Cardano founder Charles Hoskinson has introduced a new protocol called Cardinal, which brings Bitcoin into the world of decentralized finance (DeFi) for the first time on the Cardano blockchain.
According to the company “Cardinal offers a fresh approach for Bitcoin.” He explained that the Wrapped UTXO system is central to the protocol, which allows users to turn unspent transaction outputs (UTXOs) into new digital assets.
These assets are pegged 1:1 by actual Bitcoin or Ordinals, which also means they can be transferred, used in DeFi activities like lending or staking, or even burned to release the original Bitcoin.
Furthermore, Cardinal uses a security system called MuSig2, a multi-signature technology that protects the locked Bitcoin with multiple digital keys, making it safer. Unlike older systems, Cardinal does not use custodians or allow rehypothecation, where assets are reused without the owner’s direct control.
In addition, Cardinal also works with other blockchains like Ethereum, Solana, and Avalanche, meaning that Bitcoin can now move between different platforms more easily, giving users more flexibility in how they use their assets.
The protocol also brings new life to Ordinals, which are unique digital items on Bitcoin. Through this layer, holders are no longer passive collectors; they can now pledge Ordinals as collateral, swap them over virtual counters, or lend the tokens for a yield.
Moreover, Cardinal is already being used on Cardano’s DeFi platforms like MinswapDEX and SundaeSwap. This means users can farm, stake, or trade using their wrapped Bitcoin assets directly on the Cardano network.
Nonetheless, the developers behind Cardinal are still looking to improve, as they plan to add advanced features like zero-knowledge proofs for better privacy and security, wallet support for easier use, and new liquidity tools for better trading options.
This launch marks the first time Bitcoin can be fully used in DeFi on Cardano. With Cardinal, users now have a new way to earn, borrow, or trade with Bitcoin in a safer, more open system.
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