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

“Stablecoin’s first publicly listed stock” Circle revealed its latest strategy in its Q2 2025 earnings report: a public blockchain called Arc—an L1 specifically designed for stablecoins. It’s clearly aiming to take on 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 what technical features it offers.

First, Arc is an EVM-compatible Layer-1 blockchain purpose-built for stablecoin finance and asset tokenization. It provides a foundational settlement layer for programmable money on the internet, making it especially suited for scenarios such as global payments, foreign exchange (FX), and capital markets. The goal is to address obstacles that existing public chains face in enterprise and institutional use—such as transaction fee volatility, settlement uncertainty, and the lack of privacy. Here we know Arc is strongly tied to payments, and what’s particularly noteworthy is that Arc apparently isn’t for direct-to-consumer (to C).

Arc’s main technical features

Uses USDC as the 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 Ethereum’s EIP-1559. However, by updating the base fee using an exponentially weighted moving average of block utilization, it smooths out short-term fluctuations and keeps transaction costs consistently low.

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

Very high performance

Arc uses a high-performance consensus engine called “Malachite,” built on the Tendermint BFT protocol. This allows it to achieve deterministic finality: transactions can be confirmed in under one second and cannot be reversed.

Of course, there are also validators. The network is secured by a set of limited, permissioned, well-known institutions that are geographically distributed as validators. These validators’ identities are public, and they must follow high standards for accountability and operational assurance. This is easy to connect to Libra from the past.

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, and finality time is below 100 milliseconds.

Optional privacy protection features

Arc’s privacy roadmap starts with a “confidential transfers” feature, which can encrypt the transaction amounts so they are not visible to the public—while the addresses of the two transaction parties remain visible. This is a very B-to-B type of feature that protects commercially sensitive information.

There’s also a privacy model that is fully designed for regulation: it allows selective disclosure via mechanisms such as “viewing keys.” Similar to Monero, many transactions are private, but it can authorize a third party (such as an auditor or regulator) to access specific transaction data. Institutions can always fully view their customers’ transactions to meet regulatory requirements such as transaction monitoring and travel rule obligations.

The privacy features are implemented via a modular backend. In the initial phase, it uses Trusted Execution Environment (TEE) technology to process encrypted data, and 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 not all MEV is harmful. It divides MEV into two categories: “constructive” (such as arbitrage activities that help with stablecoin price discovery) and “harmful” (such as sandwich attacks).

To mitigate MEV, Arc’s roadmap includes technologies like encrypted mempools, batch transaction processing, and multi-proposers. These are designed to suppress predatory transaction behavior while preserving beneficial arbitrage activities.

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