What Is A Pegged Cryptocurrency?
Cryptocurrencies are highly unstable, which makes them excellent for earning rapid profits but not so good in other sectors. If you want to conserve money, it might be difficult in the Crypto market because they don’t perform well as a steady store of value. Similarly, if you try to build something free of oscillations with which to make a purchase, it falls short. Because of the nature of these assets and their generally limited circulating quantities, they are frequently vulnerable to severe price fluctuations, which can give ordinary people and traders who accept them a heart attack on a daily basis.
A pegged cryptocurrency is an asset whose value is pegged to something else in order to create a stable currency. In many situations, Tether is linked to the US dollar, although there are other choices. Each of these options has advantages and disadvantages, and it is up to the individual investor to determine which is best for their personal scenario. It is a type of pegged currency in which steady currencies are stored with what they have been linked to, which means it implies that if your currency is pegged to the US Dollar, you must have an equivalent amount of US Dollars in backup in order to maintain that support.
Also Read — 5 Best Ethereum-Based NFT Marketplaces
Why Should You Use Pegged Cryptocurrency?
To rookies, it may appear weird to seek a Cryptocurrency that functions similarly to conventional cash. However, you will ultimately want to get off the roller coaster and take a rest. Investors seeking a safe haven for their money that is free of large price volatility sometimes resort to pegged currencies. Assume you had made a significant profit on one of your Cryptocurrencies, but you were concerned that your winnings might vanish overnight. You could exchange those winnings for a Cryptocurrency like USDT, and your wealth would be safe, without the continual price volatility that comes with even larger Cryptocurrencies like Bitcoin or Ethereum.
3 Popular Pegged Cryptocurrencies
1. US Dollar Tether (USDT)
It is certainly the most prevalent sort of asset. The USDT is tied to the US dollar, and users are invited to see asset balances on their transparency website. This enables you to view the amount of USD they have on hand to back up their token at any moment. USDT also has connections with a variety of businesses, including ShapeShift, Bittrex, and Poloniex, making it the most widely available steady currency choice.
2. Steem Backed Dollar (SBD)
Steem and Steem Backed Dollars are the currencies used on the Steemit social media site. Those who post on the platform receive both. Steem is used to build up the account in preparation for future rewards, whereas SBD is intended to be a stable commodity that users can spend to buy products and services. Each SBD is supported by one USD worth of Steem.
3. TrueUSD (TUSD)
For a steady coin designed to contend with USDT, it seems to be doing an excellent job of staying pegged for the most part. Surprisingly, this firm compensates its consumers using a legitimate escrow mechanism. This enables them to give investors access to a stable coin without ever touching the cash. This is best handled by a reputable third party.
To summarize, there are numerous situations in which it may make sense to invest part of your cash in a solid asset, and if you don’t want to deal with the trouble of exporting to your native fiat currency, the pegged alternative may be the way to go. This not only provides good financial protection, but it also provides you with purchasing possibilities in order to mitigate risk.
Disclaimer: The author’s thoughts and comments are solely for educational reasons and informative purposes only. They do not represent financial, investment, or other advice.