USDC stablecoin is on the bright side of the news spectrum today, April 26, as the founding company Circle hits a significant milestone with the launch of its cross-chain transfer protocol (CCTP) on Ethereum and Avalanche.
The announcement, which was made on Circle’s official social media, will mark a new dawn of interoperability across blockchain ecosystems. That said, what is the Circle cross-chain transfer protocol? Are there grounds for the hype behind this announcement?
Everything To Know About Circle USDC Cross-Chain Transfer Protocol
Circle’s official website defines the cross-chain transfer protocol as a permissionless on-chain utility and service that facilitates stablecoin transfers between blockchains via two mechanisms, burning and minting of this digital asset.
Circle’s cross-chain transfer utility protocol is packed with robust solutions that address liquidity fragmentation issues and poor user experiences linked to unofficial USDC bridged versions on different blockchain ecosystems.
Before the launch of the CCTP on the mainnet, Avalanche users looking to move out their stored USDC on Ethereum had to utilize an unofficial or third-party bridge to transfer the stablecoin between networks.
With the launch of the cross-chain transfer protocol, Ethereum and Avalanche users can now fully leverage Circle’s stablecoin and become less reliant on unofficial and potentially insecure third-party bridges and services.
Circle’s new development and innovation will unify its stablecoin liquidity in Web3 and support simple and secure user payment transactions. It will also connect and unite blockchain networks, pushing blockchains’ interoperability further.
Leveraging Circle’s Cross-Chain Transfer Protocol- How It Works
On April 13, 2023, the Circle team released a demo video on the official youtube platform page, demonstrating to users and the public how the transfer protocol works.
The Youtube demonstration video shows that the cross-chain transfer protocol first burns, then issues tokens, unlike third-party bridges, which often lock funds on a blockchain and release them on another. This method has been effective but insecure in the past few years.
In leveraging Circle’s cross-chain transfer protocol, users must initiate a USDC transfer through an integrated platform or wallet, such as Metamask. Next, the user specifies the wallet address on the destination chain, after which the portal/bridge burns the stablecoin on the source chain.
Circle then certifies the burn event on the source chain and provides burn certification and authorization to the decentralized application to mint the amount of USDC on the destination chain. After this, the destination chain sends the stablecoin to the recipient.
The VP of Product for Circle, Joao Reginatto, made a blog post stating that Circle’s cross-chain protocol is the “most ambitious piece of neutral market infrastructure.” Joao further said that ecosystem and infrastructure developers had shown support by integrating the CCTP into their platform operations.
Some notable platforms integrating the CCTP include Metamask, Celer Network, LayerZero, Multichain, and Wanchain.
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Author: Mudiaga Iritare