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

“First Publicly Traded Stablecoin” Circle announced its latest layout in its Q2 2025 financial report: a public blockchain called Arc, which is also a Layer 1 dedicated to stablecoins. It is clearly targeting competitors Tether’s Plasma and Stable. Arc will launch a public testnet this fall. Let’s take a look at Circle’s latest work and what technical features it offers.

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—especially suited for scenarios such as global payments, foreign exchange (FX), and capital markets. Its goal is to solve the obstacles that existing public chains face in enterprise and institutional applications, such as transaction fee volatility, settlement uncertainty, and a lack of privacy. Here we know that Arc is strongly related to payments; what’s particularly notable is that Arc apparently is not built for to C.

Arc’s Main Technical Features

Using USDC as Native Gas and a Stable Fee Mechanism

Arc uses USDC as the native asset to pay transaction fees (Gas) and adopts a fee market mechanism inspired by the Ethereum EIP-1559, but updates the base fee using an exponential weighted moving average of block utilization—smoothing short-term fluctuations and ensuring transaction costs stay consistently low.

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

Extremely High Performance

Arc uses a high-performance consensus engine called “Malachite,” based on the Tendermint BFT protocol. This enables deterministic settlement finality, where transactions can be confirmed in under one second and cannot be reversed.

Of course, there are also validators: the network is secured by a limited set of well-known, permissioned, geographically distributed institutions acting as validators. These validators’ identities are public, and they must comply with high standards of accountability and operational assurance. This is easy to associate with the former Libra.

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

Optional Privacy Protection Features

Arc’s privacy roadmap begins with a “Confidential Transfer” feature, which encrypts transaction amounts so they are not visible to the public, while the addresses of the parties remain visible. This is a very to B feature that protects commercially sensitive information.

There is also a privacy model fully designed for regulation: Arc allows selective disclosure through mechanisms such as “view keys,” similar to Monero. Because many transactions have privacy, but authorization can be granted to 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 through a modular backend. In the initial stage, it adopts Trusted Execution Environment (TEE) technology to process encrypted data. In the future, it plans to integrate more advanced technologies 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 divides MEV into two categories: “constructive” (e.g., arbitrage actions that help stabilize stablecoin price discovery) and “harmful” (e.g., sandwich attacks).

To mitigate MEV issues, Arc’s roadmap includes implementing encrypted mempools, batch transaction processing, and multiple proposers—suppressing predatory trading behavior while preserving beneficial arbitrage activities.

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