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A suitable peg compound can greatly improve the way the pegs of a stringed instrument perform. A good peg compound should enable the peg to turn smoothly whilst also allowing the peg to have enough friction to stay put under the pull of the string.
There is one big proviso though, the pegs must be good quality and fitted properly. No peg compound will make up for badly fitting pegs.
For a very long time, chalk and hard soap has been used as a basic compound. These can be a bit extreme especially if not used judiciously. They can also be used with some but not all commercial peg compounds.
Which peg compound you prefer may depend on factors like the type of wood used for the peg, the taper of the peg, the atmospheric conditions and the type of strings you have on your instrument.