The Truth About Stablecoins: Debt Holders Are the Real Heroes in Maintaining Stability

Why can listDAO's lisUSD maintain a $1 price? Many believe it's supported by official market-making funds behind the scenes, but that's not the case. The brilliance of this system lies in — the borrower is also the arbitrageur.

What happens when lisUSD drops below $1? The protocol doesn't directly intervene to rescue the market but leaves the opportunity to the savvy debtors in the market. They can buy lisUSD cheaply on the secondary market, then use it to repay CDP debts, earning arbitrage profits while providing buy-side support, and simultaneously reducing the circulating token supply. Three benefits in one move.

The clever design shifts the cost of maintaining the stablecoin from the protocol to the users, using profit incentives to encourage active participation. But this also means whether the system can truly withstand tests depends on: when the market plunges into extreme panic, are there enough rational borrowers willing to use their liquidity to buy the dip and repay debts?

The true resilience of listUSD essentially depends on a simple game — whether the greed of debtors can outweigh the market’s panic. This is not just a price issue but the ultimate stress test on the liquidity reserves of the entire borrower community.