Pegged Tokens vs Backed Tokens

When looking at tokens it is sometimes beneficial to see if tokens are pegged or backed by any other asset besides HIVE.

In the screenshot above, one can see all of the tokens on the Hive-Engine which are pegged to other assets varying from Bitcoin to Litecoin to Telos, even BLURT can be pegged.

This means that if you hold a pegged token, it is supposed to hold its value in comparison to the other coin.

If you buy one LTC worth of LTC Pegged, you should always have one LTC worth of token, no matter what happens to the price of Hives or the Token or LTC.

The HBD for example is always supposed to be pegged to the US Dollar,

If you hold 10 HBD, then you are supposed to have 10 US dollars worth of HBD.

It is nearly impossible to keep a token 100% pegged as there are different factors that go into a token price. However, one can try. HBD has seemed to do a good job as the price stays pegged at around a US Dollar.

The SBD is always supposed to be worth ONE US Dollar as well. Historically however, it has been unstable going up and down and all around.

The peg of a token is only as strong as the market says it is. You can manipulate the market to try to make the peg be consistent, but at the end of the day, the market does what the market wants to do.

If you have an example of a pegged system that is foolproof, I would like to read about it.

A Backed Token is different

Backed tokens are different.

Take SPI Tokens for example.

One SPI token is backed by about 1.90HIVES worth of assets.

For every SPI token, there is HIVE, Bitcoin, Tether, Silver, LEO Coins, and other assets that back the price.

If one of the assets that backs the token moons, the SPI token moons with it.

If one of the assets that backs the token fails, the SPI token falls with it.

However the value of an SPI token is not married to the value of BTC or Tether or Silver. The SPI token can take off in value of its own, and it will still be backed by the same amount of assets.

Thank you for taking the time to read about the difference between pegged and backed tokens. I hope this makes it easier to make decisions when buying tokens on the HIVE-Engince

Posted Using LeoFinance