Founder of Cardano, Charles Hoskinson, has officially launched Cardinal, the first Bitcoin-focused, decentralized finance (DeFi) protocol, which is built on the Cardano blockchain.
This event is a major step forward in blockchain interoperability. Now, Bitcoin users can interact with Cardano’s DeFi ecosystem without surrendering custody of their assets. Cardinal contains several advanced technologies that make its secure, cross-chain transactions possible. Bitcoin holders have a new way to make their assets work for them, all while using Cardano’s scalable infrastructure.
The protocol uses MuSig2, a multi-signature technology that aggregates signatures from several parties into a single, compact form. This is what makes it possible for Cardinal to implement non-custodial cross-chain functionality. Users of this functionality retain full control of their Bitcoin while utilizing its value on Cardano. And it gets better. Bitcoin’s UTXO-based structure is directly integrated into DeFi functions on Cardano. This allows BTC holders to participate in lending and staking operations. And there’s more.
By using Cardinal, Cardano is among the first ecosystems to provide a native, non-custodial bridge to Bitcoin’s liquidity. This not only gives Bitcoin users access to great DeFi opportunities on Cardano, but it also helps to fund the DeFi growth in the Cardano ecosystem. The bridge was built by the digital finance company—Cardinal—whose founders are also the creators of the DeFi loan platform, Indigo. These are all native tools used on the Cardano blockchain.
Cardinal allows Bitcoin users to engage in decentralized finance on Cardano without needing custodial services or wrapped tokens. With MuSig2, Bitcoin users can initiate transactions that are verified and processed on Cardano while maintaining the security and decentralization of the original Bitcoin blockchain. Through collaboration among multiple parties, MuSig2 enables the creation of a multisignature (multisig) transaction that requires a signature from each party for the transaction to be valid.
A hallmark of Cardinal is its support for Ordinals, a new innovation on the Bitcoin network that allows for the inscription of data directly onto individual satoshis. This feature can be used as collateral within Cardinal, achieving an NFT-like utility blended with DeFi functionality. Better yet, this development provides a bridge between the rapidly growing Ordinals ecosystem and Cardano’s smart contract capabilities.
People can stake Bitcoin by lending it through Cardano-based protocols. They can then use the returns they earn as a result of that to, I don’t know, buy houses? Or maybe just pay rent?
Minswap is a decentralized exchange on Cardano that will support trading in these Bitcoin native assets. If you are a holder of Bitcoin who is trying really hard to stick to the whole “decentralized” thing and not use Coinbase, Minswap is a pretty good option.
In addition to Bitcoin and Cardano, Cardinal also connects with other major blockchain networks like Ethereum and Solana. This is accomplished using an off-chain verification system called BitVMX, which ensures that all cross-chain operations are executed in a secure and scalable manner. In technical terms, BitVMX is an off-mainnet computation system that performs the heavy lifting when it comes to number crunching. It generates cryptographic proofs for the seemingly simple operations that take place on the mainnet.
Cardinal’s method for reducing transaction costs is to execute as many instructions as possible off-chain and only execute those that require on-chain confirmation on-chain. This not only improves efficiency but also reduces potential bottlenecks on the base layers of the participating chains. Cardinal is already a multi-chain operation, using Ethereum for some computations, and is facilitating interactions with Solana and other blockchains.
Cardinal’s inclusion of multiple chains shows its long-term vision for existing as a cross-chain protocol. It aims to pull value from the many ecosystems that exist today into a single, trustless environment.
Romain Pellerin, who is the Chief Technology Officer at Cardano, has stated that technology involving zero-knowledge proofs (ZKP) will soon be integrated into the Cardinal protocol. He expects this addition to bolster privacy and enhance liquidity—even further than previous steps toward these goals—by enabling private transactions and using more scalable verification methods.
Users can confirm that a transaction or a computation is valid, thanks to zero-knowledge proofs. But these proofs don’t give away the secret data that was used to perform the transaction or the computation. When you think about this in the context of DeFi, you begin to see the potential for powerful, privacy-respecting efficiency.
Cardinal is the first protocol that lets Bitcoin assets reach Cardano’s DeFi ecosystem directly, without requiring custody, wrapping, or any kind of intermediary. It works in the opposite order to how DeFi protocols typically function—our secure dual-protocol architecture allows assets to bypass all those prohibitively costly steps. With this approach, not only could we see many 1:1 clones of established DeFi yield-generation applications popping up on Cardano for Bitcoin holders, but a lot of those applications could be running in parallel, essentially giving Bitcoin what DeFi-ers tend to call “money Legos.”
Cardinal rolls out. Its combination of multi-signature security, cross-chain interoperability, and privacy-enhancing technology allows it to play a central role in the next evolution of DeFi. We ensure that Cardano remains committed to these principles as we expand our capabilities.
Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency or investing in any services.
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