Usual Zero Rate (UZR)

TL;DR

The Usual Zero Rate (UZR) is built on top of Fira and enables users to access low-cost leverage on bUSD0.

Leveraging bUSD0 with UZR on Fira

bUSD0 is the bonded form of the USD0 stablecoin. It represents USD0 that is locked until a defined maturity date, meaning the underlying collateral is not immediately redeemable.

Because that collateral is illiquid, bUSD0 typically trades below par on secondary markets. As maturity approaches, bUSD0 is expected to converge back to par (1.00 USD0), allowing users to capture the discount between the current market price and par at maturity.

Using bUSD0 as collateral to borrow USD0

Users can deposit bUSD0 as collateral to borrow its underlying stablecoin, USD0, at a 0% base rate, plus a 10 bps (0.10% APR) fee.

To maximize borrowing capacity, the module uses a fixed-price oracle that values bUSD0 and USD0 at a 1:1 ratio, enabling users to borrow more USD0 than they could under a mark-to-market valuation.

Leveraging the bUSD0 discount

Once borrowed, USD0 can be swapped back into bUSD0 on the market (often below par), and the acquired bUSD0 can be re-deposited as collateral to borrow additional USD0.

This loop allows users to:

• increase exposure to the bUSD0 discount, and

• lock in the spread between bUSD0’s current market price and its expected redemption at par at maturity.

Example flow (leveraging the bUSD0 discount)

Assumptions

• Initial collateral: 1,000 bUSD0

• Max LTV: 0.88

• Market swap rate (example): 880 USD0 → 950 bUSD0 (i.e., bUSD0 trades at a discount at 0,9263 USD0)

• Borrow fee: 0% base rate + 10 bps (0.10% APR)

Step 1 — Open the first borrow

1. Deposit 1,000 bUSD0 as collateral.

2. Borrow 880 USD0 (1,000 × 0.88).

Step 2 — Swap borrowed USD0 into discounted bUSD0

1. Swap 880 USD0 for 950 bUSD0 on the market (buying bUSD0 below par).

Step 3 — Loop: post new bUSD0 and borrow again

1. Deposit the 950 bUSD0 as additional collateral.

2. Borrow 836 USD0 (950 × 0.88).

Position summary (after the loop)

• Total collateral: 1,950 bUSD0 (1,000 + 950)

• Total debt: 1,716 USD0 (880 + 836)

Step 4 — Accrue interest until maturity

Interest depends on elapsed time and the fee rate:

• At 10 bps APR, 1 year interest ≈ 1.716 USD0 (1,716 × 0.001)

• If you assume ~8 USD0 interest (as in this example), that implies a higher effective annualized cost than 10 bps.

Step 5 — Close at maturity

At maturity, bUSD0 redeems to 1.00 USD0 (par), so the user can unlock 1,950 USD0 worth of collateral and repay the debt.

$$\text{Profit} = 1{,}950 - \left(1{,}716 + \text{interest}\right)$$

• With ~8 USD0 interest: profit ≈ 226 USD0

• With 10 bps APR interest (~1.716): profit ≈ 232.284 USD0

This illustrates how looping increases exposure to the discount-to-par convergence, while the borrow cost remains low relative to the expected pull-to-par.

Max Leverage

This can further be looped until max leverage is achieved. This can be computed based on the LTV and realized exchange rate from USD0 to bUSD0 (assuming it is constant).

$$Leverage_{max}=\frac{LTV}{Price-LTV}+1$$

To learn more about this product and its underlying mechanics, see the Usual docs.