Circle has introduced the Bridged USDC Standard for two core objectives: expanded access to USDC and reduced fragmentation. USDC is live on 15 blockchains, with the possibility that more networks could join the ecosystem in the future. They would look to solve the cold start issue, thereby facilitating the requirement of what Circle deems important to start with right now.
Simply put, there is a difference between Native USDC and Bridged USDC, with Native USDC having more recognition considering it is issued by Circle, which is a regulated Fintech. On the other hand, a third party creates Bridged USDC, which instills a sense of diffidence.
Circle solves the problem by enabling developers to deploy Bridged USDC on EVM blockchains. They have an option for Circle, which can be enabled to transition to Native USDC anytime in the future.
The overall mechanism begins with the third-party team deploying the Bridged USDC token contract. Next, the deployment is used to bootstrap the initial liquidity. It soon reaches sufficient supply, number of application integrations, and number of holders. This fuels Circle to collaborate with third parties to securely transfer the ownership of Bridged USDC to Circle, which then bridges it to native USDC.
Circle and the third party ensure no change to the number of holders, supply, and application integrations.
This ensures that the end-user experience is seamless, convenient, and streamlined. It aids in overcoming the challenges of migration learning and liquidity fragmentation. The advantages of the Bridged USDC Standard vary according to the category of the community member. Users, for example, can use Bridged USDC for payments, borrowing, storing, and lending without worrying about converting it to Native USDC. They no longer need to switch to a new asset.
Similarly, blockchains can claim Bridged USDC and later convert it to Native USDC. Developers do not need to write or modify code to support the new asset. At a macro level, the Bridged USDC Standard assists every member in avoiding the time-consuming liquidity migration process.
At present, the product is undergoing testing at Scroll and Linea. Their achievement on the testnet was successfully executing a secure bridge USDC transition.
It is important to note that the Bridge USDC Standard does not make it mandatory for Circle to grant ownership of the token contract. Circle only has the option to do so, which is available subject to terms and conditions. The original contract deployment can only be upgraded to Bridged USDC Standard if all the technical requirements have been followed.
Moving forward, Circle intends to work on achieving the vision of widely incorporating the Bridged USDC Standard into RaaS, an acronym for Rollup as a Service. The idea is to make it convenient for a new blockchain to deploy the token contract.