How does the concept of peg apply to digital currencies?

1 answers

• Liban Valladares MartelFeb 17, 2023 · 2 years ago
  Pegging is a common practice in the world of digital currencies. Many stablecoins, which are digital currencies designed to maintain a stable value, are pegged to a specific asset. For example, Tether (USDT) is a popular stablecoin that is pegged to the US dollar. This means that for every USDT in circulation, there is a corresponding US dollar held in reserve. This pegging mechanism ensures that the value of USDT remains stable and equivalent to one US dollar. Other stablecoins may be pegged to different assets, such as gold or other fiat currencies. The concept of pegging allows users to have confidence in the value of these stablecoins and use them for various purposes, such as trading or remittances. By pegging digital currencies, issuers aim to provide a reliable and trustworthy alternative to traditional fiat currencies.
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