[DigitalToday reporter Yoonseo Lee] Charles Hoskinson has identified the Bitcoin DeFi (BTCFi) market as a key growth area that Cardano can seize early.

On May 21 (local time), blockchain outlet The Crypto Basic reported that Hoskinson said no project currently dominates the Bitcoin DeFi race and argued Cardano already has technical strength and an early edge.

Hoskinson made the remarks after reviewing material explaining the three-layer structure of Starknet's newly launched strkBTC bridge. He said the industry has now entered a competitive phase that Cardano can win, and described Bitcoin DeFi as the largest growth area in decentralised finance (DeFi). He added that no single project has yet been able to dominate the segment.

The core of this market is to draw Bitcoin liquidity into DeFi while reducing reliance on centralised custodians or vulnerable bridge structures. BTCFi was introduced as a trend that combines trust-minimised Bitcoin bridges with privacy-focused DeFi services. It is becoming more important to enable users and institutions to participate in lending, trading and yield generation without disclosing all transaction histories, the report said.

Technologies cited as supporting this include zero-knowledge proofs, shielded transactions, BitVM systems, ZK verification and 1-of-N honest security models. These technologies are designed to reduce bridge hacking risks and cut single points of failure. Based on DeFiLlama data, total value locked (TVL) in crypto bridge protocols is about $40 billion, but bridges have long been major targets in past DeFi attacks because they connect large pools of liquidity.

The market opportunity is also large. Bitcoin's market capitalisation is currently about $1.5 trillion, and many holders have kept their assets locked up without using them in DeFi applications. The Bitcoin-based DeFi ecosystem is expanding around Stacks, Rootstock, Bitlayer and Citrea, but total value locked remains smaller than Ethereum DeFi.

Amid this trend, Cardano is seeking to secure market leadership with its research-driven UTXO structure and the privacy-focused partner chain Midnight. Cardano supporters see the UTXO model as having strengths in secure bridges and atomic swaps. Midnight is aiming at both privacy and regulatory response through zero-knowledge proofs and a selective disclosure system.

Cardano's Bitcoin strategy also set a meaningful milestone in March 2026. FluidTokens completed the first native Bitcoin-Cardano atomic swap on mainnet, making trustless BTC-ADA transactions possible without bridges or wrapped assets. Hoskinson has since emphasised plans to bring more Bitcoin liquidity to Cardano and Midnight and expand into private lending and yield-focused applications.

Hoskinson also called the expansion of DeFi on the Cardano network in 2026 a "make-or-break" issue. In line with that, Lace Wallet 2.0 added support for Cardano, Bitcoin and Midnight. The ecosystem is also pursuing protocol upgrades, including node improvements and scaling work under Leios.

Changes in institutional demand are also aligning with the trend. In 2026, institutional demand for privacy tools has increased, and developers see privacy as a key element for long-term adoption. With moving sensitive data across chains harder than moving tokens, the Bitcoin DeFi competition is shifting beyond a simple bridge race into a contest over privacy and security architecture.

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