- Cardinal unlocks Bitcoin liquidity by wrapping UTXOs for DeFi use on the Cardano blockchain.
- MuSig2 and a trust-minimised setup ensure the system works even if only one actor behaves honestly.
- BitVMX powers off-chain execution, enabling safe, advanced interactions between Bitcoin and Cardano networks.
- The system is operational but pending a full launch; version 1.0 updates are currently in development.
Cardano has unveiled Cardinal, a new protocol intended to connect Bitcoin with its decentralised finance (DeFi) ecosystem. 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.
Related: Cardano Foundation Unveils Veridian: A New Open-Sourced Digital Identity Platform
Powering Safe Cross-Chain DeFi Access
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 incorporates 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 protocol works but as mentioned in the paper we don’t consider it production-ready yet. Some improvements are incoming. Stay tuned for [the] 1.0 version.
Roman Pellerin, Chief Technology Officer at IOGCardano’s DeFi sector has experienced 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 reinvigorate activity by offering Bitcoin holders more decentralised options.
Related: Ethereum Foundation Changes Tact, Goes ‘Full DeFi’
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