What is the biggest fear in borrowing arbitrage? Many people are concerned: "Will the stablecoins borrowed out go to zero?"

This concern actually stems from a stereotypical impression of algorithmic stablecoins. But here’s the key point: lisUSD is not just an algorithmic stablecoin; it is a fully collateralized over-collateralized stablecoin.

In simple terms, each lisUSD in circulation is backed by more than $1 worth of BNB, ETH, or BTCB locked in smart contracts as collateral. This mechanism is exactly the same as MakerDAO’s DAI operation logic and is the most reliable model in the DeFi space after years of testing.

**Market demand is the second line of defense**

Having collateral alone is not enough; supply and demand are the key to maintaining the peg. Currently, high-yield financial activities are creating a huge demand for stablecoins—users need to convert volatile assets into stablecoins to earn yields. This strong borrowing demand keeps lisUSD in active competition in the market. When everyone is rushing to buy lisUSD to participate in yield farming, the price of lisUSD will only be pushed higher, making a de-peg and sharp drop almost impossible.

**Liquidation mechanism is the final insurance**

The Lista protocol has an automatic liquidation protection: once the collateral value falls below the warning line, the system instantly triggers an auction mechanism to automatically liquidate the collateral to repay the debt, which corresponds to burning lisUSD. The entire process is fully automated, requiring no manual intervention, ensuring the security of the system and the true value anchoring of the stablecoin.