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DE Cross-Chain Transfer Protocol (CCTP) is a new on-chain utility that allows burning and minting of USDC on different chains, eliminating the need for traditional lock-and-mint bridges. We take a look what it plans to do and why it could be beneficial for users on Ethereum and Avalanche.
What is CCTP and how does it work?
Cross-Chain Transfer Protocol (CCTP) is a permissionless on-chain utility that enables the burning of native USDC on a source chain and minting native USDC of the same amount on a destination chain. This eliminates the need for a conventional “lock-and-mint” bridge, which locks native USDC on the source chain and mints a synthetic/bridged version of USDC on the destination chain.
CCTP is exposed through smart contracts that allow for the composability of additional functionality beyond just burning and minting USDC. Here’s how CCTP works:
- USDC is burned on the source chain: Users initiate a transfer of USDC from one blockchain to another, specifying the recipient wallet address on the destination chain. The app facilitates a burn of the specified amount of USDC on the source chain.
- A signed attestation is fetched from Circle: Circle observes and attests to the burn event on the source chain. The app requests the attestation from Circle, which provides authorization to mint the specified amount of USDC on the destination chain.
- USDC is minted on the destination chain: The app uses the attestation to trigger the minting of USDC. The specified amount of USDC is minted on the destination chain and sent to the recipient wallet address.
What are the possibilities of CCTP?
Developers can use CCTP to build novel cross-chain apps that stack together various functionalities, including trading, lending, payments, NFTs, gaming, and more. CCTP enables cross-chain swaps with digital assets that live on different chains. The routing and execution are hidden from the user to deliver a seamless user experience.
With CCTP, users can utilize USDC on Ethereum to open a position on a decentralized exchange on Avalanche, without needing to switch wallets or think about which chain they’re holding USDC on. Additionally, users can buy an Ethereum-based NFT on Uniswap and list it for sale on OpenSea with one click, with CCTP routing their USDC from Avalanche to Ethereum to purchase the NFT from Uniswap.
What chains support CCTP?
CCTP is currently available on mainnet for Ethereum and Avalanche, as well as on Goerli testnet for Ethereum and Fuji testnet for Avalanche. Circle plans to expand CCTP to additional chains throughout 2023, including Solana and other chains.
What are the benefits of CCTP?
CCTP provides a highly secure and capital-efficient way for USDC transfers in an increasingly multi-chain environment. Traditional lock-and-mint approaches can result in fragmented liquidity and poor user experience. This allows for native interoperability across Web3, simplifies the user experience.
