Blockchain
Circle, the maker of US Dollar Coin (USDC), has launched a mainnet protocol that allows users to transfer USDC between Ethereum and Avalanche, according to an April 26 announcement. Previously, Avalanche users who had USDC on Ethereum had to deposit their coins with a Circle partner or use a third-party bridge to transfer their USDC from one network to another. The new CCTP (Cross-Chain Transfer Protocol) protocol seems to remove this need for USDC bridges.
The team released a video on April 13 showing how the new protocol works. Unlike a traditional bridge, it does not lock tokens sent to its contract. Instead, it completely destroys them and issues new tokens on the receiving network. Users can instantly exchange these new tokens for bank deposits by depositing the tokens with Circle or its partners.
In the announcement, the team said it expects CCTP to solve the problem of “fragmentation” in the Web3 ecosystem. Currently, there are multiple unofficial versions of USDC floating around on different networks, most of them a result of bridging tokens on one network to another. Now that there is an official way to transfer coins from one network to another, the team expects that these unofficial copies will slowly decline in use, making the use of the token less confusing.
The team said many of the largest cross-chain protocols have already pledged to use CCTP in the future, including Celer, Hyperlane, LayerZero, LI.FI, MetaMask, Wormhole and others.
Related: VISA will enable USDC payments through a new partnership
Joao Reginatto, Vice President of Product at Circle, said he believes the new protocol will help improve liquidity and capital efficiency in decentralized finance:
“With CCTP, developers can simplify the user experience and give their users confidence that they are always trading with a highly liquid, safe and fungible asset in native USDC.
USDC is a Circle-backed stablecoin. The company claims that every USDC token is backed dollar-for-dollar in its reserves. Users can mint USDC by opening an account and depositing cash with Circle itself or with one of its partners, such as Coinbase. Once they have done this, they can receive the coin on various networks, including Ethereum, Avalanche, Stellar, and Polkadot.
Users have lost billions of dollars in USDC and other cryptocurrencies in recent years due to bridge hacks as attackers repeatedly figured out how to remove locked coins from bridge contracts and leave their copies on the receiving network without backup . This has led developers to wonder how to secure bridges for future use as digital assets become more mainstream.
