Peg

What is Peg?

An agreed-upon price for the rate of exchange between two assets is referred to as a "peg." This stands in stark contrast to "floating" currencies, which have a softer monetary policy and no fixed price goal.

A peg is a particular price that a token intends to maintain. Stablecoins are the main application for a peg. Stablecoins are digital assets with a long history of holding their value.

By reducing or diluting the total quantity, stablecoins retain their peg. Until it achieves the intended peg, the changes in the token supply will affect each token's relative price. Algorithmic stablecoins keep their peg by combining collateralization with sophisticated smart contract algorithms that control supply and demand in response to changing market conditions.