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:
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:
Smart contract execution: Automatic and transparent
Market rate sale: Bitcoin sold at current market prices via libreDEX
Lender protection: USDT lenders are repaid first
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
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.
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