The custody model is the most important safety factor — and the most misunderstood. Here is the single question that separates the two approaches. For the full breakdown, see our custody models guide.
The one question
If this platform fails tomorrow, do I get my Bitcoin back automatically — or do I become an unsecured creditor waiting in line?
Custodial platforms
Your BTC is held by the platform. If it fails, you are an unsecured creditor — same as Celsius, Voyager, and FTX customers. Recovery rates after crypto platform failures typically range from 30–70 cents on the dollar, and the process takes years. Platforms like Ledn mitigate this with Open Book reporting and proof-of-reserves work, but the structural custodial/funding-partner risk remains.
Non-custodial / Multi-sig
Your BTC is held in a wallet where you control the keys. Unchained uses 2-of-3 multi-sig — you hold 2 keys, Unchained holds 1. Even if Unchained disappears tomorrow, you and your co-signers can move the BTC without them. The platform failing does not affect your collateral.
DeFi protocols
Smart contracts hold your BTC. There is no platform to fail — the contract executes regardless of whether the front-end is online. The risk is smart contract bugs, not platform bankruptcy. Aave and Maker use this model. (Lava previously used a self-custody design, but reporting indicates it moved to custodial cold storage in Nov 2025 — its custody model is now unresolved.)
Further Reading
Custody Models Explained
The complete guide to custodial, multi-sig, and non-custodial models — with platform-by-platform scoring.
CeFi vs DeFi Lending
How custody differences create fundamentally different risk profiles between centralized and decentralized lending.
Platform Collapses: What Happens to Your BTC?
What happened to borrower collateral when Celsius, Voyager, and FTX failed — and what custody model would have prevented it.
See which platforms use which model
Use the side-by-side comparison to see custody models for every platform.
Compare custody models →