What is Ark? Circle’s proprietary L1 blockchain

arc teeth circlededicated to layer 1 blockchain It is designed to connect programmable money, tokenized assets, and institutional finance in an environment with predictable fees and deterministic payments. According to arc light paper and Arc technical documentationblockchain introduces dollar-denominated gas fees, sub-second finality, and an opt-in privacy model aligned with regulated financial services. These characteristics are intended to support workflows where predictability, compliance alignment, and auditability are core requirements.

Arc’s design addresses long-standing operational frictions in public blockchains, such as fee volatility, probabilistic settlement, and a fully transparent ledger that conflicts with financial confidentiality. Through architectural choices and deep integration with Circle’s platform services, Arc is structured as a payments layer for payments, FX, tokenized assets, and enterprise workflows with traceability and operational consistency.

Why was Ark created?

The primary motivation for creating Arc is the growing disconnect between blockchain capabilities and the needs of regulated financial institutions. Most existing blockchains were not designed to support the operational, compliance, and payments demands of banks, payment processors, fintechs, and capital market participants. Volatile gas tokens complicate accounting, stochastic finality introduces uncertainty into high-value payments, and transparent public ledgers expose sensitive financial data that institutions cannot reveal.

According to documents published by Circle, the development of Arc centered around three major design decisions.

1. Stablecoin native operations

Arc uses USDC as its native gas asset. This reduces exposure to speculative token volatility and aligns operational costs with corporate accounting models. Based on Fee Manager documentation, Arc is tuned to stabilize gas prices and reduce fluctuations between network conditions.

2. Deterministic, subsecond finality

Malachite, Arc’s consensus engine, is documented as a high-performance implementation of Tendermint BFT, irreversibly committing blocks in less than a second on the testnet. Deterministic finality is important for institutional workflows such as collateral movement, foreign exchange settlement, and treasury operations.

3. Opt-in, compliant privacy

Arc introduces configurable privacy features that allow financial institutions to protect transaction amounts while maintaining visibility of counterparties. View keys and selective disclosure mechanisms support audit and compliance requirements and allow agencies to maintain regulatory visibility when needed.

Circle’s technical literature states that these design choices are intended to support an open, neutral platform that provides predictable operational behavior for developers, enterprises, and financial institutions.

Explore the Arc ecosystem

Arc is structured as a financial operating system rather than a general-purpose smart contract platform. The document describes the ecosystem as centered around stablecoin-denominated payments, FX, collateral management, tokenized assets, and enterprise-grade financial operations.

Core use cases of the Arc ecosystem

On-chain credit with off-chain trust

Arc supports credit issuance models where traditional underwriting and real-world collateral resides off-chain, while settlement and lifecycle management occur on-chain. This structure enables transparent settlement with visibility into risk positions while maintaining the confidentiality of sensitive information.

Capital market settlements and tokenized collateral

Arc’s deterministic finality allows tokenized securities, government bonds, or fund shares to serve as collateral for automated markets. Collateral, redemption, and settlement flow movements occur with predictable timing and execution.

Stablecoin FX and programmable currency conversion

Arc includes a roadmap for a built-in FX engine that enables pay-to-pay settlement across multiple currencies. By combining this engine with smart contracts and off-chain RFQ systems, financial institutions can automate foreign exchange trading with guaranteed execution windows.

agent commerce

Developers can build autonomous financial agents that perform financial operations, manage liquidity buffers, enforce spending policies, or perform real-time financial tasks. These agents rely on Arc’s stable fees and predictable settlements.

Cross-border payments and payments

Arc supports 24/7 settlement of cross-border payments using assets linked to USDC, EURC, and future currencies. Integration with Circle’s infrastructure makes it possible to mint stablecoins directly from fiat sources and distribute them around the world.

Tokenized money and yield assets

Arc’s ecosystem supports multiple categories of tokenized value.

• USDC and EURCnatively published
• USYCa tokenized money market fund backed by short-term U.S. Treasury securities.
• Tokenized deposits and cash productsissued by an external financial institution
• Regulated real-world assetsincluding stocks, credit products, and private funds.

These products can be integrated directly into lending marketplaces, trading venues, automated payments, and treasury tools.

Arc infrastructure and how it works

Arc combines a deterministic consensus engine with an Ethereum-compatible execution environment to expand functionality specifically for stablecoin finance.

Consensus Layer: Malachite

Based on Circle’s documentation, it looks like this:

• definitive finality: Malachite finalizes each block within 1 second under testnet conditions and provides payment guarantees similar to traditional payment systems.
• irreversibility: Finalized blocks cannot be reorganized, reducing the risks associated with probabilistic finality.
• Authorized Certification Authority Validator: The initial validator set consists of vetted institutions. This roadmap includes moving to a permissioned proof-of-stake model that involves a wider range of validators.

Execution layer: Reth

Arc uses Rust-based Reth. Ethereum Execution engine. Document highlights:

• ledger and state: EVM compatible and allows use of established Ethereum tools.
• rate manager: Ensures that transaction fees are denominated in USDC, reducing volatility.
• privacy module: Supports confidential transfer and is designed for future private computation.
• stablecoin service: Enable multi-currency payments, FX operations, and programmable settlements.

Together, these layers form a system optimized for predictable payments, institutional integration, and multi-currency financial workflows.

