- The Cardano-Bitcoin Grail bridge may allow for decentralized finance (DeFi) applications secured by Bitcoin without requiring a soft fork.
- The bridge uses zero-knowledge (ZK) proofs to enable Bitcoin withdrawals from Cardano even if most Cardano nodes become malicious.
- Developing hybrid Bitcoin-Cardano DeFi apps may take significant work, as developers need to be trained in Cardano’s Aiken programming language.
The upcoming Cardano-Bitcoin bridge based on the Grail protocol may enable decentralized finance (DeFi) applications secured by the Bitcoin network.
How the Cardano-Bitcoin Bridge Works
The bridge is being developed by Emurgo, Cardano’s development team, in partnership with Grail’s developer BTC.OS. It allows users to deposit Bitcoin into a Layer 2 network and withdraw it without needing to trust the network’s validators.
Grail builds on an earlier idea called BitVM that used Bitcoin’s blockchain to store simple data. Grail improves on this by using zero-knowledge (ZK) proofs to reduce the amount of data stored on Bitcoin. This shrinks the complexity and allows Bitcoin withdrawals even if Cardano nodes are compromised.
Creating Hybrid Bitcoin-Cardano Applications
According to Cardano founder Charles Hoskinson, the bridge will enable hybrid Bitcoin-Cardano apps secured by Bitcoin. Developers can build these apps using Cardano’s Aiken programming language and pay fees in Bitcoin.
However, creating these hybrid apps from scratch will take significant effort since developers need training in Aiken. Cutting and pasting from Ethereum’s Solidity will not work. There will also be wallet integrations and other challenges. But Hoskinson believes it’s worth it given the capital tied up in Bitcoin.
Withdrawal Security Considerations
Withdrawals can still be blocked if 100% of the bridge’s verifiers collude maliciously according to BTC.OS co-founder Edan Yago. While not impossible, this is a stronger assumption than Bitcoin’s security model which assumes a majority of miners are honest.
Alternative Options
Another option called OP_CAT also claims to enable Bitcoin DeFi without Cardano. However, it requires a soft fork which some Bitcoin nodes oppose. StarkWare CEO Eli Ben Sasson predicts OP_CAT will go live in the next 12 months regardless.
Looking Ahead
While the Cardano-Bitcoin bridge is still developing, it aims to unlock the trillions of dollars sitting dormant in Bitcoin by enabling DeFi without compromising security. If successful, it could be the first step to true Bitcoin DeFi.
