Among the first movers on this front is Cardano founder Charles Hoskinson with the new Cardinal Protocol, a Bitcoin DeFi game changer. This groundbreaking development opens new doors for Bitcoin holders to leverage their assets in the rapidly-growing decentralized finance (DeFi) ecosystem within the Cardano blockchain. To keep all activities transparent and easily verifiable, the Cardinal Protocol makes peg-in and peg-out transactions easy.
The Cardinal Protocol avoids this shortcoming by being truly cross-chain, not just interoperable within Cardano but compatible with Ethereum, Solana, and Avalanche networks. By giving Bitcoin a place in Cardano's expanding DeFi sector, the protocol addresses a growing demand, especially as figures like Robert Kiyosaki advocate for Bitcoin as "people's money."
To help fill this gap, InputOutput HK built the Cardinal Protocol, a way for users to use any Bitcoin UTXO to earn DeFi yield. One important component of the new protocol is BitVMX, which serves as a basis for off-chain verification. Seamless integration with Cardano’s smart contracts BitVMX was designed with Cardano’s ecosystem in mind.
With its integration, the protocol allows users to participate in several DeFi activities. With DeFi, they can farm and trade Bitcoin-based assets on new platforms including MinswapDEX, SundaeSwap, or Fluid Tokens. Users can lend their funds through these platforms, creating another way for users to utilize Bitcoin within the Cardano ecosystem.
The Cardinal Protocol becomes the first solution enabling Bitcoin to be harnessed in DeFi on Cardano. It accomplishes this without the use of any third-party custodians. This development increases the independence from middlemen, fostering a more decentralized and safer ecosystem for Bitcoin holders looking for DeFi options.
