Stablecoin issuer Circle has launched Cross-Chain Transfer Protocol (CCTP) for developers building on Ethereum and Avalanche.
In a press release on Wednesday, Circle said the permissionless protocol would facilitate interoperability for USDC across supported blockchains.
Applications that integrate the protocol will let users burn and mint USDC natively, providing a way for the stablecoin to move from one chain to another. Circle believes that the “burn and mint” method would be more secure and capital efficient than the traditional “lock and mint” approach which presents risks and complications.
The protocol would essentially replace the need for blockchain bridges, which facilitate on-chain transfers with derivative tokens like wrapped Bitcoin (WBTC) and wrapped Ether (WETH). These tokenized representations of a cryptocurrency are backed 1:1 by the underlying asset.
However, there have been some instances where these wrapped assets have traded at a discount to the assets they are pegged to. For instance, in November, rumors that 100,000 WBTC was minted by the insolvent Alameda Research led to the asset trading at a -1.5% discount.
“CCTP helps to solve today’s DeFi liquidity and capital inefficiency issues due to the risks and fragmented nature of bridged assets,” said Joao Reginatto, Circle’s VP of Product.
“With CCTP, developers can simplify the user experience and their users can trust that they are always transacting with a highly liquid, safe and fungible asset in native USDC,” he added.
At the time of writing, around 11 blockchain-based protocols had already integrated CCTP into their products. Included in this list was omnichain interoperability protocol LayerZero Labs, cross-chain bridge aggregator LI.FI and Web3 wallet MetaMask.