Peg
Target price relationship an asset is designed to maintain
Definition
Peg means target price relationship an asset is designed to maintain. In DeFi, the concept matters because it affects risk, return, liquidity, governance, or execution assumptions.
Peg is a DeFi term used to understand target price relationship an asset is designed to maintain.
Example
A dollar stablecoin aims to keep a 1:1 peg with the US dollar.
How it works
In practice, the concept shows up like this: A dollar stablecoin aims to keep a 1:1 peg with the US dollar.
Why it matters
Peg matters because small misunderstandings can turn into bad pricing, liquidation, governance, custody, or smart-contract risk.
What to check
Inspect backing, redemption paths, liquidity, issuer assumptions, and stressed-market behavior. The main checks are: Depeg risk; Weak redemption mechanisms; Oracle or market stress.
Risks to Consider
- Depeg risk
- Weak redemption mechanisms
- Oracle or market stress
Common Questions
What does Peg mean in DeFi?
Peg means target price relationship an asset is designed to maintain.
How is Peg used in practice?
A practical example: A dollar stablecoin aims to keep a 1:1 peg with the US dollar.
What should I check before relying on Peg?
Inspect backing, redemption paths, liquidity, issuer assumptions, and stressed-market behavior. The main checks are: Depeg risk; Weak redemption mechanisms; Oracle or market stress.