5 Questions to Ask Before You Hand Any Platform Your Bitcoin

A short due-diligence checklist drawn from the 2022 CeFi collapses — and how a self-custodial vault answers each one differently.

The centralized lenders that froze customer withdrawals in 2022 didn't announce their fragility in advance. But in hindsight, the warning signs were all answerable with a handful of blunt questions — questions the marketing was carefully designed not to invite. Here are five worth asking before you trust any platform with your Bitcoin, and how a self-custodial protocol answers each.

1. Can you lend my specific coins to someone else?

This is the one that decides most of the others. Custodial lenders pool deposits and redeploy them — to trading desks, hedge funds, other lenders — because that redeployment is how they fund the yield they pay you. Your coins become collateral in a chain of borrowers you never see.

With a self-custodial protocol, the answer is no. Your Bitcoin sits in a vault — an isolated smart-contract position only you control. It is never pooled and never lent onward, because the system doesn't pay depositor yield and therefore has no book to fund. Nothing to redeploy means nothing to rehypothecate.

2. Where does the yield come from?

If a platform pays you to deposit, that money originates somewhere, and "somewhere" is almost always credit risk — lending your coins into positions that only stay solvent while the market cooperates. A yield that looks like a savings rate but is funded by leveraged crypto lending is not a savings rate.

The honest version flips the question. With Money Protocol, you're not a depositor earning yield; you're a borrower. You mint BPD, a dollar-pegged stablecoin, against your own Bitcoin at 0% interest — a one-time fee, no recurring rate. There's no yield being manufactured from your coins because your coins aren't being lent to anyone.

3. What happens to my Bitcoin if you go bankrupt?

At the failed CeFi lenders, the devastating answer only became clear in court: customer deposits were part of the company's general estate. Depositors held unsecured claims, not segregated coins. Years of proceedings later, recoveries are partial and late.

A protocol has no balance sheet standing between you and your collateral. There's no corporate estate your Bitcoin can be swept into, because it never left a contract you control. "Company insolvency" isn't a failure mode when there's no company holding your coins.

4. Are the rules the same for everyone — and can I read them now?

Opacity and asymmetry defined the last cycle. Favored counterparties got terms and early information ordinary customers never saw; the rulebook, such as it was, stayed private.

Self-custodial protocols run on public, deterministic rules that apply identically to every user: a 110% minimum collateral ratio, a 150% system-wide recovery threshold, and a stability pool that absorbs liquidations so the protocol never needs a bailout. You can read all of it before you deposit. No VIP tier, no discretionary exceptions, no rules you only discover in a bankruptcy filing.

5. What are the risks you're NOT advertising?

Any honest answer to this question earns trust; a too-clean answer should worry you. A self-custodial vault has real risks, and they're worth stating plainly: smart-contract risk (you're trusting audited code, so its quality matters), liquidation risk (a sharp Bitcoin drop can liquidate a vault that's drifted too close to the minimum ratio), and the responsibility of self-custody (no one can reverse your mistakes).

The difference from CeFi isn't the absence of risk — it's the visibility of it. These risks are transparent, bounded by public rules, and knowable before you act. The 2022 risks were hidden, unbounded, and knowable only after the withdrawals had already stopped.

Scoring the answers

Run any platform through these five questions and the pattern resolves fast. If it can redeploy your coins, funds yield through credit risk, would fold your Bitcoin into its estate on insolvency, keeps its rules private, and glosses over its risks — you're looking at the 2022 structure with a newer interface.

If your coins stay in a position only you control, no yield is manufactured from them, there's no corporate estate to be swept into, the rules are public and symmetric, and the risks are stated openly — you're looking at something built specifically so these questions have safe answers.

That second description is what self-custodial Bitcoin borrowing is for. Read the mechanics in the docs, or go straight to the tool and borrow against Bitcoin at 0% interest without handing your coins to anyone.

Educational content only; not financial advice. Self-custodial borrowing carries smart-contract and liquidation risk — understand the collateral mechanics before using any protocol.

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