- The protocol has enabled the transfer of USDC without the need for bridges or partners.
- The USDC team expects the new protocol to reduce the usage of unofficial copies of USDC.
- The USDC team has been expecting CCTP to address the “fragmentation” issue in the Web3 ecosystem.
On April 26, Circle, the creator of US Dollar Coin (USDC), announced the launch of a mainnet protocol that enables the seamless transfer of USDC between Ethereum and Avalanche networks.
Previously, users had to deposit their USDC with a Circle partner or use a third-party bridge to move their coins from one network to the other.
The newly unveiled Cross-Chain Transfer Protocol (CCTP) eliminates the need for Circle partners or third-party bridges to transfer between these networks.
Circle Powers CCTP Protocol to Unite the Web3 Ecosystem
However, the CCTP protocol revolutionizes this process by destroying tokens sent to its contract instead of locking them. The protocol then issues new tokens on the receiving network, which users can redeem for bank deposits by depositing the tokens with Circle or its partners.
The team behind USDC anticipates that CCTP will alleviate the issue of “fragmentation” in the Web3 ecosystem.
Currently, there are multiple unofficial versions of USDC scattered across different networks. Most of these versions result from tokens from one network being bridged to another.
Major Protocols to Support Circle’s USDC with CCTP Launch
However, with an official way to transfer USDC coins between different networks, the team expects the unofficial copies to become less popular, eventually making the token less confusing.
The USDC team released a video on April 13 demonstrating the functionality of the new protocol.
They also mentioned many of the largest cross-chain protocols, including Celer, Hyperlane, LayerZero, LI.FI, MetaMask, Wormhole, and others have committed to using CCTP in the future.
On the Flipside
- While the CCTP protocol may alleviate fragmentation issues, it could lead to increased centralization of USDC as more users flock to the official transfer protocol.
- While USDC is a popular stablecoin, some in the cryptocurrency community have expressed concerns over its centralized nature as a centralized entity, Circle, issues it.
- The destruction of tokens in the protocol could also lead to potential risks, such as the loss of coins if the process fails.
Why You Should Care
The CCTP developed by Circle is an important improvement for the crypto market as it solves the issue of fragmentation by allowing for the seamless transfer of USDC between different networks.
This protocol will make USDC less confusing to use and increase its adoption by providing a secure and efficient way to transfer coins between Ethereum and Avalanche networks.
To learn more about the need for stablecoin legislation and the digitization of the US dollar, check out this related article on DailyCoin:
Circle CEO: U.S. Needs Stablecoin Legislation to Combat de-Dollarization
For the latest news on Circle’s expansion into France and their recent crypto license application, read more on DailyCoin:
Circle Applies for Crypto License in France Days After USDC Depeg
