Self-Custody

What is Self-Custody?

The practice of personally holding and controlling the private keys to your Bitcoin, without relying on any third party. Lygos bridges the gap between self-custody and liquidity access. While your BTC is in a Lygos DLC, it's not in your personal wallet, but it's not in Lygos's wallet either. It exists in an on-chain smart contract with pre-defined, immutable outcomes. When your loan is repaid, your Bitcoin returns to your self-custody wallet. This is the closest thing to maintaining self-custody while accessing liquidity.

Full Definition

Self-custody means you hold and control the private keys to your Bitcoin yourself, whether in a hardware wallet, software wallet, or other personal key management system. Self-custody is the most secure model for Bitcoin ownership because it eliminates all counterparty risk. No exchange, lender, or custodian can freeze, seize, or lose your funds. However, self-custody also means you bear full responsibility for key security. If you lose your keys or seed phrase, your Bitcoin is irrecoverable. The tension between self-custody security and the need for liquidity is the core problem that Bitcoin-backed lending solves.

How Lygos Uses This

Lygos bridges the gap between self-custody and liquidity access. While your BTC is in a Lygos DLC, it's not in your personal wallet, but it's not in Lygos's wallet either. It exists in an on-chain smart contract with pre-defined, immutable outcomes. When your loan is repaid, your Bitcoin returns to your self-custody wallet. This is the closest thing to maintaining self-custody while accessing liquidity.

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)

Full comparison

Why this matters for borrowers

Understanding Self-Custody helps you evaluate how different platforms handle your Bitcoin. Not all custody models are equal, and the technical details determine whether your BTC is truly safe.

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