What is Peg (Stablecoin)?

A peg is a predetermined price used to establish the exchange rate between two assets. Normally, most assets fluctuate with market forces, but stablecoins are pegged to assets like the U.S. dollar to maintain price stability and to safeguard investors against market volatility. Generally, stablecoins are given a hard peg or a soft peg. Different stablecoin types maintain their peg by different mechanisms. These include backing the stablecoin 1:1 with fiat currency reserves, crypto-collateralized stablecoins, supply-modifying stablecoins, and other peg-maintaining designs.