What Is the Difference between Hard and Soft Pegs for Stablecoins? ▴ Learn

What Is the Difference between Hard and Soft Pegs for Stablecoins?

A hard peg means the stablecoin issuer or protocol guarantees a strict 1:1 redemption for the underlying asset, typically fiat currency, maintaining a very tight trading band. A soft peg allows the stablecoin to fluctuate within a small range around the target value, often using algorithmic or decentralized mechanisms to maintain the target, but without a direct, guaranteed redemption.

Most decentralized stablecoins use a soft peg.

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