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.

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