Cross-chain bridging is crypto industry’s Achilles’ heel and a favourite attack vector for hackers.
A recent development by a Canadian software company Axelar may have given a response to this problem.
In partnership with Circle 🔵, the issuer of USDC stablecoin, Axelar has presented a new way of transferring crypto from one blockchain to another, and it may well become industry’s new standard.
🌉 How does the current chain-bridging work?
To transfer value from, for example, Ethereum to Avalanche, ETH is locked on Ethereum and WETH (wrapped ETH) is created on Avalanche. Since the beginning of this practice, hackers have exploited different vulnerabilities in the bridging contracts, often allowing them to mint wrapped coins without depositing their equivalent.
🌉 How does Axelar’s Cross-Chain Transfer Protocol (CCTP) work?
USDC exists on all major blockchains, and the CCTP exploits this quality.
To transfer value from Ethereum to Avalanche, the protocol can swap ETH for USDC (on Ethereum), which can then be burned, while minting the same amount of USDC on Avalanche and swapping it for AVAX or any other coin.
⚒️ 🔥 The minting and burning of USDC is executed by Circle, which means that liquidity providers don’t have to assume a bridge risk: they are holding native coins.
This way of bridging can greatly improve user experience too, dispensing them from cumbersome trades or swaps, as well as funds blockages that sometimes happen when using a bridge.
The CCTP is expected to launch on Ethereum and Avalanche by the end of 2022. If successful, it should bring some relief to USDC, which has been steadily losing ground (and market cap) since the Tornado Cash incident, when Circle froze stablecoins related to the infamous mixer.