Definition
A peg-in is the act of moving bitcoin from the main chain onto a federated Bitcoin sidechain such as Liquid, where it becomes Liquid Bitcoin (L-BTC). The user sends BTC to a special deposit address derived from the federation's multisignature script. Once the deposit confirms, an equal amount of L-BTC is issued on the sidechain, backed one-to-one by the locked bitcoin. No new bitcoin is created; the supply on the main chain is simply immobilized while its sidechain representation circulates.
Why 102 confirmations
The functionaries that operate the federation wait for 102 confirmations on the Bitcoin network before crediting L-BTC. This deep confirmation depth protects the federation against a deep chain reorganization that could otherwise let a depositor double-spend the very BTC backing the freshly minted L-BTC. The trade-off is roughly 17 hours of waiting, which is why exchanges and traders often keep a working balance of L-BTC rather than pegging in repeatedly.
Trust assumptions
Unlike a self-custodial Lightning channel, a peg-in hands custody of the underlying bitcoin to the federation's multisig for as long as the L-BTC stays on the sidechain. The peg is only as honest as the federation members; the user trades the trustlessness of base-layer Bitcoin for faster settlement, confidential amounts, and asset issuance. Understanding that boundary is essential before parking sovereign-stack funds on any sidechain.
Reversing the process is a peg-out, and the entities that authorize both directions are the network's functionaries.
In Simple Terms
A peg-in is the act of moving bitcoin from the main chain onto a federated Bitcoin sidechain such as Liquid, where it becomes Liquid Bitcoin…