What is Fiat-pegged Cryptocurrency?
Fiat-pegged cryptocurrencies (also sometimes called fiat-pegged stablecoins) refer to a digital asset or currency created on a blockchain but are pegged to the value of a top national currency such as the United States Dollar(USD), EURO(EUR), or the Great Britain Pounds (GBP).
Fiat-pegged cryptocurrencies can also be a digital representation of these fiat currencies although they might not be issued by any government body or backed by a central bank. Private organizations holding these wads of money create these digital coins as a safe haven for market traders to quickly hold their assets during unstable and high volatility market events.
Tether (USDT), for example, is one of the biggest fiat-pegged cryptocurrencies, which boasts having every issued token backed by a USD. Hence, it is always priced at $1. In theory, the company Tether must have dollar reserves to protect against massive losses if there happen to be any attacks on the digital token.
Also, fiat-pegged cryptocurrencies can not be traded for any profit. It is best to consider them as digital assets or representations of a top fiat currency, and the developers behind any stablecoin project make money off minute transactions fees.
In essence, these kinds of crypto coins are expected to have long-term price stability and shield crypto traders against the unpredictable price volatility of the crypto market.
What Is a Stablecoin?
Stable coins are cryptocurrencies with little or no volatility, such as USD Tether, USD Coin, DAI, etc. These coins were created to help weather the volatility storms associated with the crypto market and are usually backed by a major fiat currency, real-world asset or commodity, etc.
A fiat-pegged cryptocurrency is a type of stablecoins as well as gold-backed cryptocurrencies.