Peg-Out

Peg-out is the process of moving value off the Liquid sidechain and back onto the Bitcoin main chain: a participant burns Liquid Bitcoin (L-BTC) on the sidechain and receives an equal amount of native bitcoin from the federation's multisig wallet. It is the exact reverse of a peg-in, and together the two flows are what let a sidechain borrow bitcoin's monetary properties without minting a new asset. When you peg out, the L-BTC is provably destroyed on Liquid, and the federation's watchmen sign a Bitcoin transaction that releases the corresponding coins from the federation multisig back to an address you specify.

The Peg-out Authorization Key

Peg-outs are permissioned, and this is the part that surprises people expecting a symmetrical bridge. 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 federation member from instantly redirecting withdrawals to themselves. In practice, regular Liquid users peg out indirectly through exchanges or licensed federation members rather than running the PAK machinery themselves. That indirection is convenient, but it means the everyday exit path runs through intermediaries, which matters if you are keeping score on self-custody.

Timing and batching

The federation's 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, which takes around 17 hours. The asymmetry is intentional. Creating L-BTC carries reorganization risk: if the main-chain deposit that backed a peg-in were reorged away, the sidechain would hold unbacked L-BTC. Releasing already-locked bitcoin carries no such risk, because the coins have been sitting in the federation multisig the entire time. Burning L-BTC on Liquid's fast, federated blocks is final within minutes, so the watchmen only need to confirm the burn before signing the release.

What the trust model really is

A peg-out makes Liquid's trust assumptions concrete. Your ability to exit depends on a threshold of functionaries remaining honest and online, and on your withdrawal path being PAK-approved. That is a real trade against base-layer Bitcoin, where spending your own UTXO requires nobody's permission. For a sovereign Bitcoiner the honest framing is: Liquid is a tool for fast, confidential transfers between counterparties who accept federated custody, and the peg-out is the moment you convert that federated IOU back into bearer-asset bitcoin. Funds you intend to hold long-term belong on the main chain, in cold storage you control, not parked on any sidechain — however well-engineered its exit ramp.

Costs and practical routes

A peg-out is never free. The user pays a Liquid transaction fee to burn the L-BTC, and the federation's release transaction pays main-chain fees that ultimately come out of the withdrawn amount, so small peg-outs can lose a meaningful percentage to overhead. Providers that front the peg-out for retail users add their own spread on top, and most enforce minimum withdrawal sizes for exactly this reason. The practical decision tree is straightforward: if you already have an account relationship with an exchange that supports Liquid, depositing L-BTC and withdrawing on-chain is usually the cheapest exit; if you are avoiding custodians entirely, swap services can move L-BTC to main-chain bitcoin atomically, trading a service fee for never touching an account. Either way, plan exits around fee conditions on the main chain — the federation's transaction competes for block space like everyone else's, and a congested mempool makes every path more expensive.

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