Glossary · Stablecoins
Peg
Also: pegged
A peg is the fixed exchange rate a stablecoin aims to hold against its reference asset, maintained in practice by arbitrageurs who mint or redeem whenever the market price drifts from it.
Related terms
- Stablecoin
- A stablecoin is a token designed to hold a constant value against a reference asset, almost always the US dollar, using reserves, overcollateralization or a hedged trading position to defend the peg.
- Depeg
- A depeg is a sustained deviation of a stablecoin's market price from its target value, usually triggered by doubt about the reserves behind it or by redemption becoming slow, restricted or impossible.
- Redemption
- Redemption is the right to exchange a stablecoin with its issuer for the underlying asset at par, and the practical accessibility of that right is what separates a peg that holds under stress from one that does not.
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