Cardano Launches Cardinal Protocol Bridging Bitcoin and DeFi

Cardinal Protocol Connects Bitcoin and Cardano DeFi

Cardinal Protocol, built by Input Output Global (IOG), Cardano’s core development team, allows users to “wrap” unspent Bitcoin transaction outputs (UTXOs) into 1:1 pegged tokens that can be used in Cardano’s DeFi ecosystem. The protocol uses MuSig2 multi-party signature technology and BitVMX off-chain computation to ensure security, decentralization, and cross-chain interoperability. According to CoinJournal, Cardinal was successfully tested at the Bitcoin 2025 conference, with a bridgeless BTC to Cardano transfer, marking an important technical milestone.

However, IOG CTO Romain Pellerin stressed that Cardinal is not yet ready for commercial deployment. “The protocol is live but needs improvements before a 1.0 launch,” he said. Future upgrades will focus on wallet integration, zero-knowledge proofs, and increased liquidity for scaling.

The need to integrate Bitcoin into DeFi

Bitcoin, with a market capitalization of over $1.5 trillion and a price of around $110,000 by June 2025, is the largest digital asset but is limited in programmability compared to blockchains like Ethereum or Solana. Meanwhile, Cardano, with an ADA price of around $0.71 and a DeFi total value locked (TVL) of $334 million, stands out for its low transaction costs and flexible smart contracts. However, Cardano's TVL has declined from a peak of $415 million in May 2025, indicating a need to attract more liquidity.

Traditional Bitcoin wrapping solutions, like wBTC on Ethereum, rely on intermediaries like BitGo, which carries the risk of centralization and rehypothecation. According to CryptoSlate, centralized bridges have lost over $2.5 billion to exploits since 2021. Cardinal solves this problem with a “trust-minimized” model, using MuSig2 to ensure that only one honest party is needed to maintain transaction integrity.

The event comes amid a tumultuous crypto market. Bitcoin and Ethereum ETFs attracted more than $50 billion in institutional inflows in Q1 2025, while the SEC is accelerating its review of a Solana ETF. Meanwhile, projects like Plasma (which raised $500 million for a Bitcoin-backed stablecoin) and Pyth Network (which puts ETF price data on-chain) show a trend toward integrating traditional finance and DeFi.

Conclude

The launch of Cardinal Protocol is a major step for Cardano in bridging Bitcoin with DeFi, giving BTC holders the opportunity to participate in activities such as lending, staking, and trading Ordinals on a decentralized platform. With MuSig2 and BitVMX technology, Cardinal promises a secure and transparent model, but still needs improvement to reach commercial version. This event not only increases liquidity for Cardano but also expands the utility of Bitcoin, shaping the future of multi-chain DeFi.

Can Cardinal propel Cardano past Ethereum and Solana in the DeFi race? Investors and developers should keep a close eye on the protocol’s progress. Stay tuned for the latest developments!

Once again we give our opinion on potential projects in the crypto market. This is not investment advice, consider your portfolio. Disclaimer: The views expressed in this article are solely those of the author and do not represent the platform in any way. This article is not intended to be a guide to making investment decisions.

Compiled and analyzed by HCCVenture

Join HCCVenture here: https://linktr.ee/holdcoincventure