In this episode, Nick Saponaro talks about stablecoins with David Johnston, from PegNet and top thought leaders in DeFi. David is a lifelong entrepreneur that has been building tech companies since his teenage years. His exposure to virtual currency at a young age helped him develop and improve his expertise in the field.
How PEG Works
Most people are familiar with reserve-based stablecoins, which are the same as USD, and theoretically, there are several dollars saved in a bank account. Each dollar has a corresponding token equivalent. However, one cannot assure that there are complete or fractional reserves as well as if a trustworthy person holds these reserves, which resulted in regulations.
People started moving into collateral-based stablecoins, and the challenges include having to over collateralize at least 1.5 to 2 times the collateral due to volatility. PEG and PegNet come into the picture are both a third way of handling stablecoins that’s consensus-based. The algorithm for the PegNet software ranks depending on which user has the most significant hash power. It also operates by ranking prices that are closest to the medium. Overall, PegNet rewards users for their work plus accurate data. Every ten minutes, the whole PEG network runs a consensus depending on the prices that several global markets release, thus creating the first-ever decentralized oracle.
StableCoin Issues That PEG Is Solving
The biggest issue that PEG helps solve is both the reserve and collateral problem. If people can start transitioning to a consensus-based system, they no longer have to deal with issues that can potentially be a cause of money loss. PegNet allows users to operate even without a mediator.
Are There Other Programs Similar To That Of PEG’s?
As of now, PEG is the only program that focuses on decentralization. While other companies are trying to emulate the idea that PEG has established in the industry, being able to focus on stable coins and everything around it is a product of PEG overall.