Circle, creator 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 held 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 Cross-Chain Transfer Protocol (CCTP) seems to eliminate the need to use USDC bridges.
The team posted a video on April 13 showing how the new protocol works. Unlike a traditional bridge, it does not block the tokens sent to your contract. Instead, it completely destroys them and issues new tokens on the receiving network. Users can redeem these new tokens for bank deposits directly by depositing the tokens with Circle or its partners.
In the announcement, the team states that it hopes CCTP will solve the problem of “fragmentation” in the Web3 ecosystem. Currently, there are multiple unofficial versions of USDC circulating on various networks, most of which are the result of token transfers from one network to another. Now that there is an official way to transfer coins from one network to another, the team expects the use of these unofficial copies to slowly decline, making token usage less confusing.
The team stated that many of the largest cross-chain protocols have already committed to using CCTP in the future, such as Celer, Hyperlane, LayerZero, LI.FI, MetaMask, and Wormhole, among others.
Joao Reginato, Circle’s VP of Product, believes the new protocol will help improve liquidity and capital efficiency in decentralized finance:
With CCTP, developers can simplify the user experience and their users can trust that they are always transacting with a highly liquid, secure and fungible asset in native USDC.
USDC is a fiat-backed stablecoin issued by Circle. The company claims that each 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 one of its partners, such as Coinbase. Once this is done, they can receive the coin on various networks including Ethereum, Avalanche, Stellar, and Polkadot.
Users have lost billions of dollars worth of USDC and other cryptocurrencies to bridge hacks in recent years, as attackers have repeatedly figured out how to remove locked coins from bridge contracts and leave their copies on the receiving network without backup. This has left developers wondering how to secure the bridges for future use as digital assets become more widespread.
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