Cardano has been making a serious splash in the decentralized finance (DeFi) world. It recently took a big step towards that goal by connecting to Bitcoin thanks to BOS Grail Bridge. This integration seeks to combine Cardano's strengths in smart contracts, scalability, and sustainability with Bitcoin's ample liquidity. By bridging this gap, Cardano looks to welcome institutional investment and position itself as a leading DeFi hub. The new integration leverages Sundial—a Layer 2 solution designed to increase transaction times and reduce transaction fees. This tremendously improves the efficiency and scalability of the whole process.
The integration process starts with Bitcoin Locking. In this initial step, users “wrap” their Bitcoin by depositing it into a smart contract on the Bitcoin blockchain. Once locked, the system then creates a smart contract-based token on the Cardano blockchain that represents the Bitcoin. This means that users can trade and utilize their Bitcoin on Cardano through other DeFi protocols, greatly increasing its utility. This encompasses everything from lending and yield farming to trading on decentralized exchanges (DEXs).
The BitSNARK protocol is the centerpiece of this integration. It allows for the confirmation of aggregate transactions to be made without revealing the actual data itself. This means that moving Bitcoin to Cardano is safe, confidential and doesn’t need centralized middlemen.
“The core of this integration is the BOS Grail Bridge by BitcoinOS (BOS), which serves as a secure and decentralized method for transferring assets between Bitcoin and Cardano, leveraging Zero-Knowledge (ZK) Cryptography, specifically the BitSNARK protocol.” - Osama Bari
Cardano’s unique selling propositions are its smart contract functionality, its scalability, and its focus on sustainability. It’s historically been missing the vibrant deep liquidity Bitcoin has. The proposed integration aims to close this gap, giving users the ability to make use of their Bitcoin assets while participating in the Cardano ecosystem.
To improve the efficiency and scalability of the integration, the Event is using Sundial, a Layer 2 solution. By speeding up transaction times and lowering costs, Sundial will help make the new banking experience more appealing for users.
Users must lock their Bitcoin. Users can stake their Bitcoin by locking them into an EVM-compatible smart contract on the Bitcoin blockchain. In exchange, they receive a matching token that lives on the Cardano blockchain. This new token can then be used across different DeFi protocols.
Through DeFi on Cardano, users have access to previously unattainable opportunities. They’re free to use the BTC-representing token earned through their activity for lending, yield farming, or trading on decentralized exchanges (DEXs). This greatly broadens the use case for Bitcoin while enriching the entire Cardano ecosystem.
“Cardano’s integration with Bitcoin through the BOS Grail Bridge is a vital step toward making Cardano a key player in the DeFi space. If the integration goes well, ADA’s price could see significant growth.” - Osama Bari
This helps solidify the entire Cardano ecosystem by drawing institutional investment and helping position Cardano as an attractive center for DeFi activity. Considering the size of resources dedicated to innovation, this move could immensely deepen Cardano’s footprint in the ever-changing competitive blockchain space.
