Custodial lending means a third party holds your assets; non-custodial lending means your assets remain under your control or locked in a verifiable smart contract.
Custodial lending means a third party holds your assets; non-custodial lending means your assets remain under your control or locked in a verifiable smart contract. Lygos uses the strongest form of non-custodial security available: Discreet Log Contracts on the Bitcoin blockchain. Unlike multisig approaches that still require human coordination, DLCs are fully automated and every possible outcome is pre-signed. Your BTC never touches a Lygos wallet.
In custodial lending, borrowers transfer their Bitcoin to the lender, who holds it in their own wallets and infrastructure. The borrower must trust that the lender will safeguard the collateral and return it upon loan repayment. Platforms like Celsius, BlockFi, Nexo, and Ledn operate custodially. In non-custodial lending, the collateral is locked in a smart contract or multi-signature arrangement where the lender cannot unilaterally access the funds. Unchained uses 2-of-3 multisig (where the borrower holds one key); Lygos uses Discreet Log Contracts where all outcomes are pre-signed. The 2022 collapse of Celsius and BlockFi demonstrated the catastrophic risk of custodial models, with billions in customer assets frozen in bankruptcy.
Lygos uses the strongest form of non-custodial security available: Discreet Log Contracts on the Bitcoin blockchain. Unlike multisig approaches that still require human coordination, DLCs are fully automated and every possible outcome is pre-signed. Your BTC never touches a Lygos wallet.
| 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) |
| APR | 10% | 9.99–11.49% | 2.9%+ (loyalty tier dependent) | 14.18% |
Understanding Custodial vs. Non-Custodial Lending helps you assess the real risks of Bitcoin lending. The difference between custodial and non-custodial models isn't just marketing. It's the difference between trusting a company and trusting cryptography.
Starting at 10% APR, $0 origination fees, and DLC-secured collateral on the Bitcoin blockchain.