What is a Peg?
Quick Definition
A peg is the fixed reference value a stablecoin is designed to track, typically a fiat currency like the US dollar.
Full Definition
The peg is the foundation of a stablecoin's identity. A stablecoin pegged to the US dollar at a 1:1 ratio is designed so that one token equals one dollar at all times. Maintaining a peg requires a combination of well-managed reserves, reliable redemption mechanisms, and sufficient market liquidity to absorb buying and selling pressure.
Why holding the peg matters
A stablecoin's ability to hold its peg under stress, such as during market crashes, mass redemption events, or liquidity crunches, is one of the most important measures of its design and quality. Brief, minor deviations from the peg are common and usually self-correcting through arbitrage. Sustained deviations, however, are a serious warning sign that the underlying reserves or redemption mechanism may not be functioning as intended.
How Steady maintains its value
Steady is a US dollar denominated stablecoin, fully backed 1:1 by reserve assets of equivalent USD value. Its value is supported by direct redemption for qualified institutional investors and by transparent, verifiable reserve reporting on the Transparency Portal. This combination of reserve backing, redemption access, and transparency creates a structural anchor that supports the peg under normal and stressed market conditions.
Related Terms
Backing
ReadBacking refers to the assets or mechanisms that support a stablecoin's value and help it maintain its intended reference value.
Depeg
ReadA depeg occurs when a stablecoin's market price deviates significantly from its intended reference value, failing to maintain its expected price.
Fiat
ReadFiat refers to government-issued currency that derives its value from legal recognition and institutional trust rather than a physical commodity.
Redemption
ReadRedemption is the process of exchanging a stablecoin for its underlying value (typically fiat currency) directly with the issuer.
Reserves
ReadReserves are the total pool of assets held by a stablecoin issuer to back the tokens in circulation.
Stablecoin
ReadA stablecoin is a type of cryptocurrency designed to maintain a stable value by being denominated in a reference asset, typically a fiat currency like the US dollar.
Other Glossary Items
Learn about common and essential terms related to Steady and other stablecoin protocols.
Algorithmic Stablecoin
ReadAn algorithmic stablecoin attempts to maintain its value through automated rules that adjust token supply based on market demand, rather than holding equivalent reserve assets.
AML
ReadAML (Anti-Money Laundering) refers to the laws, regulations, and procedures designed to prevent the use of financial systems for laundering the proceeds of crime.
APY
ReadAPY, or Annual Percentage Yield, is the standardized rate of return an asset generates over a year, including the effect of compounding.
Arbitrum
ReadArbitrum is a Layer 2 blockchain network built on top of Ethereum, designed to offer faster and cheaper transactions while inheriting Ethereum's security and infrastructure.
Asset Backing
ReadAsset backing refers to the real-world or on-chain assets held by the issuer to support the value of every token in circulation.
Asset Locking
ReadAsset locking refers to restricting access to funds for a defined period or condition, during which they cannot be transferred or used.
Asset Segregation
ReadAsset segregation is the practice of keeping client or backing assets separate from the issuer's operational funds, protecting them from the issuer's other obligations.
Audit
ReadAn audit is an independent examination of a protocol's code, reserves, or operations by qualified third parties to verify accuracy and compliance with stated claims.
Blockchain Network
ReadA blockchain network is the system of connected participants and infrastructure that validates, records, and maintains data on a specific blockchain.
Blockchain
ReadA blockchain is a distributed digital ledger that records transactions across a network of computers in a secure, transparent, and tamper-resistant way.
Bridge
ReadA bridge is a mechanism that enables the transfer of assets or data between different blockchain networks.
Clarity Act
ReadThe Clarity Act is a proposed US legislative framework intended to clarify the regulatory treatment of digital assets, defining when they should be treated as securities versus commodities.
Collateralization / Over-collateralization
ReadCollateralization refers to the ratio between the value of assets held in reserve and the value of tokens issued. Over-collateralization means holding more in reserves than the value of tokens issued.
Composability
ReadComposability refers to the ability of different protocols, contracts, and tokens on a blockchain to interact and combine with each other seamlessly.
Counterparty Exposure
ReadCounterparty exposure refers to the risk that another party, such as a bank, custodian, broker, or service provider fails to fulfill its obligations, potentially affecting the assets or funds it holds.
LearnMoreAboutSteady
Transparency Portal
reserves, statements, audits, smart contract, and more.
FAQs
Discover the basics about Steady in our frequently asked questions.
Contact Us
questions, feel free to get in touch. We'll be happy to help.
