Last updated 3 weeks ago
Cardano and Bitcoin users cannot use Lightning to receive trust-minimized BTC on Cardano instantly. Existing solutions require trust in external parties or have long delays and limit real-time use.
We combine the speed of Lightning Payments with the security of Cardinal using a Liquidity Manager so that users can pay with Lightning and instantly receive wrapped BTC on Cardano boosting adoption.
Please provide your proposal title
Bitcoin Lightning Payments on Cardano using Cardinal
Enter the amount of funding you are requesting in ADA
100000
Please specify how many months you expect your project to last
6
Please indicate if your proposal has been auto-translated
No
Original Language
en
What is the problem you want to solve?
Cardano and Bitcoin users cannot use Lightning to receive trust-minimized BTC on Cardano instantly. Existing solutions require trust in external parties or have long delays and limit real-time use.
Supporting links
Does your project have any dependencies on other organizations, technical or otherwise?
Yes
Describe any dependencies or write 'No dependencies'
Yes, the project depends on external protocols and infrastructure. Apart from these, it only uses the standard Cardano developer stack (Plutus smart contracts, Rust SDKs, indexers), which are expected tools and not external dependencies. The two key dependencies are: Bitcoin Lightning Network: We rely on a standard Lightning node (e.g. Core Lightning or lnd) to handle invoice creation, channel setup, and BTC payments. This is mature and well supported. Cardinal: We integrate with the Cardinal protocol to mint and redeem wrapped BTC on Cardano. This ensures trust-minimized, 1:1 backed assets. Cardinal APIs and operator endpoints are required for tracking the Bitcoin chain for deposit confirmation and minting. Other than these integrations, the project is self-contained. All smart contracts, connector code, and frontend components will be developed and maintained by our team, with no dependency on custodial services or external companies.
Will your project's outputs be fully open source?
Yes
License and Additional Information
Code will be licensed under Apache 2.0; specifications under Creative Commons.
Please choose the most relevant theme and tag related to the outcomes of your proposal
Cross-chain
Mention your open source license and describe your open source license rationale.
All code produced in this project will be released under the Apache 2.0 license. This license was chosen because it is a well-recognized, permissive open-source license that supports both personal and commercial use, encourages broad adoption, and allows other developers to integrate and adapt our work without restrictive conditions. It also ensures that contributions remain open while enabling commercial projects to build on top of the solution, which aligns with our goal of accelerating adoption across the Cardano ecosystem.
How do you make sure your source code is accessible to the public from project start, and people are informed?
We will maintain the project in public GitHub repositories from the very start. This includes all components (smart contract, cross-chain connector, demo, deployment scripts, etc.). Version control practices will ensure consistent, high-quality commits, and the repository will be updated frequently with progress logs so the community can follow development in real time. Milestone completions and significant changes will be clearly tagged, and we will use GitHub Issues and Discussions to coordinate feedback and answer questions.
How will you provide high quality documentation?
We will provide comprehensive documentation for both end users and developers, including a detailed README, setup guides, API docs, and integration examples. Clear structure, visuals, and flow diagrams will illustrate processes like the Lightning-to-Cardano flow. Repository docs will use Markdown, with OpenAPI for APIs, and extended guides on GitHub Wiki or Docusaurus to ensure anyone can deploy, test, and build on the solution.
Please describe your proposed solution and how it addresses the problem
The problem we are solving is the lack of a fast, user-friendly way for Bitcoin users to send Lightning payments and receive trust-minimized BTC directly on Cardano. While Cardinal offers a secure, non-custodial way to bring BTC into Cardano, it requires six or more Bitcoin confirmations before minting wrapped BTC. This wait time, on average an hour, makes the process too slow for instant settlement, which limits user adoption and real-time payment use cases.
Our approach is to build a cross-chain connector that links the Bitcoin Lightning Network with Cardinal’s minting process, combined with a Liquidity Manager (LM) smart contract on Cardano. The LM will hold a reserve of pre-minted Cardinal-wrapped BTC. When a Lightning payment is made, the connector will instantly transfer wrapped BTC from the LM to the recipient’s Cardano address. In parallel, it will forward the BTC from the Lightning payment into Cardinal’s Bitcoin deposit process. Once the required confirmations are reached, newly minted Cardinal-wrapped BTC is returned to the LM to replenish its inventory.
We chose this design because it combines Lightning’s instant payments with Cardinal’s trust-minimized asset model, while solving the confirmation delay through an on-chain liquidity buffer. It avoids price risk by only moving BTC and its corresponding wrapped BTC 1:1. The LM will enforce on-chain limits to manage transaction sizes, daily volume, and minimum reserves, and can pause payouts automatically if inventory drops below safe thresholds.
