Circle Public Chain Arc: A New Layer 1 Revolution Combining Libra + Monero + Consortium Chain

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

First, Arc is an EVM-compatible Layer-1 blockchain designed specifically for stablecoin finance and asset tokenization. It provides a foundational settlement layer for programmable money on the internet, making it especially suitable for scenarios such as global payments, foreign exchange (FX), and capital markets. The goal is to solve the obstacles that existing public chains face in enterprise and institutional use, such as transaction fee volatility, settlement uncertainty, and a lack of privacy. Here we know that Arc is strongly tied to payments; what’s particularly noteworthy is that Arc does not seem to be “to C.”

Main technical features of Arc

Use USDC as the native gas and stable fee mechanism

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

In addition to USDC, Arc also plans to support Gas fee payments for other stablecoins and tokenized fiat currencies by integrating 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, with transactions confirmed and made irreversible in less than one second.

Of course, there are also validators. The network is secured by a limited set of well-known, permissioned validators distributed geographically. 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 process 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 starts with a “Confidential Transmission” feature. This feature encrypts transaction amounts so they are not visible to the public, while the addresses of the transaction parties remain visible. This is a very B2B feature that protects commercially sensitive information.

There is also a privacy model designed entirely for regulatory compliance. Arc allows selective disclosure through mechanisms such as “view keys,” similar to Monero. Since many transactions are private, they 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. In the initial stage, they use Trusted Execution Environment (TEE) technology to process encrypted data, and in the future they plan 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 categorizes MEV into two types: “constructive” (e.g., arbitrage activities that help stablecoin price discovery) and “harmful” (e.g., sandwich attacks).

To mitigate MEV issues, Arc’s roadmap includes implementing technologies such as encrypted mempools, batch transaction processing, and multiple proposers. These are intended to suppress predatory trading behavior while preserving beneficial arbitrage activities.

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