How does pegged work in the world of digital currencies?

1 answers

• Dec 29, 2021 · 3 years ago
  When it comes to pegged digital currencies, the concept is all about maintaining a fixed exchange rate with another asset, like a fiat currency or a commodity. This is done to provide stability and reduce the volatility that is often associated with cryptocurrencies. For example, a digital currency may be pegged to the price of gold, which means that the value of the digital currency will always be equivalent to the price of gold. This can be achieved through various mechanisms, such as using smart contracts or maintaining a reserve of the pegged asset. The goal of pegged digital currencies is to provide a more stable and predictable value, which can be beneficial for users who want to avoid the wild price swings often seen in other cryptocurrencies.
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