📝 Definition:
“Pegged” means a cryptocurrency is set to match the value of another currency or asset, like the US dollar or gold, to keep its price (more) stable.
It’s like tying your boat to a dock so it doesn’t drift away with the waves.
Don't own a boat yet?
🔑 Key Features:
- Steady Value: Pegged cryptocurrencies are designed to have a stable price.
- Less Price Change: Their value doesn’t change much, even when other crypto prices are going up and down.
- Common in Stablecoins: Most stablecoins are pegged to another currency, asset, or crypto, that's how their price stay stable.
⚙️ How It Works:
- Linked to Assets: A pegged crypto’s value is directly tied to a well-known asset like the US dollar or gold.
- Keeping the Value Stable: There are different methods used to make sure the crypto’s price stays close to what it’s pegged to.
- Backed by Reserves: Usually, there’s real money or gold stored somewhere that backs up the value of the pegged cryptocurrency.
💡 Applications:
- Everyday Use: Pegged cryptocurrencies are good for buying things because the price doesn’t change much.
- Sending Money: They're useful for sending money to another country without a lot of movement like with exchange rates.
- Avoiding Money Problems: Helpful in places where the usual money might be losing value quickly.
🔍 Example:
Imagine you have a playlist that automatically updates to match your friend’s playlist, so you always have the same songs they do.
In the world of crypto, being “pegged” is similar.
A cryptocurrency is set to always match the value of something stable, like the US dollar.
This way it stays reliable and predictable, just like your synced playlist stays up-to-date with your friend’s music choices.