IOSG｜Usual Money's New Stablecoin Gold Standard

Congratulations to Usual Money on their successful launch of the mainnet after two years of hard work! On the occasion of this important milestone, we wanted to reflect on the opportunity they are pursuing and why we believe it may be the largest wealth growth opportunity in this cycle.

Let’s start with a backstory and a simple question: Why is Blackrock suddenly interested in blockchain technology?

Does Blackrock buy into the idea of ​​cryptocurrency? Probably not. Do they see the long-term benefits of replacing traditional financial infrastructure with blockchain technology? To some extent, yes. However, the main reason may be the impressive business opportunity that exists today.

This brings us to the story of Tether, the company behind USDT.

1. Tether: The best business model ever

Last year, Tether made headlines when it was reported that their first quarter net income exceeded Blackrock, even though Blackrock managed more than 120 times the assets of Tether. How did they do that?

Tether's core business is to accept fiat currency collateral in offline bank accounts and issue digital versions of these fiat currencies, namely USDT.

It undoubtedly has the best business model in the finance-related industry for the following reasons:

• Flexibility to invest 100% of collateral: They are free to manage the fiat currency they receive.

• Retain 100% of investment income: All profits remain within the company.

• Great operating leverage and profit margins: Regardless of scale, operating costs remain the same.

By investing fiat currency in productive assets such as treasury bills, Tether is expected to generate $6 billion in revenue per year from the $110 billion it manages. Unlike banks, they do not need to share revenue with users, as users are primarily interested in the stablecoin itself and its utility as a widely accepted payment medium. The last factor is that they have huge operating leverage in this business. Tether’s operating expenses remain relatively constant, whether they manage $10 billion, $100 billion, or $1 trillion. This scalability presents a huge opportunity.

2. Scaling to trillions: the need for risk-free stablecoins

Despite their success, current stablecoin providers like Tether and Circle still face several key issues that need to be addressed. The problems that emerged when Silicon Valley Bank (SVB) collapsed showed that stablecoins are not risk-free. And, if any risk materializes, users will be the first victims.

2.1 Lack of Transparency

During the SVB crisis, the public had no idea if any stablecoin providers were affected. This highlights a significant transparency issue. The lack of transparency not only erodes user trust, but also creates regulatory risk that stablecoins could be classified as securities due to information asymmetry.

2.2 Vulnerability to Bank Runs

Despite Circle holding a small percentage of total assets in SVB, it is still exposed to the risk of a death spiral. This demonstrates the poor risk management of existing stablecoins. With so much money held in one account, Circle’s deposits lack protection. Without U.S. government intervention, Circle could face a catastrophic bank run by insisting on 1:1 redemptions even though the value of its collateral has depreciated.

2.3 In-principle Mutability

Current stablecoins like Tether and Circle are not designed to handle trillions of dollars in future demand. Their reliance on human judgment, unpredictability, and lack of immutability make them vulnerable to black swan risks that, at their scale, could have catastrophic effects on the wider cryptocurrency industry. What we need is a stablecoin that is immutable in principle, based on well-established rules, and able to perform services in perpetuity.

2.4 Excessive Risk-Taking

While Circle was the only stablecoin provider to be significantly impacted by the SVB collapse, this does not mean that Tether was more prudently managed; it has simply been more fortunate so far. It could even be argued that the risks outlined above are more pronounced in Tether, which is worrisome given its size. Tether has recently begun to address these issues and mitigate some of the black swan risks. Yet, an examination of their balance sheets shows that the flexibility they have in managing offline funds is enormous. Billions of dollars are locked up in illiquid positions such as secured loans and “other investments.” Are USDT holders adequately compensated for the risks associated with these lending and investment activities?

3. Introducing Usual: A User-Owned Stablecoin with No Systematic Risk

It’s one thing to absorb a few billion dollars in a bull market, it’s another to build a stablecoin that can scale to trillions of dollars. Usual is tackling the latter challenge.

In recent years, it has become apparent that stablecoins will replace volatile cryptocurrencies as the primary medium of payment on blockchains. Even meeting the $150 billion in existing stablecoin demand will clearly require exogenous assets as collateral. Usual is building an infrastructure that:

• operates predictably based on immutable principles

• maximizes transparency

• minimizes bank run risk and mitigates the impact of black swan events

• designs stablecoins with pessimism in mind given their critical infrastructure role

Usual’s on-chain infrastructure is carefully designed to scale seamlessly, with mechanisms to avoid bank runs and efficiently aggregate high-quality collateral.

However, risk-averse and conservative designs often struggle to launch and achieve scale. Most new RWA-backed stablecoins lack appeal to early adopters, who are unlikely to be attracted to rebase stablecoins with annual yields of only 5%.Without the momentum provided by early adopters, these projects are unlikely to reach the scale required to attract institutional interest, and their prospects are bleak.

4. Risk-averse stablecoin x degen governance token design

In contrast, Usual Money takes an innovative approach by separating the main token (risk-averse stablecoin) from the governance token that is fully allocated with returns. This model encourages users to join for speculation, while at the same time, over time, it can cultivate strong network effects and ensure long-term user retention. The distribution mechanism of governance tokens is designed to strongly reward early participants. Over time, as Usual scales and network effects build, subsequent governance token mining is phased out to effectively cap supply.

Given the size of the opportunity: If Tether were to go public today, its valuation could exceed $50 billion, based on ~$110 billion in assets under management (which are effectively utilized) and a conservative P/E ratio of ~10. If Tether chooses to distribute this value back to its community, it could generate a one-time return of at least 50% for all users.

Usual Money further separates the stablecoin product from the governance tokens that are distributed according to a logarithmic function. For those participants willing to make the extra commitment and maximize returns, Usual plans to introduce a token economic model that incorporates complex game theory, the most innovative design since the birth of veCRV.

To prevent premature disclosure, the protocol’s whitepaper and token economics paper will be released soon, allowing the community ample time to familiarize themselves with key information before the Token Generation Event (TGE).

5. Outstanding Team and Vision

Over the past four years, we have met thousands of teams in the cryptocurrency space, and we can say that Usual is among the best. The Usual team is unmatched in terms of the project’s energy, dedication, sense of urgency from day one, and desire to realize their grand vision. They have the legal and financial expertise required to build a risk-averse stablecoin design, and are crypto native enough to know how to launch a community and go through the first phase of product expansion.

Usual has the potential to become the new stablecoin gold standard. With a dedicated team, revolutionary on-chain infrastructure, and innovative token economics, Usual is ready to challenge Tether. If successful, this vampire attack may become the most important wealth effect in this bull market cycle.