- Charles Hoskinson has introduced the Cardinal Protocol on X today, which is its own Bitcoin DeFi protocol.
- With Cardinal, users can now take any Bitcoin unspent transaction output and wrap it, transforming it into a flexible asset.
On June 9, Charles Hoskinson, founder of the Cardano blockchain, took to X to announce the launch of the Cardinal Protocol, the first Bitcoin (BTC)-focused DeFi solution built for the Cardano ecosystem. He did this while referencing an X thread by Romain Pellerin, a CTO at Input Output. Designed specifically for Bitcoin users, Cardinal eliminates the need for third-party custodians, giving users more direct control over their assets. He stated, “We made history with the 1st cross-chain Ordinal wrap!”
Input Output, the team behind Cardano, develops cardinal. It will let anyone use their Bitcoin UTXOs to earn DeFi yield. Meaning Bitcoin holders can now lend, borrow, stake, or farm their BTC directly on the Cardano network.
DeFi Opportunities for Bitcoin Users
An important part of the system is Wrapped UTXO technology. These wrapped assets can be “burned” at any time to redeem the original Bitcoin or Ordinals, while also enabling the creation of 1:1 pegged tokens and Non-Fungible tokens (NFTs). Thanks to this secure, fraud-resistant process, users can safely move in and out of DeFi positions while maintaining the full value of their BTC.
At the heart of Cardinal is MuSig2, a cryptographic system that allows multiple parties to sign transactions together. This makes “peg-in” and “peg-out” transactions possible, ensuring transparency and verifiability. It also guarantees that the original Bitcoin stays locked on its native chain, keeping the system secure even if only one participant behaves honestly. On top of that, Cardinal is compatible with major networks like Ethereum (ETH), Solana (SOL), and Avalanche (AVAX), offering broader interoperability.
Romania poses a question: “What makes it unique? Uses BitVMX for verifiable off-chain execution”. Here’s why. BitVMX, is an off-chain execution system that preserves decentralization while enabling more advanced Bitcoin operations. BitVMX integrates seamlessly with Cardano’s smart contracts, making complex cross-chain interactions possible without sacrificing security or transparency.
Thanks to this setup, users can now access DeFi opportunities with their Bitcoin. Cardano platforms like Minswap DEX, SundaeSwap, and Fluid Tokens allow users to farm and trade Bitcoin-based assets or lend their BTC. For the first time, Ordinals can also be used as collateral for loans or traded and auctioned across blockchains, all while preserving their original on-chain history. He added, “What’s needed for Bitcoin DeFi to go further? Better Light clients, ZK-based burn proof generation, Recursive state proofs.”
Right now, ADA is trading at $0.71, with Cardano’s total value locked (TVL) in DeFi sitting at $331.55 million, up 1.79% over the past 24 hours. This signals steady growth for the Cardano ecosystem. Open interest on Cardano has climbed nearly 10%, now totaling $912.45 million. However, options volume took a major dip, down almost 93% to just $ 6.59 K.
For comparison, Bitcoin’s DeFi activity is operating on a much larger scale. BTC’s TVL in DeFi currently stands at $6.3 billion, with a 3.45% increase in the past 24 hours. Bitcoin itself is trading at $109,000, having gained about 4% over the past week. Meanwhile, Bitcoin’s open interest has also edged higher, up 1.67% to $76.43 billion. Options volume, on the other hand, surged, jumping more than 85% to hit $4.67 billion.
