Definition
A federated peg is the trust model that lets bitcoin move between the main chain and a sidechain without changing Bitcoin's consensus rules. Rather than a fully trustless mechanism, a defined group of members, the federation, holds the deposited bitcoin in a multisignature wallet and collectively signs both the creation of sidechain coins and their eventual redemption. Liquid popularized this design, sometimes branded a "Strong Federation."
Honest-majority security
The peg remains secure as long as more than a threshold of the federation behaves honestly; on Liquid that is an 11-of-15 multisig, equivalent to needing roughly two-thirds of members. Because the membership is known and uses tamper-resistant hardware, the system gains Byzantine fault tolerance against a minority of compromised or offline signers, while accepting that custody is permissioned rather than self-sovereign. This is a fundamentally different trust posture from base-layer Bitcoin, and the distinction matters to anyone designing a sovereign holding strategy.
Why use one
The federated model buys properties the base chain does not offer natively: one-minute deterministic blocks, fast two-confirmation finality, confidential amounts and asset types, and permissionless token issuance. The cost is a custody assumption and the deep 102-confirmation peg-in delay that guards against reorganizations.
The members that operate the peg are the functionaries, and value enters and exits through a peg-in and peg-out.
In Simple Terms
A federated peg is the trust model that lets bitcoin move between the main chain and a sidechain without changing Bitcoin’s consensus rules. Rather than…