Intelligence
May 7, 2025
Why Lava?
Shehzan Maredia
Introduction
Most bitcoin-backed loans force you to give up control. Lava doesn’t.
Outside of Lava, all other lending platforms force users to give up custody of their bitcoin, rely on third parties, and navigate unnecessary friction like bridging, KYC, and multi-day settlement times. Whether it’s a DeFi protocol on Ethereum or Solana, a centralized custodian, or a multisig coordinator, users are asked to compromise on security, speed, and cost.
Lava is different.
Lava Loans let you borrow dollars against your bitcoin while maintaining full self-custody. No bridges. No custodians. No paperwork. No waiting. Loans are executed on-chain in seconds using formally verified Bitcoin smart contracts—ensuring your BTC is never rehypothecated and always under your control.
This post compares Lava to leading alternatives across every category—DeFi protocols, custodial apps, multisig platforms, and traditional lenders—to show why Lava is the most secure and seamless way to borrow against bitcoin.
Comparison Framework
To evaluate how these solutions truly differ, we’ll assess each product across the following key dimensions:
Custody Risk: Do you retain full control of your BTC at all times?
Loan Initiation Risk: Can the platform guarantee that your BTC only moves once the loan capital is secured?
Loan Repayment Risk: Is BTC automatically returned to you upon repayment, without needing a custodian to act?
Rehypothecation Risk: Can your BTC be reused or lost, and can you verify this?
Liquidation Oracle Risk: Who controls the price feed that determines liquidation, and can it be manipulated?
Privacy: Is your contract private or publicly traceable on-chain?
Speed & UX: Can you get a loan instantly with no manual approvals?
KYC Requirements: Can you use the product without handing over personal info?
Bridge & Tax Risk: Are you forced to bridge BTC or trigger taxable events?
Governance Risk: Can a DAO, multisig, or admin override or rug the contract?
Rate Model: Are interest rates fixed and transparent?
Lava vs. Morpho, Aave, and Coinbase
Category: Alt-chain DeFi protocols using bridged BTC
Dimension | Lava | Morpho / Aave / Coinbase |
|---|---|---|
Custody Risk | ✅ You hold your own keys at all times | ❌ You give up control by bridging BTC |
Loan Initiation Risk | ✅ BTC only moves once loan capital is secured via atomic swap | ✅ BTC only moves once loan capital is secured via atomic swap |
Loan Repayment Risk | ✅ BTC is automatically returned upon repayment, enforced by contract | ✅ BTC is automatically returned upon repayment, enforced by contract |
Rehypothecation Risk | ✅ Cryptographic proof that your BTC is never reused or lent | ❌ Your BTC can be rehypothecated since it is bridged to a custodian |
Liquidation Oracle Risk | ✅ User selects blinded oracle to avoid manipulation | ❌ Ethereum on-chain oracles are susceptible to miner manipulation and can manipulate individual contracts |
Privacy | ✅ Loan terms and oracle data are private and off-chain | ❌ Requires KYC to bridge. All contract logic and price feeds are fully public and traceable. |
Speed & UX | ✅ Instant loan with no friction | ❌ Multiple steps: bridging, approvals, and navigating multiple UIs |
KYC Requirements | ✅ No KYC required | ❌ KYC required to bridge |
Bridge & Tax Risk | ✅ Native BTC — no bridge fees, no tax events | ❌ Bridging triggers taxable events and incurs bridging and unbridging fees as well as gas fees |
Governance Risk | ✅ Immutable contracts — no DAO involved | ❌ DAO governance can change contract terms or seize collateral. This has happened before. |
Rate Model | ✅ Fixed interest rates disclosed up front | ❌ Variable rates that spike during liquidity crunches and increase liquidation risk. |
Lava vs. Strike
Category: Custodial crypto lender with opaque custodian and rehypothecation strategy
Dimension | Lava | Strike |
|---|---|---|
Custody Risk | ✅ You hold your own keys at all times | ❌ You give up control by depositing BTC |
Loan Initiation Risk | ✅ BTC only moves once loan capital is secured via atomic swap | ❌ No guarantee your BTC is protected during setup |
Loan Repayment Risk | ✅ BTC is automatically returned upon repayment, enforced by contract | ❌ BTC is not returned automatically — lender must release it |
Rehypothecation Risk | ✅ Cryptographic proof that your BTC is never reused or lent | ❌ Confirmed rehypothecation — strategy undisclosed (source) |
Liquidation Oracle Risk | ✅ User selects blinded oracle to avoid manipulation | ❌ Oracle mechanism is opaque |
Privacy | ✅ Loan terms and oracle data are private and off-chain | ❌ User activity and loan data are tied to your identity |
Speed & UX | ✅ Instant loan with no friction | ❌ Slower onboarding, delays tied to fiat systems, not globally accessible |
KYC Requirements | ✅ No KYC required | ❌ Full KYC required |
Bridge & Tax Risk | ✅ Native BTC — no bridge fees, no tax events | ✅ Native BTC — no bridge fees, no tax events |
Governance Risk | ✅ Immutable contracts — no DAO or multisig can change terms | ❌ Your bitcoin gets controlled by unknown custodian |
