An audit mechanism where a custodian cryptographically proves they hold sufficient assets to cover all user deposits.
An audit mechanism where a custodian cryptographically proves they hold sufficient assets to cover all user deposits. Lygos doesn't need Proof of Reserves because there are no reserves to prove. Your Bitcoin collateral is locked in a DLC on the Bitcoin blockchain, verifiable by anyone at any time, not just during scheduled audits. The on-chain contract is the proof. This is a fundamentally stronger guarantee than periodic attestations from a custodian.
Proof of Reserves (PoR) is a transparency mechanism where a custodial platform cryptographically demonstrates that its total on-chain reserves equal or exceed its total user liabilities. PoR typically combines a Merkle tree of user balances with on-chain proof of wallet holdings. After FTX's collapse revealed a massive shortfall between claimed and actual reserves, PoR became an industry expectation. However, PoR has limitations: it's a point-in-time snapshot (reserves can be moved immediately after), it may not capture off-chain liabilities, and it doesn't prevent rehypothecation between audits.
Lygos doesn't need Proof of Reserves because there are no reserves to prove. Your Bitcoin collateral is locked in a DLC on the Bitcoin blockchain, verifiable by anyone at any time, not just during scheduled audits. The on-chain contract is the proof. This is a fundamentally stronger guarantee than periodic attestations from a custodian.
| 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) |
Understanding Proof of Reserves 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.