I am trying to understand is there a better solution to this pegging to government-controlled fiat currencies.
"Pegged" means that the values are kept in sync. A USD stablecoin is "pegged" to the value of USD. Bitcoin is not "pegged" to anything.
The price being quoted in a particular currency does not mean that it is "pegged" to that currency. You can buy bitcoins with any currency. You can state its price in any currency. Its value changes with respect to those currencies, therefore it not pegged.
People use the word "fiat" to mean different things , such as
- 1. controlled by a government
- 2. has a value that can arbitrarily be set by some entity
- 3. has a value not based on the value of anything else
Bitcoin is not a fiat currency with respect to the first two definitions, but it is a fiat currency according to #3.
Given all that, can you restate your original point more clearly?