Usual just pulled in a hefty $10 million from a Series A funding round. Some of the big names involved? Binance Labs, Kraken Ventures, Galaxy Ventures, and Coinbase Ventures, to name a few.
This comes on the heels of some pretty remarkable achievements, including surpassing $1.4 billion in Total Value Locked and becoming one of the Top 5 stablecoins out there. That’s right—it's outpacing PayPal USD and Frax. And believe it or not, it's the first fiat-backed stablecoin to show sustained hypergrowth since Circle.
Usual’s Vision
Usual’s making waves with its DeFi-first philosophy and a model that aims to redistribute ownership to its users. It's an important pivot for fiat-backed stablecoins, connecting the stability of real-world assets (RWAs) with the liquidity and composability of DeFi.
This summer, Usual was the fastest-growing stablecoin on Ethereum, achieving a milestone that no other fiat-backed stablecoin has seen before. They’re not just riding the coattails of other projects like Ethena and Securitize; they’re leading the charge in developing stablecoins that offer users more than just yield.
Usual’s also carving out new partnerships with RWA tokenization platforms. One recent example? The growth of USYC through Usual’s ecosystem, showing the potential of creating bridges in DeFi that connect to the real world. Recently, they even adopted M^0 as an alternative collateral structure for their stablecoin, USD0.
A Community-Driven Approach
In a bold move, Usual is allocating 90% of its token supply to the community. It's already on Binance's spot market, and following a successful community airdrop, it now has its sights set on becoming a top stablecoin.
Impact on Traditional Finance
This community-centric and decentralized model could shake things up for traditional banks. By focusing on decentralization and community empowerment, Usual is countering the centralized control typical of traditional financial institutions. This approach could draw users away from banks, especially those frustrated with traditional banking norms.
Using blockchain and decentralized stablecoins could streamline financial services, enabling faster and safer transactions. This may force traditional banks to adopt similar technologies to keep pace with Usual’s innovation.
Risks to Existing Stablecoins
But the rapid growth of stablecoins, particularly USDC and USDT, isn't without its pitfalls. They’re not immune to market and liquidity risks. A sudden spike in redemption requests could make them illiquid, leading to a run on the stablecoin—think money market funds but worse. This could, in turn, trigger deposit outflows from banks or other funding sources.
Regulatory challenges are also looming. If the government decides to change the rules for stablecoins, it could create headaches for USDC and its managing entities. This uncertainty could erode confidence and disrupt supply.
The DeFi ecosystem, where USDC is a key player, relies heavily on leverage. This introduces risks, particularly when redemption requests surge or markets become volatile.
Despite a more balanced distribution across DeFi platforms compared to USDT, USDC remains vulnerable. A significant portion is held in smart contracts, which are susceptible to fluctuations in Ethereum or unforeseen technical glitches.
Bridging RWA Tokenization and Stablecoins
Integrating RWA (Real-World Asset) tokenization platforms with stablecoins can redefine the landscape of crypto finance. This could lead to a more stable and diverse backing for stablecoins, particularly those issued by DeFi protocols.
By tokenizing real-world assets, stablecoins can be supported by a wider array of assets, such as bonds and commodities. This diversification reduces reliance on volatile cryptocurrencies and makes stablecoins more appealing for financial applications.
RWA tokenization can also broaden their use cases to include lending, borrowing, and yield farming, making stablecoins more effective in liquidity pools.
Stablecoins, especially those tied to RWAs, can speed up cross-border payments and provide services to underbanked regions, making them stable stores of value.
The Future of Fiat-Backed Stablecoins
A DeFi-first ethos could steer the future of fiat-backed stablecoins in new directions. While they aim to eliminate intermediaries, fiat-backed stablecoins rely on traditional finance for stability. The health of these stablecoins is tied to the traditional financial system.
Stablecoins also provide significant liquidity in DeFi applications like decentralized exchanges (DEXes) and lending protocols. Their integration into DeFi could heighten scrutiny from regulators and present risks of depegging from their fiat links.
In this evolving landscape, we might see more sophisticated stablecoin designs. Hybrid models could emerge, combining the best of collateralized and algorithmic stablecoins to achieve stability.
Usual's $10 million funding round and its community-first token launch mark a turning point for stablecoins in the DeFi realm. By challenging banks, addressing risks, and integrating with RWA tokenization platforms, Usual is poised to redefine the future of stablecoins.
