kind, they dont lose that it just locked away. But yes it must be more than the value to be backed else it could become partially backed if the crypto price goes down to fast. It can be more of less than 150% backed is up to whoever writes the code. But 150% seems reasonable for a volatile assets.
You may think no one would do that but its actually a way to bet a price gains of your crypt.
By locking away 150% you get 100% in stable coins to invest/spend without losing the volatility (possible gains) of your crypto.
So if the price of you crypto goes up you get the whole profit on the locked 150% collateral even if you spend the stabel coin.
ofc you need to buy back the stable coins to unlock you crypto but the buy back should always cost the same because its a stable coin.
Example with numbers:
You lock away 150 USD in ETH
You get 100 USD in stable coin to spend
Price of ETH goes up 100% (doubles)
You can now buy 100 USD stabel coins and unlock 300 USD worth of ETH
This is interesting because you have 100 USD that you can use while you wait for the price to go up.
You could buy ETH with it which also doubles in price so you have 200 USD worth of ETH
You sell 100 USD worth of it to buy back the 100 USD stable coins
You now turned 150 USD worth of ETH into 400 USD worth of ETH even trough the price of ETH only doubled.
Ofc if the price drops your stable coin will be undercollateralized and someone else can "buy them" and re-collateralize which would make you lose the difference.
In other words if you bet on rising prices and it goes down you have to top up to keep the 150% collateral if you cant top up someone else will and you get liquidated.
In the end is a zero sum game. Some lose others win but its a net gain because stable coins can can exist that are backed by crypto.
You may think no one would do that but its actually a way to bet a price gains of your crypt. By locking away 150% you get 100% in stable coins to invest/spend without losing the volatility (possible gains) of your crypto. So if the price of you crypto goes up you get the whole profit on the locked 150% collateral even if you spend the stabel coin. ofc you need to buy back the stable coins to unlock you crypto but the buy back should always cost the same because its a stable coin.
Example with numbers:
You lock away 150 USD in ETH You get 100 USD in stable coin to spend Price of ETH goes up 100% (doubles) You can now buy 100 USD stabel coins and unlock 300 USD worth of ETH
This is interesting because you have 100 USD that you can use while you wait for the price to go up. You could buy ETH with it which also doubles in price so you have 200 USD worth of ETH You sell 100 USD worth of it to buy back the 100 USD stable coins
You now turned 150 USD worth of ETH into 400 USD worth of ETH even trough the price of ETH only doubled.
Ofc if the price drops your stable coin will be undercollateralized and someone else can "buy them" and re-collateralize which would make you lose the difference. In other words if you bet on rising prices and it goes down you have to top up to keep the 150% collateral if you cant top up someone else will and you get liquidated.
In the end is a zero sum game. Some lose others win but its a net gain because stable coins can can exist that are backed by crypto.