Discreet Log Contract (DLC)

What is Discreet Log Contract?

A Bitcoin-native smart contract that enables conditional payments based on oracle-attested outcomes without revealing contract details on-chain. Lygos uses DLCs as the core technology for securing loan collateral. When you borrow against your Bitcoin with Lygos, your BTC is locked in a DLC on the Bitcoin blockchain. All loan outcomes (repayment, liquidation, margin calls) are cryptographically pre-signed before your collateral is committed. This means neither Lygos nor any third party can access, move, or rehypothecate your Bitcoin. It remains native BTC on the Bitcoin blockchain at all times.

Full Definition

A Discreet Log Contract (DLC) is a type of Bitcoin smart contract proposed by Tadge Dryja in 2018. DLCs allow two parties to make conditional payments based on the outcome of an event as determined by an oracle, without revealing the contract details to the oracle or the broader network. The contract pre-signs all possible outcomes before any funds are committed, meaning both parties know exactly what will happen in every scenario. DLCs operate entirely on the Bitcoin base layer, with no sidechains, wrapped tokens, or additional trust assumptions required.

How Lygos Uses This

Lygos uses DLCs as the core technology for securing loan collateral. When you borrow against your Bitcoin with Lygos, your BTC is locked in a DLC on the Bitcoin blockchain. All loan outcomes (repayment, liquidation, margin calls) are cryptographically pre-signed before your collateral is committed. This means neither Lygos nor any third party can access, move, or rehypothecate your Bitcoin. It remains native BTC on the Bitcoin blockchain at all times.

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
Funding Speed	Same day	18hr median	Instant	Not disclosed

Full comparison

Why this matters for borrowers

Understanding Discreet Log Contract (DLC) is essential for evaluating non-custodial lending. This technology is what makes it possible to borrow against Bitcoin without surrendering your keys to a third party.

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