Called the “Cross-Chain Transfer Protocol,” or CCTP, the technology will be used initially for USDC transfers between the Ethereum and Avalanche blockchains, with more chains coming in the second half of 2023. DeFi apps can integrate relevant smart contracts to make it easy for users to move their stablecoins.
The technology attempts to break down the barriers now fragmenting USDC’s $30 billion market cap across many different blockchains. Though Circle issues “native” USDC on many top networks, including Ethereum and Avalanche, those asset tranches were more or less partitioned; those who wanted to "bridge" the divide had to engage in complicated and sometimes expensive cross-chain transfers.
Circle’s new method seeks to replace bridges, which solved that problem by creating another asset, a derivative token called a wrapped asset. CCTP works by destroying USDC on the source chain and recreating it on the destination chain.
The process could pay the biggest dividends when it comes to asset swaps. It could be used to move cross-chain and cross-token transfers behind the scenes.
“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. This milestone makes USDC a natively multi-chain digital dollar,” Joao Reginatto, vice president of product, said in a press release.
Circle couldn't immediately be reached for comment.
CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk offers all employees above a certain salary threshold, including journalists, stock options in the Bullish group as part of their compensation.