Recently, many people have been discussing Lista DAO's USD1 stablecoin, especially the 1% borrowing interest rate which is quite eye-catching. But how is it possible to have such a low rate? Today, let's take a deep dive into the underlying technical logic.

What ensures the price stability of USD1? Essentially, it's an algorithmic automatic adjustment. When the price exceeds $1, the protocol increases USD1 supply; when the price drops below $1, the protocol initiates a buyback mechanism. It sounds simple, but this mechanism can effectively anchor the price, directly lowering borrowing costs—that's why users can enjoy such low interest rates.

So, where are the technological innovations? There are four main aspects:

**First is the flexible design of the over-collateralization model.** Users need to collateralize higher-value assets; for example, collateralizing $100 worth of BTCB allows borrowing up to $70 of USD1. This may sound restrictive, but in reality, it's protective—reducing default risk, easing liquidation pressure, and enabling the protocol to operate more stably. Compared to traditional lending protocols like Aave and Compound, Lista DAO's collateralization requirements are more flexible, allowing users to adjust based on their risk preferences rather than adhering to fixed ratios.

**Second is the automation of the algorithmic adjustment mechanism.** No manual intervention is needed; it's entirely driven by market signals. When demand rises, the system automatically increases issuance; when demand falls, it automatically conducts buybacks. This not only helps maintain USD1's price stability but also significantly reduces operational costs.

**Third is the design of liquidity incentives.** Lista DAO encourages user participation through liquidity mining. Users who deposit USD1 into liquidity pools can earn LIS tokens as rewards. This approach continuously attracts liquidity, making USD1 easier to trade in the market and fostering a more active ecosystem.

**The fourth innovation lies in the overall sustainability of the mechanism.** Through this combination—flexible collateral ratios, automated algorithms, and ample incentives—Lista DAO has created a relatively stable and low-cost lending ecosystem. Borrowers benefit from low interest, the protocol's risk remains manageable, and the ecosystem can develop healthily.

Of course, every DeFi product carries risks; nothing is entirely risk-free. But from a technical design perspective, Lista DAO has indeed found a feasible solution in the realm of algorithmic stablecoins.