Introduction
In today’s increasingly mature blockchain technology landscape, Circle’s Arc public blockchain is attempting to carve out a new path for stablecoin payments, directly challenging traditional payment giants like Visa and Mastercard.
The Arc public blockchain is a Layer 1 network built by Circle specifically for the USDC stablecoin, using USDC as its native Gas token, employing a high-performance Malachite consensus algorithm, and offering optional privacy features. This article will delve into the technical architecture of the Arc blockchain, its token economics, and its revolutionary impact on the stablecoin payment ecosystem.
Key Takeaways
- The Arc public blockchain uses USDC as its native Gas token, eliminating the need for businesses to use volatile cryptocurrency to pay transaction fees.
- The Malachite consensus algorithm achieves a transaction processing capacity of 3,000 transactions per second with finality in 350 milliseconds.
- The optional privacy features protect user privacy while meeting regulatory compliance requirements.
- Arc directly challenges traditional payment giants, aiming to take control of the digital money flow system.
- The project is supported by Circle, with a strong commercial application background and resources.
1. Overview of the Arc Project: Circle’s Strategic Layout and Vision
Arc Public Blockchain是CircleA key step in the company’s strategic transformation. Circle’s IPO this summer is a milestone that signifies the official entry of stablecoins into the financial mainstream, moving beyond their niche in the crypto space.
Although 95% of Circle’s current revenue comes fromUSDCcash and bond interest income behind it, as expectations for interest rate cuts rise, the company is actively seeking diversified new revenue sources. The Arc public blockchain is at the core of this strategy.
Arc aims to enable businesses and institutions to seamlessly integrate into blockchain infrastructure while adhering to regulatory requirements, achieving this through three core capabilities:
- Using USDC stablecoin as the Gas token
- Providing high scalability and instant transaction confirmation based on the Malachite consensus algorithm
- Supporting user-activated optional privacy features
2. Arc Technical Architecture: Innovative Solutions to Industry Pain Points
2.1 Advantages of USDC as a Native GAS Token
Arc allows users to use USDC as the default GAS token for all transactions, enabling them to pay low-volatility and predictable fees. This is particularly important for business users, as they do not need to hold highly volatile tokens like ETH or SOL to pay transaction fees, significantly simplifying their financial accounting processes.
Arc has made two significant improvements to theEIP-1559model:
- Introduction of a ‘fee smoothing mechanism’ that determines the fees for subsequent blocks using an exponentially weighted moving average algorithm.
- A ‘base fee ceiling mechanism’ that sets a fixed upper limit for the base fee, ensuring that fees do not escalate infinitely even during network congestion.
2.2 High Performance of the Malachite Consensus Algorithm
Arc employs the high-performance BFT consensus engine Malachite, developed in Rust byInformal Systems. Malachite achieves module simplification by removing unnecessary components and streamlining the core, consisting of only three modules:开发。Malachite通过移除非必要组件并精简内核，实现了模块简化，核心库仅由三个模块构成：
- Vote Keeper
- Round State Machine
- Driver
In tests with 20 geographically distributed validator nodes, Arc achieved a transaction throughput of 3,000 transactions per second, with finality in 350 milliseconds. This deterministic instant finality lays a technical foundation for Arc as financial infrastructure.
2.3 Optional Privacy Solutions and Compliance Design
Arc plans to introduce optional privacy protection features in future upgrades after its mainnet launch, starting with a ‘confidential transfer’ feature. This feature will conceal transaction amounts while disclosing addresses, allowing regulators and analytical tools to track transactions.
By introducing ‘view keys,’ Arc allows approved third parties, such as auditors and regulators, to obtain read-only access to specific transaction data, ensuring compliance. In the future, Arc also plans to integrate various cryptographic technologies like zero-knowledge proofs, fully homomorphic encryption, and secure multi-party computation.
