In a pioneering move within the stablecoin landscape, Circle, the creator of USDC, has unveiled a bridging standard for its digital token. In a blog post on November 21, the fiat-backed stablecoin provider emphasized the necessity of assisting developers in establishing stablecoin liquidity on emerging networks.
The initiative responds to the challenges posed by the rapid expansion of layer-1, layer-2, and layer-3 blockchain protocols, rendering native stablecoin issuance impractical for Circle in deploying USDC on new networks.
To tackle this issue, Circle introduced a set of guidelines allowing the utilization of bridged USDC on new Ethereum Virtual Machine (EVM) compatible protocols. This bridged form of USDC provides the flexibility of seamless future upgrades to its native counterpart.
Introducing Bridged USDC Standard, a new way to expand access to $USDC & reduce fragmentation.
EVM blockchain & rollup teams can now deploy a bridged USDC token contract with optionality for Circle to seamlessly upgrade to native issuance in the future.https://t.co/suSgllMQoQ
— Circle (@circle) November 21, 2023
Under the new framework, all bridged USDC will be categorized as “unofficial” and will not be issued or eligible for redemption through Circle’s primary platform. Instead, these tokens will function as proxies to the regular USDC stablecoin, making them usable on any platform supporting the bridging of tokenized dollar assets.
For developers to offer bridged USDC on a new blockchain protocol, they must follow two key processes. Initially, a third-party developer will deploy their bridged USDC token smart contract based on the outlined guidelines. Subsequently, the bridged USDC can be used to contribute stablecoin liquidity to the new network.
If the bridged USDC gains significant supply, increases its holder base, and integrates with various applications, the Circle and third-party developer team can opt to securely transfer ownership to the Circle Consortium. Once transferred, the bridged USDC is retired, and a native version is launched in its place, maintaining existing supply, holders, and app integrations.
This strategic move by Circle follows its earlier deployment of the stablecoin on the Polygon layer-2 blockchain protocol in October and a similar strategy on the Coinbase-backed Base Network in September.
— Circle (@circle) October 10, 2023
Circle envisions its bridged USDC standard as a game-changer, eliminating the need for user-initiated migration – the process where stablecoin holders exchange unofficial assets for native ones. This innovation addresses concerns about liquidity fragmentation, a significant challenge in the decentralized finance (DeFi) ecosystem, providing users with seamless access to liquidity without the worry of potential future issues.
As part of its recommendation, Circle encourages all developers to adopt a bridge system with upgrade functionality from the outset.