Why did your great grandma use soap made with lye?  Because it's all natural.  Also, because you can't make soap (well, real soap that is) without using lye.

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Lye is sodium hydroxide. It comes in liquid form, flakes, or crystals.  Sodium hydroxide comes into being when soda (sodium carbonate) and lime (calcium hydroxide) come together and cause a chemical reaction.

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Before you could buy lye in a bottle, people used to make it from raw materials. They used it for tanning hides and making soap. To make lye, they would burn hardwoods at high temperatures to make white ashes. Then, they used a mixture of water and baking soda to penetrate the ashes and help remove the lye from them. Next, they filtered out the ashes. That left them with water that held enough lye to make soap and dissolve the fat from the animal hides.

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When lye mixes with oil, it becomes soap after it saponifies. At the beginning of the soap making process, you mix water, oil, and lye. But then during the hot process making of soap, the lye cooks out of it.  Then with the curing of  the soap everything changes. As the chemicals harden, the liquid becomes a soap bar. 

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After you cook and cure the soap, no lye remains in the soap. What’s left is just soap.  The saponification process eliminates all traces of lye and what remains is a beautiful moisturizing bar of all natural soap!