DeFi (Decentralized Finance)

What is DeFi?

Financial services built on blockchain protocols that operate without traditional intermediaries like banks or brokerages. Lygos is often compared to DeFi lending but operates on a fundamentally different model. While DeFi requires bridging Bitcoin to another chain (introducing bridge and smart contract risk), Lygos operates directly on the Bitcoin blockchain using DLCs. There is no bridging, no wrapping, and no exposure to Ethereum smart contract vulnerabilities. Lygos achieves the trustlessness DeFi promises while keeping your BTC on its native chain.

Full Definition

Decentralized Finance (DeFi) refers to financial applications built on programmable blockchains, primarily Ethereum, that replicate traditional financial services (lending, borrowing, trading, insurance) without centralized intermediaries. DeFi protocols use smart contracts to automate financial operations. While DeFi offers transparency and composability, it introduces smart contract risk (bugs in code can lead to loss of funds), oracle manipulation risk, and governance attack risk. DeFi lending protocols like Aave and Compound allow permissionless borrowing but typically require wrapped or bridged assets, and operate on chains other than Bitcoin's base layer.

How Lygos Uses This

Lygos is often compared to DeFi lending but operates on a fundamentally different model. While DeFi requires bridging Bitcoin to another chain (introducing bridge and smart contract risk), Lygos operates directly on the Bitcoin blockchain using DLCs. There is no bridging, no wrapping, and no exposure to Ethereum smart contract vulnerabilities. Lygos achieves the trustlessness DeFi promises while keeping your BTC on its native chain.

How Lenders Compare

	Lygos	Ledn	Nexo	Unchained
Technology	Discreet Log Contracts (Bitcoin-native)	Centralized custody	Centralized custody	2-of-3 multisig (manual)
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
APR	10%	9.99–11.49%	2.9%+ (loyalty tier dependent)	14.18%

Full comparison

Why this matters for borrowers

Understanding DeFi (Decentralized Finance) provides context for how Bitcoin lending fits into the broader financial ecosystem. DeFi concepts are reshaping how people think about borrowing and lending.

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