Circle already has the U.S. Dollar-backed stablecoin, USD Coin (USDC). Now it plans to launch an European version, the Euro-backed Euro Coin (EUROC) on the Solana Network as early as the first half of 2023.
Euro Coin was already in the works as of June 30, 2022. According to an initial press release, it originally planned to launch on the Ethereum Network. Other blockchains would potentially be added later. The price is currently acting strangely, but has not reached the meltdown stage yet.
Circle’s director of engineering, Marcus Boorstin, discussed the upcoming stablecoin at the Solana Breakpoint conference in Lisbon, Portugal.
“There’s already a lot of enthusiasm from the ecosystem,” he told an audience at the conference.
Boorstin said that FTX will support deposits and withdrawals of Euro Coin when it launches. The DeFi apps Radium and Solend will also support it. Solana Pay plans to add Euro Coin to make it easy to make payments in a digital asset that’s backed by the Euro.
Circle Also Plans to Introduce Cross-Chain Transfer Protocol, but Could Run Into Security Flaws
At Converge22 in September 2022, Circle announced plans to introduce a Cross-Chain Transfer Protocol. USDC or EUROC holders could use this protocol to send their tokens on one blockchain to another party that can receive the same tokens on another blockchain. At Solana Breakpoint, Boorstin said Circle plans to expand it to Solana.
Developers can build payment apps that include the Cross-Chain Transfer Protocol. These apps can “burn” tokens on the original blockchain and send an equivalent number of tokens to a recipient using another blockchain.
If this sounds to you like a cross-chain “bridge” with extra steps, you’re probably right. Bridges can be useful for swapping assets from one chain to an equivalent like a “wrapped” or “staked” ether on another.
However, Circle will have to watch out for potential exploits. In January 2022, Ethereum creator Vitalik Buterin warned that bridges had security holes – and it didn’t take long for him to be proven right.
Solana’s Wormhole suffered an exploit that resulted in the fraudulent minting of 125,000 wETH on February 2, 2022. The attacker could forge a valid signature that fooled its smart contract into minting the wETH without receiving an equivalent amount of ETH.
Even with the best available audits and security protocols, “sometimes things do go wrong. They do get hacked,” OtterSec’s Robert Chen acknowledged during a presentation at Solana Breakpoint.
According to Chainalysis, attackers stole $1.4 billion through cross-chain bridge exploits by August 2022. Circle will have to contend with the security issues that lead to these exploits if it plans for the Cross-Chain Transfer Protocol to become an important part of the ecosystem for its stablecoins.
Will Solana be able to hold up, though?
Solana is a favorite alternative to Ethereum for its low costs. However, its network tends to freeze whenever traffic congestion spikes. Part of the issue may be that Solana doesn’t have a dynamic transaction fee structure like Bitcoin and Ethereum do. Unless Solana users check to see how many transactions in the queue before sending a transaction, they might not realize that there’s an issue.
Circle could add to that congestion by introducing a Euro-backed stablecoin that becomes popular in Europe. Yes, stablecoins can and sometimes do have a serious meltdown. TERRA and LUNA did not help this year’s crypto markets by melting down in May. However, while they last, businesses might prefer them if they choose to accept digital assets because they tend to see less volatility.
Circle is probably aware of the risk. However, Boostin said, “We’re really excited with the use cases that Euro Coin will unlock on Solana’s ultra-fast, ultra-low-cost network.”