Lye is used to make soap, but soaps do not contain active lye. All soap requires an alkali (such as sodium hydroxide, aka lye) to chemically react with a fat (I use both olive oil and beef tallow) to produce soap and glycerine. This chemical reaction is called saponification. Potassium hydroxide (potash) is another alkali used to make soap. However, potassium hydroxide will yield liquid soap rather than solid soap (bars).

It is a popular misconception that soap contains lye. During saponification, lye molecules (sodium hydroxide, or NaOH) break apart into sodium (NA) ions and hydroxide (OH) ions. The sodium becomes part of the soap molecule and the hydroxide ions become part of the glycerine once saponification is complete.