Circle, the creator of the US dollar coin (USDC), has launched a mainnet protocol that allows users to transfer USDC between Ethereum and Avalanche, according to an announcement on April 26. 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 this need for USDC bridges.
The team released a video on April 13. demonstration 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 said it hopes CCTP will solve the problem of “fragmentation” in the Web3 ecosystem. Currently, there are multiple unofficial versions of USDC floating around on various networks, most of which are the result of tokens on one network being attached to another. Now that there is an official way to transfer coins from one network to another, the team hopes that the use of these unofficial copies will slowly decline, making token usage less confusing.
The team said that many of the largest cross-chain protocols have already committed to using CCTP in the future, including Celer, Hyperlane, LayerZero, LI.FI, MetaMask, Wormhole, and others.
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Joao Reginatto, Circle’s vice president of product, 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 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 or 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 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. backless. This has left developers wondering how to protect bridges for future use as digital assets become more commonplace.
