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Glossary

Cold Storage

Keeping Bitcoin private keys offline, disconnected from the internet, to protect against hacking and theft.

What is Cold Storage?

Keeping Bitcoin private keys offline, disconnected from the internet, to protect against hacking and theft. With Lygos, the question of cold vs. hot storage becomes irrelevant for your collateral. Your BTC is locked in a DLC on the Bitcoin blockchain itself. It's not in anyone's wallet, hot or cold. The collateral exists in an on-chain contract that can only be resolved according to pre-signed outcomes. This is a fundamentally different security model than trusting a custodian's cold storage practices.

Full Definition

Cold storage refers to keeping Bitcoin private keys on devices or media that are not connected to the internet, such as hardware wallets, paper wallets, or air-gapped computers. Cold storage is considered the gold standard for securing large Bitcoin holdings because it eliminates the attack surface that internet-connected ('hot') wallets expose. However, cold storage creates a tradeoff: the Bitcoin is maximally secure but completely illiquid, and accessing cold-stored BTC for any purpose requires a manual signing process. Many custodial lending platforms claim to use cold storage, but this still means a third party controls the keys.

How Lygos Uses This

With Lygos, the question of cold vs. hot storage becomes irrelevant for your collateral. Your BTC is locked in a DLC on the Bitcoin blockchain itself. It's not in anyone's wallet, hot or cold. The collateral exists in an on-chain contract that can only be resolved according to pre-signed outcomes. This is a fundamentally different security model than trusting a custodian's cold storage practices.

How Lenders Compare

LygosLednNexoUnchained
CustodyNon-custodial (DLC)CustodialCustodialCollaborative multisig
Rehypothecation0% (impossible by design)100%. Your BTC may be lent outYes, platform re-lends assetsNo
TechnologyDiscreet Log Contracts (Bitcoin-native)Centralized custodyCentralized custody2-of-3 multisig (manual)
Full comparison

Why this matters for borrowers

Understanding Cold Storage helps you evaluate how different platforms handle your Bitcoin. Not all custody models are equal, and the technical details determine whether your BTC is truly safe.

Related Terms

Non-CustodialCustodial vs. Non-Custodial LendingMultisig (Multi-Signature)

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