What is Pegged Cryptocurrency?

What is Pegged Cryptocurrency?

What is pegged cryptocurrency, and why should you care even if you’re not a massive crypto buff? Well, in simple terms pegged cryptocurrency is a currency that is tied to the value of another asset. That means that this currency is going to be worth the exact same amount as that value that it’s tied to. For the most part, we see pegged cryptocurrency that is tied to the value of fiat currency. There are also pegged asset DEX options that are tied to the value of commodities. One of the popular pegged assets that are built this way are tokens that mimic the value of gold.

What Are The Benefits of Using Pegged Assets

A decentralized exchange is usually going to use a pegged asset to make sure that all of the users are on the same page. What happens is that people can come into a platform with dollars, ETH, or other currencies. A lot of times what pegged assets provide is that internal currency that transactions can be processed with. So that you won’t have to deal with different exchange rates in every transaction that takes place on the platform.

Why pegged assets? Better yet, why are assets pegged to the commodities that they are tied to? This is pretty simple as well. You are not trying to reinvent the wheel here. You want to make sure that you’re able to simplify things. Therefore, it makes total sense to use a stable coin, (which is a pegged asset), like USDT. That is tied down to the value of the US dollar. It’s an easier way for people on the platform to also get a sense of the value of the trade or the investment that they’re getting into. When you’re monitoring your investments, particularly if you’re going to get into something like a liquidity pool, instead of having to keep track of the value of another asset, just make sure you have the value of the dollar down or ETH simplifies everything! 

A Simple Way To Get In On The Crypto Upside

Pegged currencies allow you to obtain the benefits of the no-fee transactions that cryptocurrencies offer. Without you necessarily having to buy into an unstable asset. We understand that many people don’t feel like taking the risk of putting their money in a crypto asset. Even Bill Gates acknowledged that although he currently doesn’t hold cryptocurrencies in his portfolio he uses blockchain transactions to fund projects of the Gates Foundation.

It would not be odd for him to use pegged cryptocurrency tokens for these transactions. You can come into the exchange with your dollars, and make the transaction in a pegged asset that is tied to the value of the dollar. Cash-out in the same green currency. No fees and no governments waiting to track you down. Are there negative ways that this can be exploited? Sure, but at the end of the day, you know what the money is going for or not. It’s not the job of the platform to be the judge and jury in the case.

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