Pegged: A Proof-of-Luck Protocol for Denominated Stable Money

A Structural Response to the Capture of Currency Issuance by Replacing Merit and Control with Access and Chance

5. Peg Maintenance and Value Logic

Pegged uses its proprietary stable-denominated tokens, such as €PEG or $PEG, as the only currency for entry and payout in draws. These tokens are not backed by reserves or collateral. They are not stabilized through algorithmic mechanisms or monetary governance. Pegged does not guarantee that €PEG equals one euro. Instead, it allows the value of #PEG tokens to emerge from how they are used.

Each draw contract specifies an entry amount in a given #PEG token. When users participate, they send that amount. The total sum collected—the inlay—is locked in the contract. After the draw is resolved, the contract pays out the winnings directly from this inlay.

Not all of the inlay is returned. Some of it is lost to what Pegged calls draw friction. Friction is the full participation cost. It includes everything that reduces the effective payout: technical fees, economic overhead, and conversion losses. To make this visible, Pegged defines a single reference metric: the Pay Out Ratio, or POR.

The POR is calculated as:

POR = (Total Inlay – Draw Friction) / Total Inlay

The result is a percentage. A POR of 100% means the entire inlay is returned to winners. In practice, this is never possible. All systems have friction. But Pegged makes this loss explicit and measurable.

Draw friction typically includes:

1. Protocol Execution Costs These are the on-chain costs required to run the draw contract. They include:

• Transaction (gas) fees
• Randomness generation (e.g., verifiable random functions or oracle feeds)
• Possible contract deployment or operational costs

2. Peg Maintenance Costs These reflect the effort and margin required to keep #PEG tokens liquid and close in value to their reference unit. They may arise from:

• Liquidity provisioning: Users often swap other assets (e.g., USDT, ETH) into #PEG via decentralized exchanges. These swaps require liquidity providers, who are compensated through fees or spreads.
• Interface or access margins: Some wallets or front-ends may offer convenience, fiat access, or multi-language support, and charge a fee for it.
• Local distribution risk: In some regions, intermediaries offer access via QR codes or paper wallets. These actors may charge extra to cover volatility risk or storage losses.

3. Conversion Costs When non-#PEG tokens are converted into #PEG before draw entry, swap fees, slippage, or rate spreads may apply. Though these occur outside the draw contract, they affect the overall cost to participate and are experienced as part of friction.

To make this concrete: imagine a draw collects €PEG 1,000. If it pays out €PEG 950, the POR is 95%. If only €PEG 700 is returned, the POR drops to 70%. The higher the POR, the more attractive the draw. Participants can compare PORs across draws or platforms before deciding to play.

This comparison reveals the structural difference between Pegged and traditional lotteries. National lotteries such as ONCE or Française des Jeux often have effective payout ratios below 55%. Nearly half of the ticket price is absorbed by administrative, promotional, or tax costs. In Pegged, these roles do not exist. Each draw is a self-contained contract. There is no administration. No middle layer. The only costs are structural.

This is also what makes #PEG tokens economically legible. When a €PEG token is used to enter a draw with a POR of 94%, it delivers 94 cents of redistribution in a euro-referenced context. That value is not promised by the protocol. It is experienced by the participant. Over time, if draws consistently behave like this, users begin to treat €PEG as roughly equivalent to the euro. Not because it is declared to be, but because it behaves accordingly.

This is Pegged’s central approach to valuation. It does not enforce parity. It allows a peg to emerge. If the protocol is used, and the use remains efficient, the reference value is preserved in practice. If the system degrades, no peg holds.

Conventional stablecoins attempt to maintain their price through reserves, governance, or algorithmic adjustment. Pegged uses none of these. It uses behavior. The peg is not managed. It is observed. And if it holds, it holds because users decide it is worth holding.

Pegged offers no stability mechanism. But it offers visibility. Each draw shows how much is lost, how much is redistributed, and how the token performs. The peg is not a fixed point. It is a pattern that may or may not persist. It does not rest on trust. It rests on use.