Custody & Security

Understanding Libre's security model with segregated Bitcoin collateral, transparent liquidations, and on-chain verifiability.

Overview

Libre's security model is built on segregated Bitcoin collateral and transparent smart contracts. Unlike traditional lending platforms, every borrower's Bitcoin is held in a dedicated vault address that can be audited by anyone.

Segregated Collateral System

Individual Vault Addresses

• One vault per loan: Each borrower gets a unique Bitcoin address

• No pooled collateral: Your Bitcoin is never mixed with others

• Public verification: Anyone can audit vault balances on the Bitcoin blockchain

• Direct ownership: Only the borrower (upon repayment) can access their Bitcoin

Why This Matters

Traditional lending platforms often:

• Pool all collateral together

• Use customer funds for trading or yield farming

• Provide limited transparency about fund usage

• Create systemic risks if the platform fails

Libre eliminates these risks through complete segregation and transparency.

On-Chain Verifiability

Bitcoin Transparency

Every aspect of collateral is verifiable:

• Vault addresses: All loan vault addresses are public

• Collateral amounts: Real-time Bitcoin balances visible on-chain

• No rehypothecation: Bitcoin stays untouched in vault addresses

• Audit trail: Complete history of deposits and withdrawals

Smart Contract Security

• Open source: All smart contracts are publicly auditable

• Automated execution: Liquidations and settlements happen programmatically

• No human intervention: Reduces counterparty risk

• Battle-tested: Built on proven DeFi primitives

Liquidation Safety

Transparent Rules

Libre's liquidation process is completely predictable:

LTV Ratio	Status	Borrower Action	Timeline
0-70%	Safe Zone	Monitor	Ongoing
70-80%	Warning Zone	Consider adding collateral	Ongoing
80%+	Liquidation Zone	Must act to avoid liquidation	72 hours
80%+ (after 72h)	Liquidation	Automatic execution	Immediate

72-Hour Buffer

• Grace period: Borrowers have 72 hours to respond once LTV hits 80%

• Multiple options: Add collateral, partial repayment, or full repayment

• Fair warning: No surprise middle-of-the-night liquidations

• Market volatility protection: Time to react to Bitcoin price movements

Liquidation Process

When liquidation occurs:

1. Smart contract execution: Automatic and transparent

2. Market rate sale: Bitcoin sold at current market prices via libreDEX

3. Lender protection: USDT lenders are repaid first

4. Excess returned: Any remaining Bitcoin goes back to borrower

Cross-Chain Bridge Security

MPC + TSS Technology

Libre uses Multi-Party Computation (MPC) with Threshold Signature Schemes (TSS):

• Distributed key management: No single point of failure

• Validator consensus: 21 validators secure the bridge

• Bitcoin finality: Transactions confirmed on Bitcoin blockchain

• Transparent operations: All bridge transactions are publicly visible

Bridge Auditing

• Real-time monitoring: Track all Bitcoin deposits and withdrawals

• Validator transparency: All validator operations are logged

• Emergency procedures: Protocols for handling edge cases

• Regular audits: Ongoing security reviews and improvements

Risk Mitigation

For Lenders

• Overcollateralization: All loans backed by 200%+ Bitcoin value

• Segregated collateral: Each loan has dedicated Bitcoin backing

• Smart contract automation: Reduced human error and manipulation

• Transparent liquidations: Predictable and fair process

For Borrowers

• Dedicated vaults: Your Bitcoin stays separate and identifiable

• Predictable liquidations: 72-hour warning system

• No rehypothecation: Your collateral is never used for other purposes

• Direct ownership: You can verify your Bitcoin's location anytime

For the Platform

• Decentralized operation: No central points of failure

• Open source code: Community verification and improvements

• Validator network: Distributed consensus for security

• Regular audits: Ongoing security assessments

Comparing Security Models

Feature	Libre	Traditional Platforms
Collateral Storage	Segregated vaults	Pooled custody
Transparency	Fully on-chain	Limited visibility
Liquidation Notice	72-hour buffer	Often immediate
Fund Usage	Bitcoin stays untouched	May be deployed elsewhere
Verification	Anyone can audit	Trust-based system
Smart Contracts	Open source	Often proprietary

Security Best Practices

For Users

• Verify vault addresses: Always confirm your Bitcoin vault address

• Monitor LTV ratios: Keep track of your loan health

• Understand liquidation rules: Know the 72-hour warning system

• Use secure wallets: Protect your private keys

For Developers

• Audit smart contracts: Review all code before interacting

• Test on testnet: Verify functionality before mainnet use

• Monitor validator health: Track bridge and consensus security

• Report issues: Contribute to platform security improvements

Getting Help

If you have security concerns or questions:

• Documentation: Review technical details in our developer docs

• Community: Join discussions in our governance forums

• Support: Contact team through official channels

• Audits: Review public security audit reports

The security model is designed to be trustless, transparent, and verifiable. You don't need to trust Libre—you can verify everything yourself on the blockchain.