Bridged token

A bridge lets a coin from one blockchain be used on another. The usual way, “lock and mint”, locks the coin in a contract on its own network and creates a matching token on the other. The new token is a claim on what’s locked, and it’s only as good as the bridge that holds it.

Digital dollars have bridged copies too. USDC has many, often labelled USDC.e. Circle describes them as “created by a third party” and backed by USDC locked in a contract on another blockchain. On Arbitrum, for example, Circle began issuing its own USDC in June 2023, and the bridged version in use until then was renamed USDC.e. They aren’t the same token: Circle’s terms say it supports only USDC, with no obligation to support copies or wrappers of it, and exchanges that accept both, Kraken among them, list them separately.

When a bridge loses what it holds, its tokens lose their backing. In July 2023, about 130 million dollars in crypto was drained from the bridges of Multichain, according to CoinDesk, including nearly everything its bridge to Fantom held. The bridged USDC on Fantom, backed by those holdings, fell to about 50 cents, according to DL News: a depeg of the copy.

Circle moves its own USDC between networks another way. Since April 2023, its Cross-Chain Transfer Protocol destroys USDC on one network and issues the same amount on the other, so nothing is left locked in a bridge.

The guide on sending and receiving digital dollars shows how to tell an issuer’s own token from a copy before you send.