Circle Public Chain Arc: A New Layer 1 Revolution Combining Libra, Monero, and Consortium Blockchain

“Stablecoin’s First Stock” Circle announced its latest strategic layout in the Q2 2025 financial report, including a public chain called Arc, which is also a Layer 1 specifically designed for stablecoins. It clearly targets competitors like Tether’s Plasma and Stable. Arc will launch a public testnet this fall, so let’s take a look at the technical features of Circle’s latest creation.

First of all, Arc is an EVM-compatible Layer-1 blockchain designed specifically for stablecoin finance and asset tokenization, providing a foundational settlement layer for programmable currency on the internet, particularly suited for global payments, foreign exchange (FX), and capital market scenarios. The goal is to address the obstacles faced by existing public chains in enterprise and institutional applications, such as transaction fee volatility, settlement uncertainty, and lack of privacy. Here we see that Arc is closely related to payments, and notably, it does not seem to be aimed at consumers.

Main Technical Features of Arc

Using USDC as Native Gas and Stable Fee Mechanism

Arc uses USDC as the native asset for paying transaction fees (Gas) and adopts a fee market mechanism inspired by Ethereum’s EIP-1559, but updates the base fee using an exponentially weighted moving average of block utilization to smooth short-term fluctuations, ensuring that transaction costs remain consistently low.

In addition to USDC, Arc also plans to support gas fee payments for other stablecoins and tokenized fiat currencies through a dedicated “Paymaster” (a payment channel).

Extremely High Performance

Arc employs a high-performance consensus engine called “Malachite,” based on the Tendermint BFT protocol. This enables it to achieve deterministic settlement finality, with transactions confirmed in less than one second and irreversible.

Of course, there are validators; the network is secured by a limited set of permissioned, geographically distributed reputable institutions acting as validators. The identities of these validators are public, and they must adhere to high standards of accountability and operational assurance. This setup is reminiscent of the former Libra project.

In a test environment with 20 geographically distributed validator nodes, Arc can process approximately 3,000 transactions per second (TPS), with finality confirmation times under 350 milliseconds. Using 4 validator nodes, throughput can exceed 10,000 TPS, with finality times under 100 milliseconds.

Optional Privacy Protection Features

Arc’s privacy roadmap begins with a “Confidential Transfer” feature that encrypts transaction amounts, making them invisible to the public, while the addresses of both parties remain visible. This is a highly B2B-oriented feature, protecting sensitive commercial information.

Additionally, for regulatory compliance, Arc’s privacy model allows for selective disclosure through mechanisms like “view keys,” similar to Monero, because many transactions are private but can authorize third parties (such as auditors or regulators) to access specific transaction data. Institutions can always fully view their customers’ transactions to meet regulatory requirements such as transaction monitoring and travel rules.

Privacy features are implemented via a modular backend, initially utilizing Trusted Execution Environment (TEE) technology to handle encrypted data, with plans to incorporate more advanced techniques in the future, such as Multi-Party Computation (MPC), Fully Homomorphic Encryption (FHE), and Zero-Knowledge Proofs.

MEV Mitigation Roadmap

Arc believes that not all MEV is harmful. It categorizes MEV into “constructive” (such as arbitrage that aids stablecoin price discovery) and “harmful” (such as sandwich attacks).

To address MEV concerns, Arc’s roadmap includes implementing encrypted mempools, batch transaction processing, and multiple proposers to curb predatory trading behaviors while preserving beneficial arbitrage activities.

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