Usual Protocol, an up-and-coming decentralized finance (DeFi) protocol that has seen a remarkable rise over the past months, faced community backlash on Friday after a tweak in the protocol’s yield-generating token triggered a sell-off on secondary markets.

Amid the turmoil, the protocol’s USD0++ token, which represents a locked-up – or staked – version of its $1-anchored stablecoin USD0, fell briefly below 90 cents from $1 on decentralized marketplace Curve. The protocol’s governance token, USUAL, plummeted as much as 17% through the day before recovering some of the losses.

The selloff was caused by a change in the redemption mechanism of USD0++ token introduced by the team on Thursday that caught investors and liquidity providers off-guard.

By design, USD0 is backed by short-term government securities to keep its price at $1. Stakers on Usual receive USD0++ that comes with a four-year lock-up period, meaning that investors are locking up their funds without being able to redeem in exchange for rewards earned in the form of the protocol’s USD0 and USUAL tokens. Yield farmers rushed in, catapulting the protocols total value locked (TVL), a key DeFi metric, to $1.87 billion earlier this week from less than $300 million in October.

However, the new feature called “dual-path exit” will allow investors to redeem the locked-up tokens early at a 0.87 USD0 floor price, or at par, by giving up a part of the rewards earned, calling the 1:1 exchange rate into question.

The abrupt implementation drew criticism across DeFi users for changing the design without warning. In certain liquidity pools, the token’s price was hardcoded to worth $1, causing havoc among borrowers and liquidity providers.

“Did they just allow degens to jump in at 1:1 and then rug the USD0++?,” prominent DeFi analyst Ignas said in an X post. “They pushed for the largest USD0/USD0++ pool on Curve knowing all well that USD0++ shouldn’t trade at 1:1.”

“DeFi continues learning the most important truth about pegs: a peg is a story about why two things that are not the same are interchangeable for each other,” noted Patrick McKenzie, advisor to payments firm Stripe.

The Usual team said in a statement that the design change with the early unstaking mechanism was communicated in advance from October. The protocol will also activate the revenue switch starting on Monday and start distributing the protocol’s earnings to governance token holders who stake their coin for longer-term (USUALx).

“The current situation regarding USD0++ stems from a misunderstanding of the protocol’s mechanisms along with a communication that should have been better articulated,” the statement reads. “We apologize and we’ll continue to do our best to communicate transparent information to users.”

The episode is another lesson for crypto investors about the potential risks of DeFi products that entice users with high-yields via token incentives and rewards flywheels.

“Users who are taking risk need to know what the exact rules are and be able to trust that they won’t change, otherwise it can result in market panic,” Rob Hadick, general partner at venture capital firm Dragonfly, told CoinDesk. “We should be thankful this happened now, before the protocol became a risk to the broader DeFi ecosystem.”

Still, USD0++ traded recently at 0.91 USD0 in the Curve pool, while the protocol’s total value locked, a key DeFi metric, dropped below $1.6 billion.

SAFE, the native token of Safe Wallet, surged 20% as Bithumb listed the token on its platform.

Safe (SAFE) rose to $1.10 on Jan. 10, marking a 20% surge from its monthly low of $0.924 while bringing its market cap to nearly $600 million at the time of writing.

The altcoin’s rally occurred in a high-volume environment. Its daily trading volume surged by 429%, climbing from $15 million early Thursday morning to over $80 million.

Despite the recent rally, the altcoin still holds significant growth potential, considering that SAFE’s price remains 69% below its all-time high of $3.56 in April last year.

SAFE rallied as Bithumb, a major South Korea-based crypto exchange, announced it would add a KRW trading pair for the SAFE token on Jan. 10, along with SONIC and AHT tokens.

A SAFE/KRW trading pair will allow direct trading between the SAFE token and the South Korean won, making it more accessible to a wider audience, particularly in the South Korean market.

Typically, a listing on a premier South Korean exchange such as Upbit or Bithumb results in a strong rally in the related token. One such instance was reported earlier in October last year when SAFE secured a listing on Upbit, leading to a 72% surge in just one day. 

SAFE also rallied as a result of increased demand among its derivatives traders. According to CoinGlass, open interest for SAFE in the futures market surged by 151% over the past day, reaching $19.5 million, much higher than the $5.5 million recorded at the beginning of the year.

However, it’s important to note that rallies following exchange listings often face a reversal as investors sell their holdings to secure profits. Notably, data from CoinGlass shows that over $5.96 million SAFE was sent to centralized exchanges on Dec. 10, compared to the $5.65 million withdrawn.

Additionally, the weighted funding rate for SAFE at press time was -0.6690%, which means short sellers were dominating the market, with more traders betting on its price to dip lower.

Such levels also increase the possibility of a short squeeze if the price reverses upwards, potentially forcing short positions to close.

At press time, SAFE had wiped most of its gains, falling 7% from its daily high, and was trading at $1.01 per coin.