Circle Launches Arc: A Blockchain Built for Stablecoins

Circle, the company behind the USDC stablecoin, has introduced Arc, a new Layer-1 blockchain focused on supporting stablecoin-based applications. This platform aims to tackle infrastructure hurdles that have hindered the wider institutional embrace of stablecoins.

Why Arc?

Circle identifies several limitations in existing blockchains when it comes to stablecoins, including:

• Fee Volatility: Unpredictable transaction costs.
• Settlement Uncertainty: Probabilistic finality and the risk of chain reorganizations.
• Privacy Concerns: Lack of adequate privacy controls for sensitive transactions.
• Liquidity Fragmentation: Divided liquidity across multiple chains.

Arc is designed to resolve these issues by offering:

• Deterministic Finality: Instant and irreversible transaction settlement.
• Predictable Fees: Fees priced in stablecoins.
• Optional Privacy: Privacy features for regulatory compliance.
• Interoperability: Built-in connections to other blockchains and traditional finance.

Arc's Roadmap

Arc's rollout is structured in three phases:

1. Private Testnet: Launched in August 2025.
2. Public Testnet: Expected in Fall 2025.
3. Mainnet Beta: Scheduled for 2026.

USDC as Native Gas

Arc uses USDC to pay for transaction fees, eliminating reliance on volatile tokens. Other stablecoins can be used as gas through a paymaster system. Arc's fee model is based on Ethereum's EIP-1559 but uses a weighted moving average of network demand for smoother and more predictable fees. Fees go into an on-chain Arc Treasury.

Deterministic Settlement and Consensus

Arc's consensus layer is powered by Malachite, a Byzantine Fault Tolerant (BFT) engine based on Tendermint. Validator selection is initially permissioned but will transition to a permissioned Proof-of-Stake mechanism.

To ensure fair execution, Circle is developing tools such as encrypted mempools and batch transaction processing.

Opt-in Privacy

Arc includes a modular privacy system for balancing compliance with confidentiality. Initial features include confidential transfers that shield transaction amounts while keeping addresses visible. Future support includes private state, confidential computation, Zero-knowledge proofs (ZKPs), Multi-party computation (MPC), and Fully homomorphic encryption (FHE).

Key Takeaways:

• Circle's Arc is a Layer-1 blockchain designed specifically for stablecoin applications.
• Arc aims to address limitations in existing blockchains related to fees, settlement, privacy, and liquidity.
• Arc uses USDC as native gas and features a modular privacy system.