On October 19, the Peg Network was announced. The Peg Network is a one of its kind protocol to create customized asset-pegged tokens. With it, users can create an ERC-20 token pegged to anything of their choice, ranging from currency, commodity or an underlying asset.
One of the marketing representatives of the Peg Network explained the usability of Peg. He explained how it can be of use for the bankers who are looking to move into blockchain-based products along with its usage in foreign exchanges and local businesses. He said while talking to BlockPublisher:
– Fund managers and bankers adopting into blockchain-based derivative products.
– Exchanges wishing to deal with foreign currencies (forex).
– Businesses needing a stable form of currency which would allow customers to pay for services and goods.
The Peg Network adds to a current system of stablecoins, which are pegged to the U.S. dollar. The advantage of such a mechanism is to take decentralization benefits of the blockchain, along with the price stability character of the fiat currencies. With a Peg Instance established, any user can issue themselves asset-pegged tokens, placing a loan corresponding to the number of newly-mined tokens. Once this loan is paid, the pegged collateral is released.
Peg Network has also developed market related mechanisms to ensure that the asset-pegged tokens meet the real price of the underlying asset. These mechanisms are known as debt scaling and wallet scaling. If the token price falls below the price threshold, the amount of debt owed is increased. This incentivizes users to buy tokens at discounts to repay their loan.
In opposition, if the token price falls below targeted price, wallet holders will see their token balances increased, which would compel them to buy more tokens to generate more bonus tokens. These manual market mechanics help push price of the asset pegged token towards that of the underlying asset.
The Peg Network roadmap suggests spreading into other blockchains, having established itself live on Ethereum currently. It also aims to reach cross-chain functionality between a variety of networks.
The full announcement from Peg Network can be found here.