UIP-16 Introduces a New Technical Step in Usual’s Governance Process

Usual’s governance framework implements upgrades through clearly defined stages, and UIP-16 adheres to this structured approach. The proposal is designed as an intermediate step rather than a final infrastructure change.

UIP-16 Proposes U0R as Eligible USD0 Collateral

The core objective of UIP-16 is to add U0R, the Usual Zero Rate Vault, as eligible collateral for USD0 on Ethereum mainnet. This proposal is strictly technical and preparatory in nature, without introducing a new product or finalizing a broader infrastructure transition.

Context From Previous Governance Decisions

Following the DAO vote under UIP-11 to reduce USUAL inflation, governance set the USL rate to 0% and halted USUAL emissions for bUSD0 deposited as USL collateral. UIP-16 builds on this context by extending zero-rate collateral support through a new mechanism.

Introduction of the Usual Zero Rate Module

UIP-16 proposes deploying U0R through a dedicated infrastructure called the Usual Zero Rate Module. UZR is explicitly designed with a fixed 0% rate and will operate alongside the existing USL infrastructure deployed on Euler.

Coexistence Without Forced Migration

The proposed module does not replace or remove existing systems. UZR will coexist with the current USL, allowing users to remain on the current setup or voluntarily migrate to the new configuration.

Technical Proposal Precedes a Broader Infrastructure UIP

This proposal is intentionally positioned ahead of a future UIP that will outline the complete new infrastructure. UIP-16 is required to unlock essential testing before such a comprehensive proposal can be responsibly submitted.

Enabling Real-World Testing and Validation

By authorizing U0R as eligible USD0 collateral, UIP-16 enables testing of security assumptions, integrations, on-chain behavior, accounting flows, and user interactions under real conditions. These tests are necessary to reduce implementation risk.

No Changes to Risk or Monetary Policy

The proposal does not alter USD0’s risk framework, monetary policy, or collateral philosophy. Its sole purpose is to allow controlled experimentation and data collection ahead of a broader architectural decision.

UIP-16 as a Governance Prerequisite

UIP-16 serves as a prerequisite for future governance decisions. It creates the conditions needed to gather on-chain data, validate technical assumptions, and mitigate risk before requesting DAO approval for a full infrastructure migration.

Full Infrastructure Details to Follow

A detailed technical description of the complete future infrastructure is expected to be submitted to governance in a forthcoming proposal, once insights from this testing phase are available.