Quote from: s.matthew.english on September 26, 2016, 11:58:25 AM

When the government of Argentina says they're going to peg the peso to the US dollar that means that if you come and give them a peso they will give you a US dollar in return. That's a 1 way peg.

A 2 way peg would mean you could get a peso for a dollar in the US and you could get a dollar for a peso in Argentina.

With cryptocurrencies a peg can't function this way since there isn't any authority, such as a national government, who can make such a commitment.

So what are we talking about when we say 2 way peg?

We were a bit worried about this point of confusion when we used the word "peg" in the sidechains whitepaper, but it was the cleanest word we could come up with. You're right that in the finance world, a peg between two different assets requires some authority to maintain the peg (and they do so basically by fighting every market movement, at cost to themselves). This is how sidechains work on a technical level, but not on a moral one.

A sidechain peg is not between two separate currencies, like Ethereum and Bitcoin. It is between the same currency on different blockchains. For example, there is a testnet sidechain, Elements Alpha, out there. You can distinguish between "testnet coins on the testnet chain" and "testnet coins on Alpha", and these are technically distinct entities, but every coin on Alpha is 100% backed by a locked coin on testnet, and using the peg mechanism you can swap a testnet coin on Alpha for one of its backing coins on testnet. So there can't be market movements of the coins on one chain relative to the other, except up to time-preference since the peg is slow, otherwise people will arbitrage out any price difference using the peg.