Cardano Introduces Cardinal, Connects Bitcoin Liquidity to DeFi

• Cardinal Brings Bitcoin to Cardano’s DeFi
• Bitcoin Liquidity Drives New DeFi Opportunities
• MuSig2 and BitVMX Strengthen Decentralized Security

The Cardano ecosystem gained a new liquidity booster this Tuesday, June 10, with the launch of Cardinal, a protocol that involves Bitcoin UTXOs and converts them into native tokens, ready to circulate in the network's DeFi applications.

The initiative was highlighted by Charles Hoskinson on social media and represents the foundation's most ambitious attempt yet to attract “Bitcoin liquidity” into Cardano's smart contract infrastructure, without relying on custodial bridges or federations.

Welcome to the first Bitcoin DeFi protocol developed for Cardano https://t.co/CoYvrYnIfI

— Charles Hoskinson (@IOHK_Charles) June 9, 2025

Cardinal works through a wrapping scheme that maintains one-to-one parity: each satoshi locked in Bitcoin releases a corresponding token on the Cardano side. When the user decides to close the trade, the wrapped asset is burned and the original BTC returns to its native chain.

To preserve security, the protocol adopts MuSig2, a multi-signature standard that allows multiple entities to sign a single transaction, reducing attack vectors and on-chain fees. This layer cooperates with BitVMX, an off-chain execution environment that processes complex logic without sacrificing decentralization.

Another concern is the handling of block reorganizations. Cardinal waits for a predefined number of confirmations before releasing any critical step, minimizing the risk of double-spend or cross-chain censorship.

Despite the progress, Romain Pellerin, technical director of Input Output Global, noted that the system is not yet ready for production: “The protocol works, but as mentioned in the article, we do not consider it ready for production yet. Some improvements are coming. Stay tuned for version 1.0.”

With this new feature, Bitcoin holders gain direct access to lending, staking and liquidity provision services run on Cardano, expanding the yield offering without giving up their own custody.

Analysts point out that the arrival of “Bitcoin liquidity” could increase the network’s total value locked (TVL) and attract projects focused on algorithmic stablecoins, derivatives and credit platforms, expanding Cardano’s competitiveness in the multichain DeFi scenario.

The team promises to release version 1.0 after additional audits and throughput optimizations, consolidating the integration between the two largest proof-of-stake and proof-of-work ecosystems on the market.