The "collateral" is a bunch of useless tokens that can flash crash in an instant. It is the same thing as the luna/Terra system but with minting $2 worth of luna for $1 worth of UST. Any depeg event will only be faster as compared to luna
In the case of DAI and other debt-based stablecoins, there is no minting of additional collateral when liquidations occur or when debt is repaid (the total amount of the underlying collateral in circulation does not increase when DAI is destroyed).
This is the main difference between so-called "algorithmic stablecoins" (e.g. UST, FRAX, USDN), which rely on internal collateral (whose supply can be arbitrarily expanded/contracted by the controlling entity) and "overcollateralized debt-based stablecoins", which usually rely on external collateral (whose supply cannot be arbitrarily expanded/contracted).
Treating these two different things as if they are the same is not particularly insightful.