The Massachusetts-based crypto payment company Circle updated the Twitter community on June 1, plans to launch an itself-own stablecoin pegged to the US dollar USDC.e. The tweet revealed the Circle’s stablecoin would be centred on the Arbitrum network.
A subsequent tweet from Circle and Arbitrum revealed that the new stablecoin would be available in the market from June 8. The Arbitrum network has popularity due to its massive capability to provide a scaling solution for the Ethereum network.
Feature of the Arbitrum Network
Notably, the Arbitrum network holds approximately 65% of the total value locked (TVL) on the Ethereum network. According to L2Beat data, the Arbitrum network expedites the transaction speed and reduces the charges.
The L2Beat report illustrated that the Arbitrum network utilizes the Optimistic Rollup technology. They noted that the Optimistic Rollup technology engages in rolling up multiple transactions before sending the data to the Ethereum network through a single transaction.
Considering these developments, it is worth mentioning that most Layer 2 networks, such as the Arbitrum network, are usually centred on top of the Layer 1 network, such as Ethereum. Mostly the Layer 2 network provides users with a platform with low fees and fast transactions.
This has prompted most Layer 1 user to move their assets to Layer 2 through a process known as bridging to tap into the endless benefits of L1.
Importance of Launching USDC on Arbitrum Network
Reflecting on the June 1 tweet, the Circle team stated that the new stablecoin would be renamed USDC.e. The tweet expanded on the features of the new stablecoin and the changes that would be made on the Arbitrum network.
In the meantime, the Arbitrum team confirmed that minimal changes would be conducted on the Arbitrum Bridge. However, the Arbitrum bridge would experience changes after the launch of the native stablecoin.
In an official blog post, the Arbitrum Foundation outlined the benefits of the stablecoin on its network. The post stated that the USDC centred on the Arbitrum network would provide the institutional investors with on and off-ramping services through the Circle platform.
Reportedly the USDC native token is expected to work closely with the Cross-Chain Transfer Protocol (CCTP). The expected interaction between the CCTP and the stablecoin would replace the lock-and-mint bridge by increasing the burning rate of the USDC located on the native chain.
The minting process is expected to occur at the destination chain Arbitrum network, where new USDC will be generated. Over the year, the CCTP has been utilized to unify liquidities and has supported multiple transactions conducted on the blockchain network.
USDC Market Performance
The post stated that the user would be required to burn the USDC on the native chain, and the information would be shared with the Circle team for further confirmation. This process has eliminated the minting of the USDC.e and locking the USDC.
Recently the USDC and Circle group has been making headlines after the depegging of the stablecoin when the major banks in the US were battling liquidation. It was reported that during the closure of Silicon Valley, the USDC and its parent company lost over $3.3 billion.
Irrespective of this, in 2022, Coingecko data indicated that the most stablecoins pegged to the US currency, such as USDC and Tether (USDT), experience losses in market share. The data shows that the dollar-backed stablecoin market capitalization was $45 billion last year.
As of this publication, these stablecoins’ market capitalization plummeted to $28 million.