Cardano, one of the most popular blockchain networks and the tenth largest cryptocurrency by market capitalization, has made a significant leap in the decentralized finance (DeFi) ecosystem with the launch of the Cardinal Protocol. This innovative solution directly connects Bitcoin to Cardano's decentralized finance world, enabling users with new opportunities to use Bitcoin in activities such as lending, storage, and yield farming, without the need for intermediaries or external custodians.
Cardano founder Charles Hoskinson revealed this technology that combines the security and transparency of the Cardano network with the liquidity and popularity of Bitcoin.
How does the Cardinal Protocol work and what does it mean for Bitcoin DeFi?
The 'Wrapped UTXO' technology at its core relies on the 'Wrapped UTXO' technique, which allows Bitcoin to be wrapped and used within Cardano. It also ensures the ability to 'burn' it and redeem it for the native asset at any time.
This means that users retain full control over their BTC and do not rely on centralized platforms to participate in DeFi.
Additionally, Cardinal uses a multi-signature system known as MuSig2, which eliminates the need for custodians, making transactions more secure and transparent.
This multi-signature architecture also facilitates interoperability with other major blockchains like Ethereum, Solana, and Avalanche, expanding the ecosystem.
From now on, Bitcoin holders can use their assets to interact with Cardano DeFi platforms like Minswap, SundaeSwap, and Fluid Tokens. This feature will allow them to lend their Wrapped Bitcoin, stake it, or collect yields.
Ordinal coins, unique tokens built on Bitcoin, can also be used as collateral or traded without losing their identity. This opens new horizons for collectors and advanced users.
The Cardinal Protocol is amazing. You can integrate any Bitcoin (UTXO), including Ordinals, and convert it into a native Cardano asset. You can then use it to earn yield on Cardano DeFi. Both networks benefit. Bitcoin users gain utility, while Cardano gains liquidity, as Cardano YOD₳ explained on X.
The Future of Bitcoin DeFi Integration on Cardano
Roman Beleren confirms that the Cardinal Protocol is just the first step in an ongoing evolution. Future updates will include wallet support, zero-knowledge proofs (zk-proofs), and increased liquidity to facilitate large-scale transactions.
This innovation not only enhances the usability of Bitcoin in the DeFi space but also reinforces the vision that Bitcoin can be 'the people's money,' as Robert Kiyosaki defined.
By combining the robustness of Bitcoin with the flexibility and efficiency of Cardano, conditions are set for broader and safer adoption of decentralized finance. However, not all opinions are positive, and some critical voices have emerged.
Nico ₿ said on X: 'Other l2s, including RSK, will at least allow Bitcoin mining to stay strong through integrated mining, so while we can't stop you from using Cardano this way, I don't believe there's value in supporting Bitcoin for it other than perhaps having some DeFi tools.'
Nevertheless, this development positions Cardano as a key player in the next phase of the blockchain ecosystem, where interoperability and decentralization are reinforced as pillars of global cryptocurrency market growth.