[pietjepuk88]

> You can take an interest free loan out against your Ethereum

Well, you do have to pay to take out a loan. Closing a loan is free, and redeeming LUSD for ETH (if it's not your loan) costs _at least_ 0.5%. And being liquidated costs you money (10%?) as well I guess.

> What happens if many people do that and never repay the loan?

Nothing? What do you think is supposed to happen?

> you are suddenly dealing with real like risk that cannot be ignored.

The only risk I know of is a cascade. If a trove drops below 110% because the ETH price drops, and someone liquidates the trove and gets the ETH at a 10% discount, and then _sells_ the ETH, the price drops even more causing other troves to be liquidated, etc.

[meltedcapacitor]

The cascade problem is systemic: all algo stable work inevitably in a similar way, so if it starts somewhere all the protocols will reinforce the death loop. At the limit, the whole ecosystem of ether + ether-based algo stablecoins becomes terra/luna.

Crypto has no global risk manager in charge of keeping the total sum of algo stables small enough to be safe.