Collateral

What is Collateral?

An asset pledged by a borrower to secure a loan, which the lender can claim if the borrower defaults. With Lygos, your Bitcoin collateral is locked in a Discreet Log Contract on the Bitcoin blockchain. It is never converted to a wrapped token, never moved to a custodial wallet, and never commingled with other users' funds. Your collateral remains isolated, native BTC throughout the entire loan term. If Lygos ceased operations, your collateral would remain secured on-chain, accessible via the pre-signed contract transactions.

Full Definition

Collateral is an asset that a borrower offers to a lender as security for a loan. If the borrower fails to repay, the lender has the right to seize the collateral to recover the outstanding debt. In Bitcoin-backed lending, the collateral is Bitcoin (BTC). The amount of collateral required is determined by the Loan-to-Value (LTV) ratio. For example, at 50% LTV, a borrower must post $200,000 in Bitcoin to receive a $100,000 loan. Collateral management (how it is held, who controls it, and whether it can be rehypothecated) is the single most important factor in evaluating a Bitcoin lending platform.

How Lygos Uses This

With Lygos, your Bitcoin collateral is locked in a Discreet Log Contract on the Bitcoin blockchain. It is never converted to a wrapped token, never moved to a custodial wallet, and never commingled with other users' funds. Your collateral remains isolated, native BTC throughout the entire loan term. If Lygos ceased operations, your collateral would remain secured on-chain, accessible via the pre-signed contract transactions.

Collateral Calculator

Full calculator

Loan Amount

$50K$250,000$5M

BTC required

5.00 BTC

$500,000

Monthly interest

$2,083

at 10% APR

At 50% LTV, your collateral is always worth 2× your loan — providing significant downside protection.

Loading live BTC price... $100,000

How Lenders Compare

	Lygos	Ledn	Nexo	Unchained
Custody	Non-custodial (DLC)	Custodial	Custodial	Collaborative multisig
Rehypothecation	0% (impossible by design)	100%. Your BTC may be lent out	Yes, platform re-lends assets	No
Technology	Discreet Log Contracts (Bitcoin-native)	Centralized custody	Centralized custody	2-of-3 multisig (manual)
LTV	50%	50%	50% (BTC)	50% (200% CTP)

Full comparison

Why this matters for borrowers

Understanding Collateral is critical when comparing loan offers. This concept directly affects how much you pay, how much collateral you need, or what happens if market conditions change during your loan.