This revolutionary Cross-Chain Transfer Protocol (CCTP) eliminates the need for USDC bridges, simplifying transactions and enhancing security for users.
A solution to fragmentation
The new CCTP aims to address the issue of fragmentation in the Web3 ecosystem. Prior to its launch, multiple unofficial versions of USDC existed on various networks as a result of tokens being bridged between them.
With an official means of transferring coins from one network to another, Circle anticipates that the use of unofficial copies will gradually decrease, making the token less confusing and more secure.
In contrast to traditional bridges, the CCTP does not lock tokens sent to its contract. Instead, it destroys them and issues new tokens on the receiving network.
Users can then redeem these new tokens for bank deposits directly by depositing the tokens with Circle or its partners.
Many prominent cross-chain protocols, including Celer, Hyperlane, LayerZero, LI.FI, MetaMask, and Wormhole, have pledged to adopt CCTP moving forward.
Joao Reginatto, Circle’s Vice President of Product, believes that the new protocol will enhance liquidity and capital efficiency in decentralized finance. He said:
With CCTP, developers can simplify the user experience and their users can trust that they are always transacting with a highly liquid, safe, and fungible asset in native USDC.
Circle’s USDC and its growing popularity
USDC is a fiat-backed stablecoin issued by Circle, with each token purportedly backed dollar-for-dollar by the company’s reserves. To mint USDC, users need to open an account and deposit cash with Circle or one of its partners, such as Coinbase.
Once completed, they can receive the coin on multiple networks, including Ethereum, Avalanche, Stellar, and Polkadot.
The introduction of CCTP comes at a crucial time, as users have lost billions of dollars’ worth of USDC and other cryptocurrencies due to bridge hacks in recent years.
Attackers have repeatedly exploited bridge contracts to remove locked coins, leaving their copies on the receiving network without backing. The CCTP is a step towards securing bridges for future use as digital assets become increasingly mainstream.