What is a peg in crypto?

Peg - a specified price used to determine the exchange rate between two assets; in crypto – a fixed asset price tied to a token. Let's find out Peg meaning, definition in crypto, what is Peg, and all other detailed facts. In traditional markets, a peg is the specified price that traders use to set the exchange rate between two assets.

What is a pegged cryptocurrency?

Unlike Bitcoin and other regular cryptocurrencies, a pegged cryptocurrency is designed to hold a steady, less volatile value. It holds its peg in one of three ways. One, it maintains a reserve of cash (fiat money) or cash-equivalent assets. The value of these assets approximately matches the total value of the stablecoin in circulation.

How do you Pegg a cryptocurrency?

There are two methods for pegging a digital currency, keeping reserves and algorithms. In the first method, the value of the pegged cryptocurrency depends on what is in reserve. Algorithmic stablecoins maintain pegging using smart contracts and collateralization to increase the supply.

How does a reserve back a pegged cryptocurrency?

A reserve backs a pegged cryptocurrency. Usually, the reserve assets of a pegged currency must have an equal number of the stable currency to which it is pegged. So, if a crypto asset is pegged to the US dollar, an equivalent number of USD must be in the present reserve.