Decentralised finance has introduced a technologically advanced system of interconnected cryptocurrencies and blockchains that is arguably superior to the traditional banking system. There are tens of thousands of cryptocurrencies, tens of main and sub-blockchains, and multiple DeFi protocols that make this sophisticated system work.
When cryptocurrencies were founded, transactions between protocols were challenging because of the differences in programming languages, minting methods, coin validation process and other technical details.
However, crypto bridging emerged to bridge the gap between DeFi ecosystems and blockchains. Today, we will discuss what is bridged USDC, what makes it a solid crypto payment method, and how it compares to the original USDC stablecoin.
Understanding USDC Stablecoin
USD Coin is a stablecoin developed by Circle in 2018 and launched in a joint venture between Circle and Coinbase. USDC aims to digitalise traditional money by creating a similar currency to the fiat USD on the blockchain.
USDC is minted using the ERC-20 tokenisation system on the Ethereum blockchain and backed by dollar reserves or dollar equivalents. This pegging system aims to keep 1 USDC to $1, facilitating stablecoin transactions for individuals, businesses and financial institutions.
USDC’s usability made it among the top 10 cryptocurrencies. At the time of writing, it is the 6th largest coin, taking over other established DeFi ecosystems like Ripple, Cardano, and Avalanche.
What is Bridged USDC?
The high demand for USDC as a stable cryptocurrency payment system led to its foundation on blockchains and networks other than Ethereum. The developer company, Circle, mints USDC on different ecosystems and implements the Cross Chain Transfer Protocol to facilitate cross-chain operations.
Currently, the company directly manages USDC on 16 blockchains, while other chains and networks bridge crypto transactions to create a similar token.
This practice is also known as crypto bridging, where particular systems and protocols enable cryptocurrencies to be transferred and interact between different blockchains quickly and safely.
Bridged USDCs are not directly managed by Circle and cannot be directly exchanged for traditional USD. Instead, they must be back-exchanged to native USDC and then to fiat dollar.
Why Accept Bridged USDC Payments
Despite not being managed directly by the original token’s developers, Circle puts strict frameworks for bridging USDC stablecoin, ensuring that users can securely operate in the crypto space with aUSDC (Aave), USDC.e (Avalanche), USDbC (Base), and other variations of the bridged USDC.
Bridged USDC offers significant flexibility in the crypto world, allowing users to transact and operate without worrying about differences and non-compliance with a specific chain’s infrastructure or coding language.
- Businesses can hold and store bridged USDC to manage their money savings in cryptocurrencies on their preferred blockchain.
- Bridged USDCs are compatible with many blockchains and can be swapped with hundreds of other cryptocurrencies.
- Many e-commerce merchants, virtual shops and online trading platforms accept bridged USDC stablecoin.
- Using bridged USDC, users can save money by swapping it directly for other cryptos without having to exchange it for the native token and bear additional blockchain costs.
Explaining Crypto Bridging
Crypto bridges are decentralised protocols that facilitate communication and connectivity between different blockchains, side-chains and other DeFi networks.
These bridges elevate cryptocurrency usage by allowing cross-chain transactions and eliminating the need for additional exchanges or intermediary swaps.
For example, if token A and token C are on two different chains, classically, users would have to find a mutual token B that exists on both blockchains and transact from A to B to C. However, a bridge crypto protocol allows users to directly exchange token A for token C, saving time and money.
How to Bridge USDC
Thanks to many crypto bridges, sending and receiving USDC stablecoin between blockchains is now easier.
To bridge USDC between blockchains, you must have the following:
- Crypto wallets in source and destination networks.
- USDC holdings in the source blockchain.
- Amounts in both wallets to pay for blockchain gas fee.
Let’s say you are bridging USDC from X-chain to Ethereum. Here’s how the process goes:
- Find a crypto bridge that supports both chains and ensure its reliability to avoid scams. Rango Exchange, SushiSwap, and Portal Bridge are examples of intermediary networks.
- Connect your wallet from where you are sending USDC.
- Enter your Ethereum wallet address and insert the amount of cryptocurrencies you want to send.
- Review the transaction details, including gas fees and destination address.
- Proceed with the transaction. Your USDC holdings in X-chain will be locked, and the amount will be released to your ETH wallet.
Bridged USDC vs Native USDC
Native USDC is a stablecoin directly managed and minted by the founding company. Currently, USDC is available on 16 blockchains and is easily accessible and operated across these ecosystems.
As an original stablecoin backed by USD and USD-equivalent reserves, users can convert the native USDC to fiat money and interact with other smart contracts that support USD Coin. Additionally, USDC on supported blockchains can be used for minting and other income-generating models.
On the other hand, the bridged USD Coin expands on the utility of the original token and makes it far more accessible and usable. Bridged USD Coins can interact with blockchains, whether supported by the founding company or not.
This broader utility is supported by systematic protocols that connect chains and networks of different coding languages and infrastructure, enabling users to pay, store, send and receive stablecoins across various blockchains.
This cross-functionality eliminates the need for an intermediary coin or exchange, saving costs and time.
However, since the founding company does not regulate some bridged USDCs, precautionary measures must be taken to avoid scams and fraudulent crypto applications or platforms that claim to bridge crypto operations.
Advantages and Disadvantages of Bridged Stablecoins
Using bridged USDC for transactions and other crypto operations opens the door for more DeFi platforms, decentralised applications, and other crypto projects to exist, enabling interaction with more users.
However, some challenges must be considered. Let’s review the ups and downs of the USDC stablecoin bridged.
Pros
- Facilitated interaction between distinct blockchains, side chains and DeFi networks that follow different coding and infrastructure.
- Allowing businesses to reach more users by interacting with different USDC blockchains.
- Saving money and time without having to find and interact through an intermediary coin.
Cons
- Bridged USDC on blockchains not supported by Circle can be risky because anyone can create a smart contract and launch their token version.
- The crypto bridging concept can be technically challenging for non-tech-savvy users.
Conclusion
Bridged USDCs are stablecoins that run on blockchains that are not directly supported by Circle, as opposed to native USDC tokens that the founder company regulates.
Crypto bridging allows coins and tokens, like USDC, to interact and operate across distinct blockchains regardless of different infrastructure and cryptographic coding systems. This technology improves users’ and businesses’ ability to transact seamlessly and directly.
