What are the potential drawbacks of a digital currency with no pegging?

3 answers

• Dec 18, 2021 · 3 years ago
  One potential drawback of a digital currency with no pegging is the lack of stability. Without a peg to a stable asset or currency, the value of the digital currency can be highly volatile. This volatility can make it difficult for businesses and individuals to use the currency for everyday transactions, as the value could change significantly from one day to the next. Additionally, the lack of stability may discourage widespread adoption of the digital currency, as people may be hesitant to hold or use a currency that is subject to such large price fluctuations.
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• Dec 18, 2021 · 3 years ago
  Another potential drawback is the potential for manipulation. Without a peg, the value of the digital currency is determined solely by market forces. This opens up the possibility for market manipulation, as individuals or groups with large holdings of the currency could potentially manipulate the price to their advantage. This could create an unfair playing field and undermine the trust and credibility of the digital currency.
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• Dec 18, 2021 · 3 years ago
  From BYDFi's perspective, a digital currency with no pegging can offer advantages in terms of decentralization and freedom from government control. However, it's important to recognize that without a peg, the currency may be more susceptible to market volatility and manipulation. It's crucial for users to understand and carefully consider the potential risks and drawbacks before investing or using such a currency.
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