🔐 Rehypothecation: The Hidden Risk in TradFi vs Bitcoin's DLC Solution
BlockFi, Celsius, FTX - all collapsed because they REHYPOTHECATED customer Bitcoin. Your "collateral" was used for THEIR trades. When they failed, you became an unsecured creditor.
MF Global (2011): Used client funds for €6.3B bet on Euro bonds. Lost. Clients fought for scraps in bankruptcy.
Why TradFi rehypothecation "works":
- Fiat is infinitely printable
- Fed bails out failures
- Losses socialized via inflation
Why it FAILS with Bitcoin:
- 21M hard cap
- Lost BTC = gone FOREVER
- No bailouts possible
Solution: Discreet Log Contracts (DLCs)
DLC-based lending (Lava, Firefish):
✅ BTC locked in multisig escrow
✅ NEVER rehypothecated
✅ Oracle-based settlement (price, repayment)
✅ Bankruptcy-remote (funds not on platform balance sheet)
✅ Atomic entry/exit (no trust during funding)
Lava Loans (2025): $100-$1B loans, 5% rates, sub-second processing. $27.5M funded by Founders Fund, Khosla.
The "never sell" strategy is now REAL. Borrow against BTC, keep your stack, no rehypothecation risk.
Digital scarcity changes everything. Rehypothecation worked when money was infinite. Bitcoin enforces REAL collateral.
Learn more: https://adiabat.github.io/dlc.pdf (Tadge Dryja's DLC whitepaper)
#Bitcoin #DLC #SovereignFinance #NoRehypothecation
BlockFi, Celsius, FTX - all collapsed because they REHYPOTHECATED customer Bitcoin. Your "collateral" was used for THEIR trades. When they failed, you became an unsecured creditor.
MF Global (2011): Used client funds for €6.3B bet on Euro bonds. Lost. Clients fought for scraps in bankruptcy.
Why TradFi rehypothecation "works":
- Fiat is infinitely printable
- Fed bails out failures
- Losses socialized via inflation
Why it FAILS with Bitcoin:
- 21M hard cap
- Lost BTC = gone FOREVER
- No bailouts possible
Solution: Discreet Log Contracts (DLCs)
DLC-based lending (Lava, Firefish):
✅ BTC locked in multisig escrow
✅ NEVER rehypothecated
✅ Oracle-based settlement (price, repayment)
✅ Bankruptcy-remote (funds not on platform balance sheet)
✅ Atomic entry/exit (no trust during funding)
Lava Loans (2025): $100-$1B loans, 5% rates, sub-second processing. $27.5M funded by Founders Fund, Khosla.
The "never sell" strategy is now REAL. Borrow against BTC, keep your stack, no rehypothecation risk.
Digital scarcity changes everything. Rehypothecation worked when money was infinite. Bitcoin enforces REAL collateral.
Learn more: https://adiabat.github.io/dlc.pdf (Tadge Dryja's DLC whitepaper)
#Bitcoin #DLC #SovereignFinance #NoRehypothecation