Lygos Finance Brings Forward the First Non-Custodial Bitcoin-Backed Lending Platform
Lygos Finance, a prominent name in the crypto space, recently launched its newest venture- a truly non-custodial bitcoin BTC $109,875.57 -backed lending platform. This introduction marks a significant milestone in its mission to revamp the crypto credit market with an institutional-grade protocol.
Discrete Log Contracts: The Building Blocks
The lending platform derives its underlying technology from Discrete Log Contracts (DLCs). Earlier this year, Lygos acquired Atomic Finance, the developer behind these DLCs. These contracts enable bilateral lending agreements on the base layer of Bitcoin, relying on an external oracle for facts like BTC-USD prices, while restricting control over funds. This establishes a Contract Execution Transactions environment, ensuring all settlements occur directly on the Bitcoin blockchain, thereby eliminating the need for custodians or smart contract-related risks.
CEO Jay Patel Expressed Enthusiasm
During its launch, Jay Patel, the CEO of Lygos, explained in detail about the platform. He said, “True non-custodial means exactly this. No participant other than the borrower and lender can move the funds.” The platform is capable of supporting up to $100 million, utilizing BTC collateralized in the inherent 2-of-2 script, and issuing USDC/USDT on Ethereum. Lygos’ model dismisses the need for wrapped bitcoin or synthetic collateral, thereby maintaining custody inherent on both sides of the transaction.
The 2021 Crypto Bull Market and Centralized Lenders
During the 2021 crypto bull market, several centralized lenders like Celsius Network, Voyager Digital, and BlockFi garnered billions in deposits with the promise of high yields. However, this promised abundance often had a risky, interconnected loans foundation.
The system started to show its vulnerabilities in 2022. The combined effects of the Terra-Luna stablecoin collapse and the subsequent bankruptcy of hedge fund Three Arrows Capital (3AC) exposed many of these significant lenders, causing massive withdrawals and subsequent firm’s assets freezing and bankruptcy filing. Many customers lost a lot of their deposited funds, tarnishing the reputation of bitcoin lending severely.
Lygos: Transforming the Bitcoin Credit Market
Lygos aims to restore faith in bitcoin lending by enforcing agreements directly on the Bitcoin layer 1. By doing so, it intends to present transparent, enforceable contracts while eliminating the reliance on custodians. The launching of this lending platform marks an attempt to redesign bitcoin credit markets using non-custodial rails.
In conclusion, with its non-custodial bitcoin-backed lending platform, Lygos Finance aims to transform the present crypto credit market. By using Discrete Log Contracts and direct enforcement on the Bitcoin layer 1, Lygos strives to provide transparency, efficiency, and trust in crypto-based lending, opening new opportunities in the market.
