# Yearn Finance Launches Pegged Token to Mitigate Trade Risk
Yearn Finance is a decentralized finance (DeFi) project that has recently launched its own version of a pegged token in an effort to reduce the risks associated with automated market maker (AMM) trading. The launch of this token is part of a larger mission to make automated market maker trading safer and more secure for its users.
## What Is a Pegged Token?
A pegged token is a type of cryptocurrency that is designed to maintain a stable value. This is achieved by pegging its value to a more stable asset, such as a fiat currency or commodity. For example, Yearn Finance’s pegged token is pegged to the US Dollar.
In addition to providing stability, pegged tokens can also be used to facilitate trading in volatile markets where traders are unable to purchase or sell assets directly due to price fluctuations. This type of token is typically used for hedging purposes, as traders can buy and sell the tokens without being affected by the underlying asset’s price movements.
## Benefits of Yearn Finance’s Pegged Token
One of the main benefits of Yearn Finance’s pegged token is the ability to provide traders with access to liquidity. By having a stable token that is pegged to the US Dollar, traders can easily transfer funds between different currencies without having to worry about exchange rate fluctuations. This is beneficial for traders who want to take advantage of arbitrage opportunities.
Another benefit of Yearn Finance’s pegged token is the reduction of slippage and impermanent loss. Slippage occurs when a trader places an order and the asset does not execute at the expected price, resulting in a loss of funds. Impermanent loss occurs when the price of an asset fluctuates dramatically and the trader is unable to recover their initial investment. Yearn Finance’s pegged token helps to reduce the risk of these losses by providing a stable value that can be used to trade.
Finally, Yearn Finance’s pegged token also provides traders with access to enhanced trading features. For example, the token can be used to access advanced trading strategies such as time-weighted average price (TWAP) or volume-weighted average price (VWAP). These features can help traders to maximize their profits in volatile markets.
Yearn Finance’s launch of its own pegged token is a welcome addition to the DeFi ecosystem. The token provides traders with access to more stable trading strategies, reduces the chances of slippage and impermanent loss, and offers enhanced trading features. As DeFi projects continue to innovate, Yearn Finance’s pegged token will likely become an integral part of automated market maker trading.