The report discusses the implications of Circle’s Cross-chain Transfer Protocol (CCTP) on the bridging landscape. CCTP is a permissionless onchain tool by Circle that facilitates native USDC transfers between different blockchains. The protocol functions in three steps: USDC is burned on the source chain by a dApp, Circle then attests to the burning, and the signed attestation allows the dApp to mint USDC on the destination chain. The report compares the performance of CCTP and non-CCTP bridges, concluding that for larger transactions, CCTP performs better.
- Understanding CCTP: Circle’s Cross-chain Transfer Protocol (CCTP) is a significant development in the crypto space, facilitating native USDC transfers between different blockchains. It operates in three steps: burning USDC on the source chain, attesting to the burning, and minting USDC on the destination chain.
- Performance Comparison: The report compares the performance of CCTP and non-CCTP bridges. For smaller transactions, non-CCTP transactions are cheaper and result in the user receiving more USDC. However, for larger transactions, CCTP performs better.
- Implications for Bridges: The introduction of CCTP may lead to a reduction in bridge revenue from USDC transactions as margins are compressed. However, bridges are not completely obsolete as there are still users who value faster bridge transactions over better execution.
- Future Developments: With developments like dYdX V4 and native USDC coming to Cosmos, it is possible that USDC could become the most used money on the blockchain. This could have further implications for bridges and their revenue.