Farewell Fluctuation: How USDC Redefines the on-chain Fee Experience?

Original Title: How Gas Works on Arc

Original author: Circle

Original compilation: Sleepy.txt, BlockBeats

Editor’s Note: Throughout the development of blockchain, the Gas mechanism has always been one of the most challenging issues for enterprises and developers when it comes to implementing applications. The unpredictability of fees and the cost structure closely tied to the fluctuations in the crypto market make it difficult for blockchain to be seen as a reliable infrastructure. The emergence of Arc is a systematic solution addressing this pain point: it sets USDC as the native Gas, layering a fee smoothing algorithm and enterprise-level accounting logic, aiming to convert the cost of using blockchain into a predictable dollar pricing model similar to SaaS. In scenarios such as payments, fund management, and capital markets, this transformation not only simplifies operational processes but also reconstructs financial infrastructure at a fundamental level. This article will delve into the design of the Gas mechanism in the Arc network and its potential implications for future applications.

The following is the full text:

Every type of transaction, whether it’s swiping a credit card, sending a wire transfer, or currency exchange, comes with a cost for using the underlying infrastructure. These fees help cover the resources that make payments possible. Blockchain is no exception: every operation on the network requires a small transaction fee to maintain its functionality. In an on-chain environment, these fees are referred to as "Gas". On many mainstream blockchains, Gas fees are priced in the volatile native assets of the blockchain (such as ETH, SOL, etc.), and the dollar cost of a transaction depends on:

How much Gas does your transaction consume? Units: This is the fixed computational workload required for your transaction, based on the specific actions it performs on the blockchain.

Base fee per unit of the protocol: This is the price set by the network for each unit of Gas, which may fluctuate based on the level of congestion on the blockchain at any given time.

Native token market price: This refers to the dollar value of the blockchain native Gas token in the open market, which fluctuates continuously and directly affects the actual cost of Gas.

Among these factors, the market price of the token is often the most significant source of uncertainty. Its value may fluctuate sharply between the planned trading time and the actual execution time—this can create accounting troubles in the best case and lead to levels of volatility that make blockchain impractical for many businesses in the worst case.

The volatility of Gas fees can significantly complicate accounting processes and business models, making it difficult to set consistent pricing for customers. This is why financial, payment, and enterprise teams often say: "We need predictable and planable costs" and "Our funds management team cannot hold volatile crypto assets to pay Gas fees."

Arc is specifically built to eliminate this barrier.

Design of Arc: USDC as Native Gas

One of the most significant and important innovations of Arc is that USDC is the native Gas token of the network. Transaction fees are paid in USDC, which is a stablecoin pegged to the US dollar, rather than a speculative asset. Since USDC is designed to maintain stable value, businesses do not have to worry about their blockchain operating costs rising and falling with the fluctuations of the crypto market.

As mentioned earlier, users may experience fluctuations in Gas fees due to changes in network conditions and the market price of Gas tokens. These variables combined can make it nearly impossible to accurately know the dollar cost of a transaction in advance.

By eliminating token price volatility from the equation, Arc makes predictable, dollar-denominated fees possible—reducing accounting complexity and operational friction.

How Arc Keeps Costs Low and Stable

Arc goes beyond just being priced in USD; it also stabilizes the level of fees. The fee market of Arc is inspired by Ethereum's EIP-1559, but adjusted for predictability:

Fee Smoothing: Arc does not adjust the base fee on a block-by-block basis, but instead updates the base fee using an exponentially weighted moving average of block utilization, which is constrained within strict boundaries. This dampens short-term spikes, so fees do not fluctuate dramatically due to brief bursts of demand.

Bounded base fee: The barrier restricts the speed of fee movement, further stabilizing long-term costs.

Throughput and finality: Sub-second deterministic finality (supported by the Malachite consensus engine) and high throughput provide ample block space at high speeds, reducing the likelihood of congestion—another driver of costs on other networks.

Circle Paymaster and multi-currency support

The future roadmap project includes enhancements to Circle Paymaster, allowing other regulated stablecoins (such as EURC) to be routed through the paymaster to be used as Gas (i.e., users can pay transaction fees with EURC or other assets, which will be automatically routed and converted to USDC in the background through an integrated stablecoin forex engine), providing global businesses with local currency options without compromising fee predictability.

Think of Arc as an enterprise-level network where Gas is just another item priced in US dollars. You wouldn't accept a card processor that suddenly spikes in fees by 20% due to speculative token prices; for many critical use cases, we believe blockchain shouldn't work that way either. Arc eliminates this variable, allowing you to plan, price, and scale with confidence. Here’s how low and predictable Gas fees priced in USDC can benefit your business:

Predictable Unit Economics

The finance team needs to set aside extra capital to cover such risks: when they replenish their native Gas token holdings, the dollar value of these tokens may have already fluctuated significantly—meaning that the cost of maintaining the same coverage level could be several times their expected expenditure. Since Arc prices each transaction in USDC and employs a smooth moving average, the fees you approved in the operational meeting should be reflected in the expenses on your ledger, allowing the budget and forecasts to be locked in at a fixed dollar amount rather than a moving target. You can model the cost of each transaction just like modeling any other SaaS or payment rail input.

Cleaner Accounting and Compliance

The accounting chain effect may be equally important. Every time a business pays for Gas using a volatile asset, it may record a taxable disposal and may need to calculate fair value adjustments. Arc's USDC fees are designed to be treated like dollar operating expenses, with no foreign exchange conversion layer and no capital gains risk. This is also consistent with the way financial teams have already been thinking about costs (i.e., in dollars), reducing internal friction between product, finance, and treasury management.

No Forced Exposure to Volatile Assets

Fund management policies can also become simpler. Some corporate treasury departments are prohibited from holding volatile crypto assets, forcing operational teams to go through brokers or exchanges every time they need the native Gas token. With Arc, the only asset you need to keep on the balance sheet is USDC, a fiat-backed stablecoin designed to fit most categories of cash equivalents, reducing policy friction and counterparty risk.

Better Customer User Experience

Predictable gas fees have enabled a smoother end-user experience. Customers no longer need to acquire separate tokens, monitor price charts, or recharge a volatile balance before interacting with the application. Developers can even sponsor or completely abstract the fees, deducting a few cents in USDC in the background, making the "blockchain part" of in-app payments disappear, allowing the product to feel as simple as any web or mobile service.

What does this release for builders?

Arc is an open, EVM-compatible layer one. This means that teams can bring existing tools into a familiar environment, now paired with predictable USDC Gas. When every function call lands at a cost you can quote in dollars, Gas is no longer a market risk warning, but becomes a line item you can lock into your sprint budget. This provides a solid foundation for the following applications:

Global payments and expenditures: The payroll engine and market custody can provide reliable transaction costs from Denver to Denmark, achieving long-term stability with fixed fee pricing.

Stablecoin Forex and Programmatic Fund Management: Automatic rebalancing, arbitrage, and liquidation operations can run 24/7 without the need to pause for gas repricing or letting gas volatility erode profits.

Capital market workflow: DvP/PvP transactions, margin calls, and collateral movements can benefit from a combination of deterministic finality and predictable costs, allowing financial teams to match blockchain transactions with their ledger entries in near real-time.

Due to the native integration of Arc with the broader Circle platform (such as USDC, EURC, USYC, Mint, CCTP, Gateway, Wallets, etc.), enterprises can coordinate the flow of value between on-chain and off-chain systems within a single enterprise-grade framework.