A peg-in locks BTC on Bitcoin and enables a corresponding sidechain asset; a peg-out burns or locks that asset and releases BTC under bridge rules that Bitcoin usually cannot fully validate by itself.
A sidechain has its own genesis block, nodes, history, mempool and validity rules. Its reorg or invalid block does not rewrite Bitcoin, but it can reverse local transactions, break applications and endanger claims on BTC held by the peg.
A peg-in locks a mainnet UTXO under a bridge script or keys and creates a representation such as L-BTC or rBTC on another ledger. The same UTXO does not cross databases; 1:1 integrity depends on issuance and withdrawal accounting.
A sidechain can verify a Bitcoin deposit from headers and an SPV proof, while unchanged Bitcoin normally cannot validate arbitrary sidechain state. Returning funds therefore often needs a federation, specialized hardware or another mechanism with separate assumptions and delays.
The original paper describes an SPV two-way peg; production systems use federations, hybrid pegs or merge mining. Drivechain BIP 300 proposes slow hashrate-voted withdrawal bundles. Each model changes theft, freeze, censorship and exit-liveness risks.
Block producers and the parties able to release locked BTC need not be the same set. Hashrate may order sidechain blocks while peg-outs need watchman signatures, so audits must separate chain consensus, bridge custody, key rotation and emergency procedures.
Liquid runs on Elements with a Strong Federation: functionaries sign blocks and watchmen operate the Bitcoin peg. L-BTC represents locked BTC; faster blocks, Confidential Transactions and asset issuance come with different trust and exit-availability assumptions.
Rootstock is an EVM sidechain whose blocks receive Bitcoin merge-mining work. Peg-ins verify Bitcoin evidence, while a bridge contract and functionary PowHSM devices coordinate peg-outs; rBTC therefore combines hashrate, software, hardware and operational assumptions.
BIP 300 specifies hashrate escrows and slow miner-approved withdrawal bundles; BIP 301 specifies blind merged mining. On 30 August 2026 both remain Draft and are not Bitcoin Core consensus features, so a test implementation is not mainnet activation.
Lightning locks BTC in Bitcoin channels and enforces state with Bitcoin scripts; a sidechain maintains a separate blockchain. A rollup posts data or proofs to a parent layer, while a statechain transfers UTXO control differently. The layer 2 label alone proves no security property.
Identify who holds peg keys, the signing threshold, membership and software upgrade powers, peg-out delay, and responses to censorship or outage. Verify address format, fee asset, confirmations, limits, node options, backups and a small round trip; a peg is not a Bitcoin guarantee. Enabling Blockchain Innovations with Pegged Sidechains · Liquid Network — Technical Overview · Liquid Network — How Liquid Works · Elements Project — blockchain platform · Rootstock — Foundations · Rootstock — PowPeg protocol · BIP 300 — Hashrate Escrows · BIP 301 — Blind Merged Mining
For the clearest picture, read this entry together with Bitcoin, Liquid Network, Proof of Work, Consensus rules, Testnet, Bitcoin Core. The reverse links also lead from Liquid Network, Adam Back.