Cardano has unveiled Cardinal, a new protocol intended to connect Bitcoin with its decentralised finance (DeFi) ecosystem.
Cardano has built a protocol called Cardinal to connect Bitcoin with its decentralised finance (DeFi) ecosystem, aiming to provide decentralised access to DeFi tools for Bitcoin holders.
Announced by founder Charles Hoskinson on 9 June, the launch was accompanied by a post from Roman Pellerin, Chief Technology Officer at Input Output Global (IOG), Cardano’s development arm.
The protocol introduces a method for wrapping Bitcoin’s unspent transaction outputs (UTXOs), allowing them to circulate as pegged tokens on Cardano’s network. These tokens retain a one-to-one link with Bitcoin and can be burned at any point to redeem the original asset.
Cardinal allows Bitcoin users to access DeFi tools such as lending, staking, and borrowing without using centralised platforms or custodians. Its design prioritises decentralisation through a trust-minimised system that works as long as a single operator remains honest.
The system employs MuSig2, a cryptographic protocol that enables joint transaction signing by multiple parties. This enhances the platform’s resilience and removes the need for central trust authorities.
Cardinal also includes BitVMX, an off-chain computing system for handling advanced Bitcoin operations securely and efficiently. The integration with both Bitcoin’s scripting and Cardano’s smart contracts ensures programmable and secure asset transfers.
Pellerin confirmed that although the protocol is operational and has been used to wrap/unwrap the first ordinal on the two mainnets, it is not yet considered ready for full-scale development.
The Cardano DeFi sector has seen a decline, with total value locked dropping from US$415 million (AU$635.11 million) in May to US$334 million (AU$511.72 million) by 10 June, according to DefiLlama data. The team believes Cardinal could help by offering Bitcoin holders decentralised options.
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