TL;DR
- Cardano introduced Cardinal, a protocol that allows Bitcoin to be used in DeFi without centralized custody services or tokenized versions.
- Cardinal uses MuSig2 to securely manage cross-chain transactions and adds support for Ordinals within the Cardano ecosystem.
- Following the announcement, ADA rose 5.54% and Bitcoin 3.78%, while Nasdaq seeks to add ADA to its crypto index, pending SEC approval.
Cardano launched Cardinal, a protocol designed to integrate Bitcoin into its DeFi ecosystem without relying on centralized intermediaries.
Improving DeFi Capital Efficiency
The initiative, announced by Charles Hoskinson, enables BTC holders to use their capital for decentralized financial operations like staking, lending, and collateralizing, without giving up control of their funds. This mechanism removes the need to convert Bitcoin into tokenized forms, a common requirement on other platforms.
Cardinal uses MuSig2, a cryptographic scheme that allows multiple parties to securely authorize transactions. Thanks to this technology, it manages cross-chain flows without the typical risks associated with bridges. It also supports Ordinals, a tool that lets users embed unique digital assets within Bitcoin and leverage them in financial products on Cardano.
The system incorporates an off-chain solution called BitVMX, which optimizes transfer speeds and enhances privacy. The development team is also exploring the implementation of zero-knowledge proofs in future updates, aiming to reduce vulnerabilities and protect users’ private information.
Cardano and Bitcoin React in the Market
The immediate market response was noticeable. ADA surged 5.54% in 24 hours, reaching a price of $0.71 per unit, with a 40% increase in trading volume. Bitcoin also gained 3.78%, accompanied by a 50% spike in its trading volume. The reaction from investors and traders was positive, driven by interest in the new utilities.
Meanwhile, Nasdaq filed a request to include ADA in its crypto index, alongside other assets like Solana and XRP. If approved by the SEC, this move could pave the way for launching new financial products tied to ADA’s price, following the model of existing Bitcoin and Ethereum ETFs.
Cardinal opens a direct path for BTC holders to access DeFi tools on Cardano, without the limitations of centralized custody or forced conversions. Its adoption will depend on the trust it builds among users and its ability to sustain secure large-scale operations
