Price stability

It is important to remember that destablecoins are not more prone to de-pegging or de-stabilizing than stablecoins. All stablecoins are at risk of de-pegging, and thus the word “stablecoins” have always been a misnomer. In addition, having a “peg” with fiat currencies does not guarantee stability due to inflation. Furthermore, traditional fiat-currencies also have varying reference rates and interest rate parity. Yet, most would still consider the US Dollar a stable benchmark for global currency.

The misnaming of this asset is critical as it obscures any inherent risk to holding such an asset. Every type of asset class has its potential strengths and weaknesses, and that should be clearly reflected to investors.

lisUSD's price stability mechanism

The Lista is able to maintain lisUSD’s $1 value with respect to USD in the following scenarios:

When lisUSD > $1, the supply of lisUSD needs to increase:

  • Since lisUSD is at a premium, borrowers are incentivized to borrow more lisUSD to sell for other assets for arbitrage opportunities.

  • To reduce demand for lisUSD farming, Lista will reduce lisUSD farming rewards by decreasing lisUSD borrowing interest.

When lisUSD< $1, the supply of lisUSD needs to decrease

  • Since lisUSD is at a discount, borrowers are incentivized to buy lisUSD from the market to pay back the debt.

  • To decrease lisUSD borrowing demand, Lista will increase lisUSD borrowing interest, which increases lisUSD farming rewards

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