Circle Announces New Protocol to Transfer USDC between Avalanche and Ethereum

Circle, the issuer of USD Coin (USDC), announced a new protocol that will let users make transfers in the stablecoin between Avalanche’s blockchain and the Ethereum Mainnet, CoinTelegraph reported.

In the past, USDC holders had to use a third-party bridge or deposit their coins with a Circle partner to make transfers. The new protocol, called the Cross-Chain Transfer Protocol (CCTP), eliminates the need for a bridge.

The bridge doesn’t lock tokens

Unlike a typical bridge, CCTP doesn’t lock tokens users send to its contract. It obliterates them and issues new ones on the receiving network. Users can deposit those with Circle or a partner platform and redeem them for bank deposits.

Eliminating fragmentation

The team hopes that the new protocol will do away with the issue of “fragmentation” in the Web3 ecosystem. At the moment, several unofficial versions of USDC exist, most of which were created after tokens on one platform were bridged to another.

Now that a way to transfer tokens between networks exists, Circle expects the unofficial versions to lose popularity and for USDC to be easier to use.

According to Joao Reginatto, Circle’s Product VP, the new protocol will help improve capital efficiency and liquidity in DeFi. He assured that the user experience would be simpler and more pleasant now that CCTP is a fact.

New protocol mitigates risks

Bridge hacks have generated losses of billions of dollars over the past few years, as exploiters are not finding it hard to move locked coins out of contracts, leaving copies without value behind. Developers have been working on ways to secure bridges as adoption of digital assets increases.

According to Circle, each USDC token is backed 1:1 by the US dollar. The stablecoins can be minted by making a deposit with Circle or a partner platform, like Coinbase. Then, users can get them on blockchains such as Ethereum, Polkadot, Stellar, and Avalanche.