Stablecoins are very popular in the cryptocurrency world. They are critical for new blockchains, linking to the US dollar and assisting these platforms in growing.
They provide a familiar entry point for new users and allow decentralized finance (DeFi) protocols to provide more reliable services such as lending and yield farming. As a result, when Polygon zkEVM adopted the Bridged USDC Standard, it raised some serious concerns.
Therefore, experts are keen to assess this new standard’s significance and how it benefits the Ethereum Layer 2 chain.
Bridged USDC Standard Explained
Due to low transaction volumes, new blockchains frequently struggle to secure native blockchain support at the initial stage. Consider the Polygon PoS chain, which only received native USDC support in October 2023 despite launching its mainnet in June 2020.
Without native stablecoin support, these emerging blockchains have traditionally relied on third-party bridged solutions. However, relying on these solutions poses security risks and results in network liquidity fragmentation.
Thus, Circle created the Bridged USDC Standard, which provides a viable alternative to address this issue. This standard specifies using bridged USDC on Ethereum Virtual Machine (EVM) chains.
What distinguishes it is the possibility of a seamless transition from the bridged solution to native support. In a November 2023 announcement, Circle stated that this standard consists of open-source ERC-20 contract code developed on top of the audited USDC smart contract.
This smart contract is a trusted framework safeguarding billions of dollars of liquidity. Using this approach, Circle aims to bridge the gap for new blockchains, allowing them to gain stablecoin support without sacrificing security or liquidity.
By adhering to this standard, emerging chains can evolve towards native support, promoting a more robust and secure decentralized finance ecosystem.
Importance Of Bridged USDC Standard For Polygon zkEVM
Polygon zkEVM recently adopted the Bridged USDC Standard to ease future Layer 2 blockchain transitions. The standard is a requirement and process for deploying a bridged form of USDC that can be seamlessly upgraded to native USDC by Circle when necessary.
This action strengthens the blockchain, preventing incoming apps from making future updates to support native USDC. Furthermore, the transition to the new standard represents a shift toward a more trusted model with improved security guarantees for users and developers.
Polygon zkEVM prioritizes a secure and robust environment by adhering to this standardized approach, instilling trust in its ecosystem.
Benefits Of The Bridged USDC Standard
The Polygon zkEVM network benefits from the Bridged USDC Standard in several ways. It switches users to a more trusted model with improved security guarantees.
Also, deploying a new bridged USDC token contract that adheres to the Polygon zkEVM standard will prevent liquidity fragmentation in the future whenever Circle is ready for native minting on the network. After adopting the new standard, Polygon Labs announced that the already supported form of bridged USDC in circulation would be phased out.
Hence, it advised users and developers to transition to the new standard.
How To Migrate To The Bridged USDC Standard On Polygon zkEVM
Here’s a step-by-step guide for switching to the Bridged USDC Standard on Polygon zkEVM:
Swap Your Existing Legacy Bridged USDC for the Updated Version: Begin the process by exchanging your existing legacy Bridged USDC for the updated version. Access leading DeFi protocols on Polygon zkEVM to make a seamless 1:1 swap from old bridged USDC tokens to new bridged USDC tokens.
Deploy a New Bridged USDC Token Contract: Once you’ve obtained the updated bridged USDC, the next step is to deploy a new token contract on Polygon zkEVM that adheres to the Bridged USDC Standard. This contract ensures standard compliance, allowing seamless interoperability and enhanced functionality within the Polygon ecosystem.
However, it is unclear when the Polygon zkEVM protocol will offer native USDC support. In addition, certain Circle products, such as Circle Mint and Cross-Chain Transfer Protocol (CCTP), do not support the Bridged USDC Standard.
It is worth noting that the Bridged USDC Standard serves as a blueprint for future Layer 2 blockchain-to-native USDC transitions. This requirement outlines the procedure for deploying a bridged form of USDC that can be seamlessly upgraded to native USDC by Circle.