Cardano has made a significant leap into the decentralized finance (DeFi) space with the launch of Cardinal, its inaugural Bitcoin DeFi protocol. This development has triggered a notable increase in both the price and trading volume of ADA, Cardano’s native cryptocurrency.
Cardano Introduces Cardinal Protocol
The Bitcoin DeFi protocol was first unveiled by Charles Hoskinson, the founder of Cardano, at the Bitcoin 2025 conference. A live demonstration illustrated a seamless BTC transaction transitioning to Cardano without the need for third-party bridges. The protocol is now fully operational.
Cardano founder Charles Hoskinson has announced the launch of Cardinal, the first Bitcoin DeFi protocol on the Cardano network. The protocol leverages MuSig2 multi-signature technology to enable non-custodial cross-chain functionality, allowing users to directly use Bitcoin UTXOs…
— Wu Blockchain (@WuBlockchain) June 10, 2025
Market reactions were swift, with ADA’s price surging nearly 4% within 24 hours, pushing its transaction volume beyond $700 million, as reported by DefiLlama. The recent inclusion of ADA in the Nasdaq cryptocurrency index has further spurred institutional interest, contributing to this momentum.
How Cardinal Integrates Bitcoin into Cardano’s DeFi Ecosystem
This introduces a groundbreaking opportunity for Bitcoin holders to utilize decentralized financial services on Cardano, without relying on centralized custodians or third-party bridges. Developed by Input Output (IOHK), Cardinal encapsulates Bitcoin’s unspent transaction outputs (UTXOs) into tied tokens, enabling users to stake, lend, or borrow while maintaining full control over their assets.
The protocol employs MuSig2 multi-signature schemes for secure anchoring processes, ensuring that the original Bitcoin remains locked on its native blockchain. Cardinal’s trust-minimized design marks a significant innovation compared to traditional wrapped Bitcoin solutions reliant on custodial infrastructure.
Features: Encapsulated UTXOs and Cross-Chain Compatibility
What sets Cardinal apart is its ability to manage wrapped UTXOs in a transparent and secure manner while offering users flexibility in recovering their original Bitcoin or native ordinals. These wrapped tokens are not only pegged 1:1 with BTC but can also be burned by users at any time to retrieve their original assets through a verifiable process.
Cardinal also utilizes BitVMX, an off-chain execution system, to overcome Bitcoin’s scripting limitations and facilitate interactions with Cardano’s smart contracts. This approach enhances compatibility with other blockchains, such as Ethereum, Solana, and Avalanche, thereby broadening Bitcoin’s reach in multi-chain DeFi environments.
Adoption Among Cardano’s DeFi Platforms
Major DeFi platforms within Cardano, including Minswap DEX, SundaeSwap, and Fluid Tokens, have already integrated Cardinal, allowing users to farm, lend, and swap Bitcoin-linked assets directly. With this integration, Bitcoin can now be used as collateral, exchanged for other native tokens, or even utilized in NFT and Ordinal markets without compromising security or transaction history.
Romain Pellerin, the Chief Technology Officer, noted that as Cardinal undergoes significant transformation, future upgrades will focus on enhancing wallet integrations, implementing zero-knowledge proofs, and increasing liquidity. These advancements are expected to solidify Cardinal’s appeal and strengthen Cardano’s position within the broader DeFi landscape.
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