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It may be non-custodial, but calling it full control makes no sense.
The definition of custody has been bastardized by marketing. True non-custody means you and only you can withdraw funds at any time. Anything beyond that, there is some shared custodial relationship.
And who in their right mind would give you full control over the collateral you used to get a loan? It isn't collateral if you can go spend it.
I think people are afraid to call their project anything other than self-custody. Nobody wants to hear the boring details of your contract. So you just say the magic words of "self-custody" and people nod their heads (hello ark).
Okay, so you send some of your bitcoin to an address and then they send you some stablecoin called UNIT, which I couldn't find much info about.
It's essentially a rune. The protocol for runes is actually quite simple and elegant for alternative assets. They are still a shit-coin though.
The address you send your bitcoin to is kind of like the addresses used by Spark: it's a shared utxo that relies on FROST to give stakeholders shares of they key.
The loan contract is a 2-of-2 multi-sig between the borrower and the FROST key, with an extra spending path (for liquidation) that is the FROST key + pre-image from a price oracle. AFAIK spark setup is more like a FROST key wrapped in a 2-of-2 musig key.
One big question I have with the bitcoin loan companies is how their oracle works. Even if the liquidation process is 100% automated by some on-chain script, the oracle is the weak link.
All lending protocols rely on the multi-sig and price oracle not colluding. There's really no way around this. You can try to bury the problem under complex multi-sigs or staking / slashing mechanisms, but you end up with a cluster-fuck solution.
Unfortunately there is a lot about the protocol that is not in the docs (yet). I know all the dirty secrets though.
Thanks for your clarifications/corrections.
I do think that hodlers will eventually decide that don't want to leave all their capital in cold storage. Especially if tax structures remain the way they are, so the lending protocols make sense.
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