Do NOT put pegboard on your walls with nothing behind it, unless you want to burn the place down.
I weld and do car restoration work in my shop, and did the following:
-Insulated the walls with a foil faced fiberglass insulation I got 2nd hand.
-put up 5 ply, 1/2" plywood, and screwed it to the studs. I left a 1/8" gap between each panel, that I caulked. I also caulked to the concrete.
-Painted it white.
where the chop saw sprays sparks, I put up some stainless sheet I got a good deal on.
Where I wanted pegboard, I put up 1x2 stringers are attached the pegboard to it, over the plywood. This way, there's no dusty nook where a spark can go and fester.