Rate Model | ✅ Fixed interest rates disclosed upfront | ✅ Fixed interest rates disclosed upfront |
Lava vs. Unchained, Debifi, and Firefish
Category: Multisig lending platforms
Dimension | Lava | Unchained / Debifi / Firefish |
|---|---|---|
Custody Risk | ✅ You hold your own keys at all times | ❌ BTC is held in multisig with 2 of the 3 keys held by lender |
Loan Initiation Risk | ✅ BTC only moves once loan capital is secured via atomic swap | ❌ Lender must manually approve or fund the loan |
Loan Repayment Risk | ✅ BTC is automatically returned upon repayment, enforced by contract | ❌ BTC is not returned automatically — lender must release it |
Rehypothecation Risk | ✅ Cryptographic proof that your BTC is never reused or lent | ❌ Cryptographic proof that your BTC is never reused or lent |
Liquidation Oracle Risk | ✅ User selects blinded oracle to avoid manipulation | ❌ Oracles are centralized or predefined by the platform |
Privacy | ✅ Loan terms and oracle data are private and off-chain | ❌ User activity and loan data are tied to your identity |
Speed & UX | ✅ Instant loan with no friction | ❌ Setup involves manual coordination and slower turnaround |
KYC Requirements | ✅ No KYC required | ❌ KYC is required |
Bridge & Tax Risk | ✅ Native BTC — no bridge fees, no tax events | ✅ Native BTC — no bridge fees, no tax events |
Governance Risk | ✅ Immutable contracts — no DAO or multisig can change terms | ❌ Lenders or platforms retain control via multisig |
Rate Model | ✅ Fixed interest rates disclosed upfront | ✅ Fixed interest rates disclosed upfront |
Lava vs. Arch, Figure, and Salt
Category: Custodial crypto lender with opaque rehypothecation strategy
Dimension | Lava | Arch / Figure / Salt |
|---|---|---|
Custody Risk | ✅ You hold your own keys at all times | ❌ You give up control by depositing BTC |
Loan Initiation Risk | ✅ BTC only moves once loan capital is secured via atomic swap | ❌ Loan requires platform approval and coordination |
Loan Repayment Risk | ✅ BTC is automatically returned upon repayment, enforced by contract | ❌ BTC is not returned automatically — lender must release it |
Rehypothecation Risk | ✅ Cryptographic proof that your BTC is never reused or lent | ❌ Your BTC can be rehypothecated since it is sent to a custodian |
Liquidation Oracle Risk | ✅ User selects blinded oracle to avoid manipulation | ❌ Price feeds are controlled by the platform |
Privacy | ✅ Loan terms and oracle data are private and off-chain | ❌ User activity and loan data are tied to your identity |
Speed & UX | ✅ Instant loan with no friction | ❌ Requires underwriting, paperwork, and slower onboarding |
KYC Requirements | ✅ No KYC required | ❌ Full KYC required |
Bridge & Tax Risk | ✅ Native BTC — no bridge fees, no tax events | ✅ Native BTC — no bridge fees, no tax events |
Governance Risk | ✅ Immutable contracts — no DAO or multisig can change terms | ❌ Terms are controlled by internal company policies |
Rate Model | ✅ Fixed interest rates disclosed upfront | ✅ Fixed interest rates disclosed upfront |
FAQ
Why is borrowing from Morpho, Aave, or Coinbase risky for bitcoin users?
Morpho, Aave, and Coinbase's integrated lending options are risky for bitcoin borrowers because they rely on variable-rate liquidity pools where capital can leave at any time. When lender funds exit the pool, interest rates spike dramatically, leaving borrowers exposed to sudden, unaffordable costs. This asset-liability mismatch means your loan is only stable if lenders continue to supply capital, which is exactly when the system is most fragile. In stress scenarios, rates can jump from single digits to hundreds or even thousands of percent with no warning, and there’s no lender of last resort to stabilize the system.
Lava avoids this risk by securing capital from long-term partners and locking in fixed rates for the full loan term. You’re protected from market-driven spikes and daily refinancing pressure, while still retaining full self-custody of your bitcoin.
How do I know Lava doesn’t rehypothecate my bitcoin?
Lava is the only loan product where you can independently verify—on-chain and in real time—that your bitcoin is not being rehypothecated. Lava uses bitcoin-native smart contracts that lock your BTC in a Discreet Log Contract (DLC), which cannot be moved or reused without your private key or explicit contract conditions being met. Unlike other platforms that rely on legal or reputational assurances, Lava provides cryptographic proof that your collateral is secure and untouched throughout the life of the loan.
Isn't my bitcoin safe on a centralized lending platform?
Trusting a company is not the same as having control. Centralized lending platforms require you to give up custody of your bitcoin and hope the custodian manages it responsibly. This introduces counterparty risk: hacks, fraud, bankruptcy, and rehypothecation can all result in total loss. With Lava, you never hand over your keys. Your bitcoin is secured by cryptographic guarantees, not company promises. It stays in your control from start to finish.