3. Arc Public Blockchain: New Use Cases for USDC
Although the Arc public chain itself does not issue new native tokens (instead using USDC as the base currency), understanding the role of USDC in the Arc ecosystem is crucial.
3.1 Token Utility and Value Accumulation Mechanism
On the Arc platform, USDC is not only a medium for transactions but also the fuel for the network. All transactions require USDC to pay transaction fees, and these fees will be injected into the treasury on the Arc chain during the early development stages to support the long-term development of the network.
This model creates a continuous demand for USDC, as any user conducting transactions on the Arc network needs to hold USDC to pay fees. With increased network adoption, the demand for USDC may correspondingly grow.
3.2 Payment Flexibility and Multi-Stablecoin Support
Arc not only supports USDC but also allows the use of various stable-value tokens as fee tokens, including:
- Stablecoins pegged to other national currencies
- Deposit tokens
- Central bank digital currencies
This functionality is associated with Circle’s payment hosting service throughCircle Paymaster implementation. The payment master function allows transaction fees to be paid with tokens other than USDC, increasing the system’s flexibility.
4. Arc Use Cases: Multi-Domain Solutions for Enterprises and Financial Institutions
The design features of the Arc public chain give it application potential in multiple fields:
4.1 Corporate Finance and Cross-Border Payments
Enterprises can use Arc for fast, low-cost cross-border payments without worrying about the cost uncertainties brought by cryptocurrency price volatility. Arc’s predictable fee model allows enterprises to conduct financial planning more accurately.
4.2 Infrastructure Upgrades for Financial Institutions
Traditional financial institutions can use Arc as the next-generation financial infrastructure to provide blockchain-based payment services to their clients while meeting regulatory compliance requirements. The confidential transfer feature enables financial institutions to protect sensitive customer information while providing transparency to regulators when needed.
4.3 Privacy-Sensitive Application Scenarios
Arc’s optional privacy features make it suitable for application scenarios that require the protection of sensitive business information, such as:
- Private order books
- Financial transaction protocols
- Automated fund management
In the future, Arc also plans to support “privacy state” and “confidential computing” technologies to enable more advanced privacy application scenarios.
5. Arc Competitive Analysis: Market Positioning and Differentiation Advantages
The emergence of Arc marks a new stage in the competition of stablecoins. Previously,Tetherhad already supported Stable andPlasmablockchain networks designed specifically for USDT. Arc shares similarities with these networks but also has notable differences.
Similarities include a focus on stablecoin features, support for using stablecoins as the default GAS token, high scalability achieved through underlying optimization, and plans to offer optional privacy protection features.
In contrast, the Arc chain only supports the use of USDC as the token for paying transaction fees, and there is no fee waiver policy for USDC transfer transactions. This reflects the differences in the business models of Circle and Tether.
More importantly, Arc directly challenges traditional payment giants like Visa and Mastercard, attempting to take control of the digital flow of funds.FireblocksChief Strategy Officer Stephen Richardson points out that companies are racing to develop services to “control the flow of funds” to ensure their share in the next generation of digital payments.
6. Conclusion: Future Prospects of the Arc Public Chain
The Arc public chain represents a broader trend: stablecoins are evolving from mere transactional tools into a complete financial ecosystem that could reshape the future landscape of digital payments. The success of the project will depend on the smooth implementation of technology, market acceptance, changes in the regulatory environment, and the evolution of the competitive landscape.
As the Arc network matures and its adoption rate increases, USDC may play a more significant role in the stablecoin ecosystem. However, while blockchain technology is supposed to bring greater interoperability and openness, these emerging stablecoin-specific networks may end up creating new ‘walled gardens.’ Finding a balance between innovation and openness will be key to the success of Arc and similar projects.
Recommended Reading:
What is USDC? A Complete Beginner’s Guide to USD Coin
What is USDT (Tether)? A Complete Guide for Cryptocurrency Beginners
What is USDe? A Beginner’s Guide to Ethena’s Synthetic Dollar Stablecoin
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