Imagine an extreme scenario: a well-known cross-chain bridge custodian suddenly collapses, and the private keys are already lost. Hundreds of thousands of wrapped assets in circulation instantly lose their backing, and their prices plummet to zero. All lending positions collateralized with these assets are liquidated en masse, and the protocol accumulates massive bad debt. The stablecoins issued through these assets would also face a collapse in confidence.

This hypothetical may seem exaggerated, but it exposes a harsh reality: Not your keys, not your coins.

Wrapped assets (such as BTC, Ethereum, or assets from other blockchains transferred across chains) are essentially IOUs issued by custodians. You do not hold the real assets; instead, you hold a credit promise from the issuer. Once that promise is broken, the assets vanish. Worse, this risk propagates through DeFi lending protocols layer by layer.

So how to avoid this? The answer is simple: prioritize native assets.

DeFi protocols are generally aware of this. They mitigate risk by adjusting LTV (Loan-to-Value ratio)—wrapped assets typically have a significantly lower LTV than native assets. The straightforward logic is: the higher the risk, the less you can borrow.

My personal asset allocation principle is clear: Native > Wrapped. When choosing collateral, prioritize native assets like BNB over various wrapped tokens transferred across chains. This is not conservative; it’s understanding the underlying logic of the crypto market.