Cardano-Bitcoin bridge may be first step to true Bitcoin DeFi
The new bridge enables users to withdraw Bitcoin even if most Cardano nodes become malevolent. The planned Cardano-Bitcoin bridge, which is based on the Grail protocol, might be a first step towards delivering Bitcoin-secured decentralised financial (DeFi) applications, according to docs from the bridge’s underlying protocol.
Emurgo, Cardano’s development team, revealed on October 24 that it was working on the bridge with BTCOS, the developer of Grail. In an X post the next day, Cardano founder Charles Hoskinson clarified that the network will eventually host DeFi applications secured by Bitcoin, adding that “With babel fees, Bitcoin developers can develop Hybrid Cardano/Bitcoin applications in Aiken and pay their transaction fees in bitcoin.”
The post was deleted on November 16, but X user Al’O captured identical words from Hoskinson and uploaded them on his channel. Some Bitcoin users were sceptical that the Bitcoin network could protect DeFi applications.
Critics stated that previous “Bitcoin layer 2s” did not allow users to withdraw Bitcoin without the network’s operator’s agreement, and they predicted that the new Cardano/Bitcoin hybrid network would be similar. Nonetheless, documentation for Grail demonstrate that it allows Bitcoin users to withdraw from Cardano without the approval of its validators.
Smart contracts on Bitcoin
Grail was inspired by an earlier concept dubbed “BitVM,” which was explained by developer Robin Linus in a 2023 white paper.
The article advocated creating a Bitcoin “optimistic rollup,” similar to Ethereum’s Optimism, Base, or Arbitrum, by having a server commit to either a “0” or “1” for each byte of data recorded. It stated that simple games such as chess, go, and poker could be played on Bitcoin with this method.
The Grail white paper, issued in April, stated that Grail “builds on the BitVM paradigm,” and that the original BitVM system generated billions of complex transactions that would eventually render its bridge unsuitable for usage.
Creating hybrid apps may take a long time
Even after the bridge is built, it may take some time to establish Bitcoin-secured DeFi applications. Hoskinson stated in his now-deleted X post that developers would need to be trained in Cardano’s Aiken programming language to produce these hybrid Bitcoin/Cardano apps.
Because most Ethereum DeFi developers are skilled in Solidity, new apps cannot be produced by simply copying and pasting ones from Ethereum. They’ll need to be written from scratch.
In the recording posted by Al’O, Hoskinson stated, “It’s going to be an enormous amount of work, a very heavy lift, and there’s going to be wallet integrations and all of these things that have to happen.”
Withdrawals can still be blocked
Cointelegraph met with Edan Yago, the co-founder of Grail developer BTC OS. Yago stated that withdrawals from the bridge might still be halted if all of its verifiers colluded maliciously.
“To take over the Grail system maliciously, you would need to own 100% of the nodes,” he noted. Nonetheless, he stated that this is “a stronger security assumption than Bitcoin,” as Bitcoin relies solely on the assumption that the “majority of miners [or hash power]” are trustworthy.
According to Yago, the bridge is more secure than current Bitcoin pegging systems, and developing a more secure system is critical because Bitcoin holds trillions of dollars in capital. He added:
“Most BTC is currently latent because holders are unwilling to trust third-party centralized businesses that provide bridging/wrapping to other blockchains. We believe that a vault or bridge like Grail, which is secured by zero-knowledge cryptography and a network of Bitcoin miners, could be the most secure crypto native vault solution that holders will rely on before putting their BTC to work.”
OP_CAT as an alternative for Bitcoin DeFi
Grail is not the only solution attempting to protect DeFi apps over the Bitcoin network. Another option, “OP_CAT”, claims to provide the same benefit. However, it would necessitate a soft fork of the Bitcoin node software, which some Bitcoin nodes are unwilling to execute. Even yet, StarkWare CEO Eli Ben Sasson has lobbied for the move, predicting that it will be implemented “within the next 12 months.”
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