals Usual specifically losing ground rather than the sector contracting.
Caveats
The supply, backing-composition, and Pills figures are approximations from Usual's published dashboards, DeFi Llama, and on-chain data through April 2026. Backing composition is from monthly attestations and may differ from real-time on-chain state by small margins. The depeg event sequence reflects publicly available reporting from January 2025 — exact loss figures and liquidation totals varied by source. Pills-to-USUAL conversion rates change per epoch and historical realized yields differ from forward yields. The personal allocation observations reflect my own positioning and are not investment advice. Stablecoin allocation depends on risk tolerance, jurisdiction, and time horizon — sizing is individual. Smart contract risk and governance risk for Usual remain meaningful, particularly given the established precedent that redemption mechanics can shift via governance action.