Circle Launches USDC Cross-Chain Transfer Protocol (CCTP)
- The CCTP aims to solve the liquidity fragmentation issues caused by unofficial, bridged versions of USDC.
- CCTP implementation is to provide users with a capital-efficient way to transact in a multichain world.
Now, US Dollar Coin (USDC) stablecoin users can transfer their tokens between Ethereum and Avalanche without going through a third party. That became possible after the stablecoin issuer, Circle, implemented the Cross-Chain Transfer Protocol (CCTP) on the mainnet.
On Wednesday, April 26, 2023, Circle announced it implemented the CCTP protocol to solve the issues of liquidity fragmentation and poor user experiences caused by unofficial, bridged versions of USDC floating around the ecosystem. According to the announcement, apps built on the newly launched CCTP can teleport native USDC from one chain to another.
Circle noted that one of the aims of the CCTP implementation is to provide users with a capital-efficient way to transact in a multichain world.
Before now, users could not transfer USDC directly between the Ethereum and Avalanche networks. Customers wanting to do so would require the services of a Circle partner or a third-party bridge before completing the transfer. The CCTP implementation has eliminated the need for such intermediaries.
With the new protocol, there would no longer be the need to lock tokens during transfers. Instead, the CCTP destroys them and issues new coins to the receiving network. Users can convert freshly minted tokens into bank deposits by depositing them with Circle or one of its partners.
According to Circle, the CCTP will solve the fragmentation problem within the Web3 ecosystem. It will gradually eliminate the use of unauthorized USDC copies currently circulating on other networks as a result of bridging on those networks. The issuer notes that the latest update will make USDC easier to understand and utilize.
There are signs that the newly implemented CCTP might enjoy wide adoption, as several cross-chain protocols have already committed to its implementation. The committed cross-chain protocols include Celer, Hyperlane, LayerZero, LI.FI, MetaMask, and Wormhole.