Circle Cross-chain Transfer Protocol (CCTP) Lands on Cosmos Ecosystem, the Market Defense Battle of USDC

CCTP, the Circle Cross-Chain Transfer Protocol, Expands to Cosmos Ecosystem Advancing the Market Protection of USDC

Author: Dark Side of the Moon, LianGuaiNews

Recently, USDC issuer Circle officially partnered with the Cosmos ecosystem Noble to test the effectiveness of its cross-chain transfer protocol CCTP on Cosmos. Currently, USDC supports 55 public chains, slightly ahead of USDT’s 52 public chains.

However, USDC’s market share continues to decline, currently at 18%, much lower than USDT’s 70%. Thus, CCTP is seen as a means for Circle, the issuer of USDC, and its largest supporter Coinbase to reopen the market. They hope to connect all ecosystems on the chain through CCTP and seamlessly integrate traditional financial systems with on-chain stablecoins.

Cosmos ecosystem Noble: New member of CCTP

Cross-Chain Transfer Protocol (CCTP) is a cross-chain messaging and asset transfer bridge launched by Circle. Unlike existing cross-chain bridges, when transferring USDC across different public chains, cross-chain bridges, apps, and dApps using CCTP, there is no need to lock liquidity or mint synthetic forms of USDC, which improves the overall network security.

• Bitcoin Mid-term Plot Speculation Bull Market Cycle Established, Pullback is an Opportunity
• Luke sparks a heated debate about the Bitcoin engraving, how does the overseas community view it?
• Will the Bitcoin community fork if core developers want to ban inscriptions?

Liquidity pool bridge: The application holds a large amount of USDC on both Chain A and Chain B. Users deposit USDC into the liquidity pool on Chain A and withdraw USDC on Chain B. This process involves trust assumptions and liquidity-related costs.

Lock/mint bridge: Lock a certain amount of USDC on Chain A and mint the corresponding amount of USDC on Chain B. This requires a third-party security guarantee for the cross-chain bridge.

CCTP asset transfer: Destroy a certain amount of USDC on Chain A, Circle signs the destruction certificate, and issue the corresponding amount of USDC on Chain B without the need for additional security mechanisms.

As can be seen, using CCTP does not result in liquidity loss, and Circle itself also guarantees the transactions because it is a centralized entity with stronger compliance and security for its assets.

After the cooperation between CCTP and Noble, on the one hand, USDC can be used in various chains within the Cosmos ecosystem through IBC. On the other hand, it can be exchanged for assets with EVM compatible chains such as Ethereum.

From a broader perspective, Circle is also consciously using CCTP to create new competitive advantages to cope with the ongoing impact of USDT and other stablecoins. Starting with Coinbase CEX applications, Circle plans to expand to on-chain ecosystems using CCTP, and consequently incorporate traditional finance into its own system.

In addition, Cosmos chains like Noble also have greater capital efficiency, especially in terms of confirmation time, where they have a magnitude advantage. Ethereum and other EVM compatible chains confirm transactions in around 13 minutes. Applications such as derivatives have a stronger demand for reducing transaction time.

According to Circle’s explanation, using CCTP can enable large transactions and high-frequency small transactions to operate at extremely high TPS, such as achieving instant confirmation for single million-dollar transactions and other powerful features:

• Programmability. Supports customizing specific functionalities for developers;

• Slippage-free design. Can guarantee 1:1 exchange between any public chains, eliminating liquidity loss;

Not only that, this cooperation between dYdX, Osmosis, Squidrouter, and Noble in areas such as DeFi, cross-chain bridges, and developers is a clear “model project”, representing Circle’s desire to create a comprehensive stablecoin swapping protocol and dedicated to creating more popular applications by tapping into developer potential.

In theory, using CCTP can build cross-chain DEX applications, such as swapping assets on Ethereum using Cosmos assets, and can be extended to various fields such as NFTs, games, and more.

Furthermore, CCTP maintains its native nature on the chain, for example, it does not require a permissioned access mechanism, and developers can directly use its API and toolchain without registering with Circle. Besides the Gas Fee charged for asset minting and burning on different chains, CCTP itself does not require additional fees.

We will continue to update Blocking; if you have any questions or suggestions, please contact us!