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

“Stablecoin’s First Stock” Circle announced its latest layout in the second quarter financial report of 2025, a public blockchain named Arc, which is also a Layer-1 specifically designed for stablecoins. It directly competes with Tether’s Plasma and Stable. Arc will launch its public testnet this fall; let’s take a look at the technical features of Circle’s latest creation.

First, Arc is an EVM-compatible Layer-1 blockchain designed specifically for stablecoin finance and asset tokenization, providing a foundational settlement layer for programmable money on the internet, particularly suitable for scenarios like global payments, foreign exchange (FX), and capital markets. The goal is to address the obstacles that existing public chains face in enterprise and institutional applications, such as transaction fee volatility, settlement uncertainty, and lack of privacy. Here we know that Arc is strongly related to payments, and it is noteworthy that Arc does not seem to target consumers.

Key Technical Features of Arc

Using USDC as the 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 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 allows it to achieve deterministic settlement finality, with transactions being confirmed in less than one second and being irreversible.

There are also validators; the network is secured by a limited, permissioned group of well-known institutions geographically distributed as validators. These validators’ identities are public and must adhere to high standards of accountability and operational assurance. This easily evokes memories of the former Libra.

In a testing setup with 20 geographically distributed validator nodes, Arc can handle about 3,000 transactions per second (TPS), with finality confirmation times below 350 milliseconds. If using 4 validator nodes, throughput can exceed 10,000 TPS, with finality times below 100 milliseconds.

Optional Privacy Protection Features

Arc’s privacy roadmap starts with a “Confidential Transfer” feature, which can encrypt transaction amounts so that they are not visible to the public, but the addresses of both parties remain visible. This is a very business-to-business (B2B) feature, protecting sensitive commercial information.

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

Privacy features are implemented through a modular backend, initially using Trusted Execution Environment (TEE) technology to handle encrypted data, with future plans to integrate more advanced technologies like 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 helps stablecoin price discovery) and “harmful” (such as sandwich attacks).

To mitigate the MEV issue, Arc’s roadmap includes implementing cryptographic mempools, batch transaction processing, and multiple proposers to suppress predatory trading behavior while retaining beneficial arbitrage activities.

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