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 the Q2 2025 financial report, introducing a public blockchain called Arc, which is also a Layer 1 dedicated to stablecoins. Clearly targeting competitors like Tether’s Plasma and Stable. Arc will launch a public testnet this fall. Let’s take a look at Circle’s latest work and its technical features.

First, Arc is a Layer-1 blockchain designed specifically for stablecoin finance and asset tokenization, compatible with EVM, providing a foundational settlement layer for programmable money on the internet, especially suitable for global payments, foreign exchange (FX), and capital markets scenarios. Its goal is to address obstacles faced by existing public chains in enterprise and institutional applications, such as transaction fee volatility, settlement uncertainty, and lack of privacy. We know that Arc is closely related to payments; notably, it seems not to be to C.

###Arc’s Main Technical Features

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 exponential weighted moving average of block utilization to smooth short-term fluctuations, ensuring transaction costs remain consistently low.

In addition to USDC, Arc 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 deterministic finality, with transactions confirmed and irreversible in less than one second.

There are also validators: the network is secured by a limited set of known, permissioned, geographically distributed institutions acting as validators. These validators are publicly identified and must adhere to high standards of accountability and operational security. This setup is reminiscent of Libra.

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

Optional Privacy Features

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

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

Privacy features are implemented via modular backend, initially using Trusted Execution Environment ((TEE)) technology to handle encrypted data. Future plans include integrating advanced technologies such as Multi-Party Computation ((MPC)), Fully Homomorphic Encryption ((FHE)), and Zero-Knowledge Proofs.

MEV Mitigation Roadmap

Arc believes not all MEV is harmful. It categorizes MEV into “Constructive” (e.g., arbitrage that helps 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 to suppress predatory trading, while preserving beneficial arbitrage activities.

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