Peg
The target price a stablecoin is designed to maintain, typically $1.00 for dollar-pegged stablecoins.
When people say USDC is "pegged" to the dollar, they mean it's designed to always be worth $1. The peg is maintained through a simple mechanism: you can always mint 1 USDC by depositing $1, and you can always redeem 1 USDC for $1. This arbitrage opportunity keeps the market price close to $1.
A "depeg" happens when a stablecoin trades significantly above or below its target price. USDC briefly depegged in March 2023 when Silicon Valley Bank (which held some USDC reserves) collapsed. It returned to $1 within days after the government backstopped depositors. Depegs are rare for well-managed stablecoins but are a key risk to understand.
Related Terms
Stablecoin
A cryptocurrency designed to maintain a stable value, usually pegged 1:1 to a fiat currency like the U.S. dollar.
USDC (USD Coin)
A regulated, fully-backed stablecoin pegged to the U.S. dollar. Each USDC is redeemable for $1.
Reserves
The pool of real-world assets (U.S. Treasuries, cash) held to back each USDC token at a 1:1 ratio.
Mint
The process of creating new stablecoin tokens by depositing an equivalent amount of fiat currency.
Redeem
The process of exchanging stablecoin tokens for their underlying fiat currency value, effectively burning the tokens.
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This definition is provided for educational purposes. USDC.org is an independent resource and is not affiliated with Circle Internet Financial.