Peg-Out

A peg-out is the reverse of a peg-in: a participant burns Liquid Bitcoin (L-BTC) on the sidechain and receives an equal amount of native bitcoin on the main chain. The federation's watchmen verify the request, then sign a Bitcoin transaction spending from the federation multisig back to the user. This is how value exits the sidechain and returns to base-layer Bitcoin's trustless settlement.

The Peg-out Authorization Key

Peg-outs are permissioned. Each withdrawal must reference a Peg-out Authorization Key (PAK) tied to the participant's wallet through a BIP32 derivation, and the destination must match an entry on the federation's approved PAK list. Adding or changing PAK entries takes roughly three days to take effect, a deliberate delay that prevents an attacker who briefly compromises a member from instantly redirecting withdrawals. In practice, regular Liquid users peg out indirectly through exchanges or licensed members rather than running the PAK machinery themselves.

Timing and batching

Watchmen process peg-outs in batches, typically completing within roughly 11 to 35 minutes depending on network conditions, far faster than a peg-in's 102-confirmation wait. The asymmetry exists because creating L-BTC carries reorganization risk, whereas releasing already-locked bitcoin does not.

The signing entities are the network's functionaries, and the inbound counterpart of this flow is the peg-in.