Understanding Bitcoin-Backed Loans Series
Part 3 of 4: Custody Models for Bitcoin-Backed Loans
Today's topic is a 🌶️ one: CUSTODY.
There’s a common perception amongst the community that using collaborative custody for loan collateral is the gold (or bitcoin 😉) standard. But, it’s not that simple… things get tricky.
Here's why 👇🏽
Imagine a Bitcoin loan where the borrower uses multisig for security. Sounds great for them, right? But what if the roles were reversed? Would YOU be comfortable giving up full control of your Bitcoin for a loan where dollar collateral is locked in a multisig bank account? Probably not.
That's a massive imbalance. 🚨
For lenders (especially banks), the dollar collateral is key. They need control and easy access to move those funds. Multisig in its current form makes that difficult.
This lack of control and cumbersome processes are why banks are hesitant to offer Bitcoin-backed loans. It's just not feasible for them right now.
The result? Limited loan options for Bitcoin holders.
There are borrowers, but capital providers (like banks) are staying on the sidelines.
That, of course, is where Ledn comes in.
Learn more about our Standard and Custodied loan options by visiting ledn.io/borrowing
Stay tuned for Part 4: Bitcoin-Backed Loan Options.
#Bitcoin #CryptoLoans #Ledn #FinancialFreedom #CryptoSeries #InvestSmart