Cardano has made a major move to unite two of the largest crypto ecosystems. On Sunday, June 9, Charles Hoskinson, the network’s founder, announced the launch of Cardinal – Cardano’s very first DeFi protocol built specifically for Bitcoin users.
🔗 What Is Cardinal and How Does It Work?
Cardinal, developed by the Input Output (IO) research and development team behind Cardano, aims to give Bitcoin holders access to DeFi services like lending, staking, and borrowing — without relying on centralized platforms or bridges.
The protocol works by wrapping Bitcoin, specifically its Unspent Transaction Outputs (UTXOs). These fragments of BTC are converted into tokens at a 1:1 ratio, and users can redeem their wrapped BTC at any time through a secure, fraud-resistant process.
🛡️ No Need for Trust: Cryptography Replaces Custodians
Unlike traditional systems that depend on centralized custodians, Cardinal uses the MuSig2 cryptographic model, which allows multiple parties to co-sign transactions. This significantly reduces the need for trust. In practical terms, the original Bitcoin remains locked on its native chain — and the system remains secure even if only one participant acts honestly.
🔄 Safe, Bridge-Free Transfers with Full Asset Control
Another important feature of Cardinal is its rejection of rehypothecation — the practice of reusing users’ assets without their knowledge, which is common in traditional finance. Cardinal ensures users retain full control over their assets while keeping the original BTC intact.
The protocol also integrates BitVMX, a system for off-chain execution that preserves decentralization while enabling complex Bitcoin operations. Combined with Cardano’s smart contracts and Bitcoin’s scripting capabilities, Cardinal supports secure and efficient asset transfers between the two networks.
🎤 Live Demo at Bitcoin 2025 Conference
Cardinal was officially showcased during a live demo at the Bitcoin 2025 conference, where IO developers successfully conducted a bridge-free BTC transfer to the Cardano network using BitVMX. The event was hailed as a major milestone in Cardano’s mission to become a platform for Bitcoin-native applications.
📉 Cardano’s DeFi Sector Faces Challenges, but Cardinal Could Revitalize Liquidity
Despite the technological breakthrough, Cardano’s Total Value Locked (TVL) in DeFi has dropped from its May peak of $415 million to around $334 million as of June 10, according to DefiLlama.
The Input Output team hopes Cardinal will bring fresh liquidity by offering Bitcoin holders new opportunities to utilize their assets in the DeFi world — without ever leaving the Bitcoin ecosystem.
#Cardano , #bitcoin , #defi , #CharlesHoskinson , #CryptoCommunity
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