Circle hopes new cross-chain USDC protocol will reduce exploits

Fin is a former junior editor at TechForge.

Circle, creators of the stablecoin USD Coin (USDC), has launched a mainnet protocol enabling users to transfer USDC between the Ethereum and Avalanche blockchains.

The cross-chain bridge is different from other bridges in that, instead of locking tokens sent to its contract, it completely burns coins on the sending chain and then mints new ones on the receiving chain.

In the past, Avalanche users with USDC on Ethereum would need to deposit the tokens with a Circle-approved partner or use a third-party bridge to transfer between the blockchains.

Circle says that its new Cross-Chain Transfer Protocol (CCTP) removed the need for USDC bridges.

Developers at Circle want CCTP to fix the issue of “fragmentation” within the web3 space. As it stands, there are a number of unofficial USDC tokens operating on multiple networks due to them being bridged from one network to another.

The CCTP offers an official, standardised method to transfer coins between networks, making USDC less confusing to use and shrinking the supply of unofficial tokens over time.

Circle says that many of the most popular cross-chain protocols have already agreed to make full use of CCTP moving forward. These include protocols like MetaMask, Wormhole, Celer, and Hyperlane.

Joao Reginatto, Circle’s vice president of product, said the new protocol will improve liquidity and capital efficiency within the decentralised finance ecosystem:

“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.”

USDC is the second most popular fiat-backed stablecoin in the crypto space after Tether. Circle says each USDC token is backed one-to-one to the US Dollar in its reserves.

In recent years, web3 users have lost billions of dollars of USDC to decentralised finance (DeFi) and cross-chain bridge hacks.

Bridge hacks often result from hackers discovering how to withdraw coins locked in bridge contracts. Some developers in the space have even said cross-chain bridges will never be secure.

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