Circle Set to Launch Cross-Chain Bridge for USDC Stablecoin

Circle, the issuer of the USDC stablecoin, is planning to roll out a cross-chain swap feature for USDC in Q1 2023, named the Cross-Chain Transfer Protocol (CCTP).

According to Jeremy Allaire, CEO of Circle, the company will introduce a cross-chain bridge for USDC in Q1 2023, aimed at making inter-blockchain stablecoin swaps smoother.

This bridge, called the Cross-Chain Transfer Protocol (CCTP), will operate on a simple burn-mint mechanism through smart contracts. Specifically, when a user wants to transfer USDC from Blockchain A to Blockchain B, the Circle protocol will review and approve the transaction, burn the USDC on Blockchain A, and then mint it again on Blockchain B.

Circle asserts that the mint-burn mechanism will address the flaws of the lock-mint method used by many other cross-chain solutions, which have become targets for hackers due to the large amount of tokens held to back their value. As reported by Coin68, cross-chain attacks became a major issue in 2022, causing over $1.5 billion in damages. Ethereum founder Vitalik Buterin had earlier warned of the risks associated with cross-chain solutions, which have since materialized.

Returning to the main topic, the most noticeable application of the Cross-Chain Transfer Protocol will be its ability to facilitate swaps across different blockchains. For instance, users could swap ETH on Ethereum for AVAX on Avalanche. A trading solution integrating CCTP could allow users to exchange ETH for USDC on Ethereum, burn it, and then mint the equivalent stablecoin on Avalanche, finally swapping USDC on Avalanche for AVAX.

Additionally, Circle’s developers reveal that the CCTP bridge for USDC may be directly integrated with DeFi protocols to support cross-chain farming activities, or to provide liquidity for lending products, payments, blockchain games, NFTs, and more.

Currently, the Cross-Chain Transfer Protocol is being tested on the testnets of Ethereum and Avalanche, with a planned launch in Q1 2023 to support these two blockchains. Throughout the rest of 2023, Circle aims to expand CCTP connectivity to include Solana and other blockchains.

As of January 22, 2023, USDC is available on eight blockchains: Ethereum, Solana, Avalanche, TRON, Algorand, Stellar, Flow, and Hedera, and is linked to Polygon, Fantom, NEAR, Arbitrum, and Cosmos.

The total supply of USDC stands at $43.1 billion, backed by $43.2 billion in assets, including $9.5 billion in cash and $33.7 billion in U.S. Treasury bills. Circle recently shared a report affirming that the company has consistently upheld the value of USDC against the USD, ensuring its stablecoin remains absolutely safe.

However, in 2022, particularly in Q4, USDC and other major stablecoins experienced a sudden decrease in total supply as cryptocurrency users rushed to convert their holdings back to USD amid a cascading crisis.

USDC Total Supply Fluctuations Over the Past Year, according to CoinMarketCap