What Is a Hard Peg?
A hard peg is a strict fixed link between one currency and another asset or currency, meaning the value does not fluctuate relative to its reference. In a hard peg, the price relationship is maintained at a constant level, and the issuing system commits to keeping that value intact through rules, reserves, or policy.
In traditional finance, a hard peg might mean a currency is fixed at a set rate against another. For example, one unit of currency always equals a defined amount of another currency or commodity. Because the value is fixed, the pegged asset does not move with market forces, providing stability and predictability for users.
In the context of stablecoins or digital assets, a hard-pegged token is designed to maintain an exact, unwavering value relative to its target, such as a 1:1 peg to a fiat currency. Maintaining a hard peg often requires robust backing and mechanisms to absorb market pressure.
Hard pegs help reduce volatility and provide certainty, which is useful for payments, accounting, and everyday transactions.
