Peg

A peg is a target value that an asset aims to maintain relative to a reference, such as one stablecoin equalling one US dollar. Issuers and protocols use various mechanisms to hold a peg, including holding reserves, allowing redemptions, or adjusting supply through algorithms. A peg is a design goal, not a physical law, so the market price can drift above or below the target.

A common misconception is that a peg is automatically guaranteed; maintaining it depends on collateral quality, redemption rights, liquidity, and market confidence, all of which can weaken under stress. This entry is educational and not financial advice.