Cardano has officially launched Cardinal, its first decentralized finance (DeFi) protocol tailored specifically for Bitcoin users. The announcement was made by Cardano founder Charles Hoskinson on June 9, 2025. Developed by Input Output, the research and development team behind Cardano, Cardinal enables Bitcoin holders to access DeFi services such as lending, staking, and borrowing without relying on traditional custodians or centralized bridges.
The protocol works by wrapping Bitcoin's unspent transaction outputs (UTXOs) into tokens pegged 1:1 to Bitcoin, allowing users to redeem their wrapped BTC through secure, fraud-resistant procedures. Cardinal distinguishes itself from typical wrapped Bitcoin solutions by employing a trust-minimized system using MuSig2 cryptography. This allows multiple parties to jointly sign transactions, ensuring Bitcoin remains securely locked on its native blockchain, even if only one participant acts honestly.
Additionally, Cardinal avoids the common issue of rehypothecation by giving users full control over their assets while preserving the original Bitcoin. The protocol also leverages BitVMX, an off-chain execution system that supports complex Bitcoin operations and decentralized asset transfers between Bitcoin and Cardano networks. During the Bitcoin 2025 conference, a live demo showcased a bridgeless BTC-to-Cardano transfer via BitVMX, signaling a significant step towards Cardano becoming a platform for Bitcoin-native applications.
Despite a recent decline in Cardano's DeFi total value locked (TVL) from $415 million in May to about $334 million by June 10, the team expects Cardinal to attract new liquidity by providing Bitcoin holders enhanced ways to engage with DeFi on Cardano without detaching from the Bitcoin ecosystem.
Charles Hoskinson envisions Bitcoin becoming the largest DeFi platform globally, with Cardano playing a key bridging role between the two vast communities. The integration is anticipated to boost BTC liquidity on Cardano, stimulate innovation, and elevate Cardano's market position. Similar cross-chain initiatives, such as wrapped Bitcoin on Ethereum, have historically increased network activity and TVL significantly, suggesting positive prospects for Cardinal and both ecosystems.