This has been my investment thesis from the beginning, but I am still waiting for a convincing answer to the problem of custody.

Let's say I hold BTC and there's a lender interested. We agree to some terms. Broadly speaking, interest, period, overcollateralization, margin call limits, and minimum monthly payments to be made. All good, we're on the same page.

Then what? I'm supposed to put my BTC in a multisig wallet? Who controls it? It would seem we must introduce a third party that we both can trust. That's not BTC, as far as I'm concerned.

Other crypto projects have "smart contracts" that can take care of all that. Does BTC have the ability to handle such complex contracts? 

It's a genuine question of which I ignore the answer. Does anyone have a thorough, believable answer?

(Before anyone comes in with the usual answer: NO, "layer 2, bro" is not  valid answer. Layer 2 is not Bitcoin).

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