Soft Peg
A target exchange rate a stablecoin aims to track closely without an absolute guarantee, allowing for some tolerated deviation.
A soft peg is a target exchange rate — commonly 1:1 with a reference fiat currency — that a stablecoin aims to track closely, without providing an absolute, ironclad guarantee of maintaining that exact rate at all times, allowing for some tolerated, typically small deviation.
Most crypto stablecoins operate with a soft peg in practice, since maintaining an absolutely rigid hard peg (see Kaavon's "Hard Peg" glossary definition) generally requires mechanisms or guarantees most crypto-native designs don't actually provide — see Kaavon's "Why Stablecoins Depeg" guide for how and why even a soft peg can come under real stress.
Examples
- A stablecoin with a soft peg might trade at $0.998 or $1.002 during normal conditions, without this being considered a genuine depeg event.
- Most crypto stablecoins operate with a soft peg in practice, rather than an absolute, ironclad guarantee of an exact fixed rate.