This solution will engage both Bitcoin and Cardano communities. Lightning users gain a fast way to access Cardano’s DeFi ecosystem, while Cardano gains fresh BTC liquidity in a secure and transparent way. Liquidity providers can supply Cardinal-wrapped BTC to the LM and earn fees for doing so. We will demonstrate success through public testnet and mainnet trials showing Lightning payments settling instantly as Cardinal-wrapped BTC on Cardano, and by publishing metrics such as transaction volumes, liquidity turnover, and replenishment rates. All components will be open-sourced and fully transparent to the community.
Prerequisites: A user in the Lightning Network is connected to a Node with an active channel and with an existing Layer1 address on the Cardano blockchain
Lightning to Cardano flow: Deposit of BTC into a Lightning Network node, leading to a withdrawal of wrapped BTC on the Cardano blockchain:
Cardano to Lightning flow: Deposit of wrapped BTC into a liquidity pool on a smart contract on the Cardano blockchain, leading to a withdrawal of BTC into the Lightning Network
The system is designed to minimize trust, but certain operational and protocol-level assumptions apply:
These assumptions are transparent, auditable, and aligned with existing practices for both Lightning and Cardinal users. They further rely on the availability of Cardinal for developer use. Where availability is a concern (e.g., in the connector), the design allows for multiple independent operators to run connectors against the same smart contract, increasing availability guarantees.
Please define the positive impact your project will have on the wider Cardano community
Successfully delivering this project will bring immediate value to the Cardano community by creating a fast, secure on-ramp for BTC liquidity. With Lightning-to-Cardinal integration, users can move BTC into Cardano almost instantly, without the delays normally caused by Bitcoin confirmations. This will encourage more BTC holders to participate in Cardano DeFi, deepen liquidity pools, and expand the utility of BTC-backed assets within the ecosystem.
The benefits will be seen in stronger DeFi markets, greater adoption of Cardinal-wrapped BTC, and new opportunities for developers to integrate instant BTC settlement into their applications. The liquidity manager design ensures that these benefits are available from day one, without waiting for full BTC confirmation cycles.
We will measure impact through both quantitative and qualitative indicators. Quantitatively, we will track:
Qualitatively, we will assess user feedback, developer integrations, and DeFi platform adoption. All outputs—smart contract code, Connector code, documentation—will be released as open source. We will share them through public repositories, developer guides, and community channels. The LM’s activity will be fully transparent on-chain, enabling the community to verify usage and security in real time. This openness ensures the benefits are widely accessible and contribute to Cardano’s sustainable growth.
What is your capability to deliver your project with high levels of trust and accountability? How do you intend to validate if your approach is feasible?
Our team has the right combination of skills to deliver this project from start to finish. In the past 5+ years we have implemented Cardano Plutus smart contracts for multi-asset handling, built scalability and interoperability solutions such as state channels, and integrated Bitcoin Lightning nodes through RPC interfaces. This background allows us to design both the on-chain Liquidity Manager and the cross-chain connector that links Lightning payments to Cardinal’s minting process.
The Liquidity Manager will be developed using proven Plutus patterns for:
The connector service will:
Initiate Cardinal deposit flows and manage replenishment after BTC confirmations
Feasibility is high because each component builds on mature technology: Lightning is well-established, Cardinal’s architecture is public and has been demonstrated on mainnet, and Cardano’s smart contract framework is stable. The main integration challenge—Cardinal’s ~6-block confirmation delay—is addressed directly by the Liquidity Manager design, which enables instant payouts while staying 1:1 backed.
We will deliver in phases: isolated development and testing, cBTC-based early integration, public testnet deployment, and finally Cardinal integration once APIs and operator infrastructure are stable. Quality will be maintained through code reviews, automated tests, and transparent reporting, with all code released under an open-source license to allow community oversight and reuse.
Milestone Title
Cardano Smart Contract: Liquidity Manager
Milestone Outputs
Smart contract code that can be deployed on Testnet. It contains the following features:
Acceptance Criteria
Evidence of Completion
Availability of code in public Github repository, as well as deployed and accessible smart contract on the Cardano Testnet.
Delivery Month
2
Cost
30000
Progress
30 %
Milestone Title
Cross-Chain Connector
Milestone Outputs
The Connector is a Lightning Network Node, written in Rust and modified to communicate with vanilla Lightning Nodes, as well as our LM smart contract on the Cardano blockchain. It will contain the following features:
Acceptance Criteria
Evidence of Completion
Delivery Month
3
Cost
20000
Progress
50 %
Milestone Title
Cardinal Integration inside Connector and Liquidity Manager Smart Contract
Milestone Outputs
If required Cardinal functionality is available at this stage of development:
We use Cardinal to exchange BTC from the Bitcoin blockchain with wrapped BTC that is minted and burned by Cardinal’s wrapping protocol. This will effectively lock and unlock funds inside the LM smart contract. The Connector uses the Cardinal API to sign, broadcast and verify transactions on the Bitcoin blockchain. It tracks UTXOs on the Bitcoin blockchain to ensure that funding and settlement transactions progress according to the Lightning protocol.
