Cardinal, the first Bitcoin DeFi protocol on Cardano’s network, has launched. Without relying on centralized bridges or third-party custodians, the protocol enables Bitcoin holders to utilize DeFi services easily. These include lending, staking, borrowing, and yield farming directly on the Cardano blockchain.
This is Cardano’s most concentrated attempt to integrate its expanding DeFi network with Bitcoin liquidity. Historically, custodial wrapped tokens that rely on intermediary trust have limited the use of Bitcoin in DeFi. By using a non-custodial, trust-minimized design based on the MuSig2 multi-signature cryptographic protocol, Cardinal defies this convention.
This enables peg-in and peg-out of Bitcoin while guaranteeing that the original BTC stays locked on its home chain and is completely backed 1:1 by the wrapped tokens produced on Cardano. It also permits multiple parties to co-sign transactions securely. Additionally, it eliminates the risks that have plagued previous wrapped Bitcoin solutions, such as rehypothecation and third-party failure.
Through a fraud-resistant exit mechanism, users can always exchange wrapped Bitcoin tokens for native BTC. This gives them complete control over their assets. These tokens can be exchanged, farmed, or used as collateral within Cardano’s DeFi platforms without losing their provenance. This is thanks to the protocol’s support for Bitcoin Ordinals, which are unique digital inscriptions on the Bitcoin blockchain.
Cardano Unlocks New DeFi Opportunities for Bitcoin Holders
Owners of Bitcoin can now use their assets to participate in various DeFi activities on Cardano and generate yield. On well-known Cardano decentralized exchanges, such as MinswapDEX and SundaeSwap, as well as lending platforms like Liqwid Finance and Indigo Protocol, Wrapped Bitcoin UTXOs can be staked, lent, borrowed, or sold.
Moreover, the protocol’s integration with Cardano’s eUTXO model, low transaction fees, and robust smart contract capabilities make it an ideal platform for managing wrapped Bitcoin assets and Ordinals.
Furthermore, Cardinal’s compatibility extends beyond Cardano, with plans to support cross-chain interoperability with Ethereum, Solana (SOL), and Avalanche via the BitVMX off-chain verification layer, broadening the scope for Bitcoin DeFi across multiple ecosystems.
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