USD0 Peg Stability
As a RWA-Backed stablecoin, USD0 is designed to maintain a $1.00 peg at all times. Peg stability is the most critical metric for any stablecoin — a persistent de-peg can trigger a loss of confidence, mass redemptions, and cascading liquidations in DeFi protocols that depend on the token.
How USD0 Maintains Its Peg
Users deposit accepted RWA tokens (primarily Hashnote's USYC — a tokenized Treasury bill) to mint USD0 at a 1:1 ratio. The deposited RWAs earn Treasury yield, which is redirected to the Usual Protocol treasury. USD0 can be staked into USD0++ (the yield-bearing version), which earns a share of Treasury yield distributed as USUAL tokens and yield-bearing rewards. The peg is maintained by direct redemption: USD0 is always redeemable for $1 of underlying RWAs. Usual's innovation is the governance model: USUAL token holders govern how protocol revenue is distributed, aligning the stablecoin with its user community.
Common De-peg Causes
During extreme market volatility, selling pressure on USD0 can exceed available buy-side liquidity on exchanges. This causes temporary downward deviations until arbitrageurs step in to buy discounted tokens and redeem for $1 from Usual Protocol.
Negative news about Usual Protocol, questions about reserve adequacy, or regulatory actions can cause holders to sell, pushing USD0 below $1.00 on secondary markets even if reserves are fully intact.
Failures of other stablecoins (e.g., UST/Luna collapse) or crypto lenders can cause panic selling across all stablecoins, including USD0, as holders flee to fiat. These events typically resolve as USD0's peg mechanism operates.
Monitoring the Peg
Track USD0 peg deviations in real-time using the BTC.PH Depeg Monitor. Set alerts for deviations below $0.995 or above $1.005 to react quickly to potential instability.