Else:
We implement the RPC communication to the Bitcoin Network within our Lightning Network implementation to sign, broadcast and verify transactions on the Bitcoin blockchain. Since we do not have a minting and burning mechanism, we will lock BTC funds on the Lightning Network node and the LM smart contract respectively, during the exchange.
Acceptance Criteria
In our setup, consisting of the Connector, a user-run vanilla Lightning Network node and the LM smart contract, we will be able to transfer and lock funds on the Connector and the LM smart contract. The setup will run on local Bitcoin and Cardano Devnet.
Evidence of Completion
Passing integration tests which incorporate all three components during the asset exchanges: Node, Connector and LM smart contract. The integration tests will succeed in depositing and withdrawing BTC on the Bitcoin blockchain and wrapped BTC on the Cardano blockchain. The code will be available in our Github repositories.
Delivery Month
5
Cost
30000
Progress
80 %
Milestone Title
End-to-End Testnet Deployment
Milestone Outputs
Acceptance Criteria
Evidence of Completion
Successful BTC payments between the Bitcoin and Cardano blockchains using our Lightning Network setup.
Delivery Month
6
Cost
15000
Progress
90 %
Milestone Title
Public Demo & Documentation
Milestone Outputs
We showcase the project’s capabilities developed in milestones 1-4 by building a simple, user-friendly frontend that allows anyone to try out Lightning to Cardano payments. We further provide clear, step‑by‑step documentation for users and developers.
Acceptance Criteria
Evidence of Completion
Delivery Month
6
Cost
5000
Progress
100 %
Please provide a cost breakdown of the proposed work and resources
Roles and costs
Senior Developer: $85/hr, ~101 ADA/hr
Junior Developer: $55/hr, ~65 ADA/hr
Researcher : $100/hr, ~137 ADA/hr
Project Manager: $70/hr, ~83 ADA/hr
MS1 — Cardano Smart Contract (30,000 ADA)
Total: 30,000 ADA
MS2 — Cross-Chain Connector (20,000 ADA)
Total: 20,000 ADA
MS3 — Cardinal Integration (30,000 ADA)
Total: 30,000 ADA
MS4 — End-to-End Testnet Deployment (15,000 ADA)
Total: 15,000 ADA
MS5 — Public Demo & Documentation (5,000 ADA)
Total: 5,000 ADA
Total Project Budget: 100,000 ADA
Funding Plan:
The requested budget fully covers the planned scope. No additional funds required beyond the grant.
How does the cost of the project represent value for the Cardano ecosystem?
This project delivers a high-impact, implementation-focused solution to bridge Bitcoin Lightning payments directly into Cardinal-wrapped BTC on Cardano. By combining Lightning’s speed with Cardinal’s security, and using a Liquidity Manager to bypass confirmation delays, the solution offers instant, trust-minimized BTC settlement on Cardano. This capability does not currently exist in the ecosystem.
The requested budget of 100,000 ADA is tightly aligned with the development effort across five milestones, each with clear deliverables and a direct link to user-facing functionality. The distribution of costs reflects the specialist skills required, from advanced Plutus contract development to Lightning integration and Cardinal protocol adaptation. Each ADA spent contributes directly to building, integrating, testing, and delivering a working product, rather than to overhead or non-technical work.
The return to the Cardano community includes:
By enabling BTC liquidity to enter Cardano’s DeFi ecosystem quickly and securely, this project has the potential to boost wrapped BTC adoption, deepen liquidity pools, and attract new users from the Bitcoin community. This is a foundational interoperability improvement that can be extended to other assets and protocols in the future, maximizing long-term value for the ecosystem.
Terms and Conditions:
Yes
The project team has successfully delivered Catalyst projects in the past and covers all necessary skills ranging from experience with Cross-Chain protocol design and implementation, Plutus contract development, Bitcoin Lightning, Threshold Cryptography to successful project management and delivery.
Hendrik Amler (Co-Founder, CEO)
Master’s degree in Computer Science focused on IT security. Leads project management and ecosystem outreach. Has worked on two previous successful Catalyst projects (State Channels, Threshold Cryptography).
Ilja von Hoessle (Dev Lead)
Holds a PhD in Physics, Technical Lead for Perun State Channel OSS project, experience in go, rust, python in 4+ different ecosystems. Designed and implemented interoperability layer between EVM and non-EVM (including EUTXO based) ecosystems including Lightning Network.
Huy Tranh (Core developer)
Holds bachelor’s degree in Computer Science. Core Developer. Has experience with EUTXO based ecosystems and Cardano Development. Has worked on a previous Catalyst project extending an existing library with Threshold Cryptography.
Jan Bormet (Researcher)
PhD Student and researcher. Experience with Cardano development (Cardano Plutus/EUTXO contract development) for State Channels. Experience in protocol development, formal verification and assessing security.
No Additional Hiring Needed for MVP:
All required skills for MVP delivery are already present in the team.