Arc public testnet

Arc’s public testnet is designed to give developers, enterprises, and auditors early access to the platform’s architecture and core functionality. This includes:

• Deterministic resolution, reflecting intended mainnet behavior
• Transaction fees denominated in USDC for predictable testing
• EVM compatibilitymaking it easy to port existing Ethereum contracts
• developer toolsincluding faucets, documentation, and debugging resources.

This testnet will also serve as a proving ground for initial privacy features, stablecoin services, and FX features as we move forward with our roadmap. Developers can test how their applications respond to sub-second finality and stable gas prices, allowing for accurate performance modeling before deploying to mainnet.

The testnet explorer is live and provides real-time updates on blockchain performance. At the time of writing, it processes up to 800,000 transactions every day.

What are the main features of Arc?

Arc introduces a set of structural features designed to meet the operational, compliance, and payment requirements of institutional finance. These features differentiate it from most existing layer 1 blockchains by addressing persistent challenges such as fee volatility, stochastic finality, limited privacy controls, and lack of native financial primitives.

stablecoin native gas

Arc uses USDC as its native gas asset, replacing the traditional model where networks rely on volatile speculative tokens to pay for transactions. This design removes uncertainty from operating costs and creates a consistent framework for accounting and reconciliation. Agencies can model network charges in familiar units of account and reduce administrative overhead associated with fluctuating gas markets.

This roadmap includes support for additional fiat-linked stablecoins via Paymaster integration, enabling fee payments in local currency equivalents without introducing currency risk.

Deterministic settlement

Arc’s payment model provides deterministic finality within a single block. Unlike stochastic systems, where transactions require multiple confirmations and remain vulnerable to reorganization, Arc irreversibly terminates each block in less than a second.

This level of settlement assurance is essential for workflows such as collateral movement, exchange execution, clearing, and institutional trading where timing accuracy and immutability are non-negotiable. Deterministic finality allows systems built on Arc to rely on instantaneous state changes without the need for additional safeguards or waiting periods.

Integrated FX engine (roadmap)

Arc’s architecture includes an upcoming programmable FX engine designed to support multi-currency payments and foreign exchange operations directly on-chain. The engine features vetted pay-to-pay (PvP) settlements between counterparties, reducing counterparty risk by ensuring both sides of a transaction are settled at the same time.

Price discovery is done through an off-chain request for quote (RFQ) layer, allowing financial institutions to obtain quotes from market makers while maintaining transparency around execution. A controlled settlement window gives participants visibility into timing and finality. Initial versions of the FX engine will operate in a permissioned environment to meet regulatory requirements, with plans to expand access through permissionless protocols over time.

opt-in privacy

Arc introduces an opt-in privacy model tailored to financial institutions that require confidentiality without sacrificing auditability. The first phase involves a confidential transfer that encrypts the transaction amount while keeping the sender and recipient addresses visible. This protects commercially sensitive data while ensuring compatibility with compliance monitoring and analysis tools.

Future upgrades will enable private smart contract logic and confidential state through modular cryptographic backends such as Trusted Execution Environments (TEEs), Multiparty Computation (MPC), Fully Homomorphic Encryption (FHE), and zero-knowledge systems. This approach allows institutions to maintain regulatory visibility through selective disclosure mechanisms, such as view keys for auditors and other authorized parties.

Native support for tokenized assets

The Arc blockchain is built to support the entire lifecycle of tokenized financial instruments. This includes issuance, transfer, custody integration, settlement, and combinability with other on-chain applications. Supported assets include fiat-backed stablecoins, tokenized money market funds (such as USYC), tokenized deposits, and regulated real-world assets such as equities, fixed income products, and private credit products.

Arc provides an integrated environment where regulated financial products can function natively on-chain by allowing these assets to interact with lending markets, trading venues, and payment systems.

MEV mitigation tools (roadmap)

The protocol roadmap includes measures to mitigate miner or validator extractable value (MEV), a known risk in decentralized networks where the order of transactions can be manipulated. Planned enhancements include an encrypted memory pool that prevents transaction details from being viewed before blocks are incorporated. Multi-proposer architecture to reduce the influence of individual proposers. A batch ordering mechanism that minimizes opportunities for front-running and insertion attacks. These tools are intended to support fair trade execution and ensure the integrity of high-value payment flows.

Taken together, these features position Arc as a blockchain infrastructure layer designed for environments that require predictable behavior, standardized financial controls, and alignment with regulatory frameworks. This allows developers and institutions to build on-chain systems with the reliability and auditability expected from traditional financial infrastructure.

What can I build with Arc?

According to the website and documentation, developers and institutions can build a wide range of financial applications on the Arc blockchain due to its stability, deterministic finality, and support for tokenized money. Below is a list of products that developers can deploy on the Arc blockchain.

Loan and collateral system

By tokenizing high-yield assets like USYC, developers can build lending protocols with predictable collateral valuations and clear settlement guarantees.

Forex market and financial tools

Arc’s stable fees and settlement speeds enable a system for automatic hedging, real-time currency conversion, and financial optimization.

Payment networks and payment platforms

Businesses can use structured metadata and automated reconciliations to build invoice-linked payment systems, payroll tools, and supply chain finance applications.

Trading venue for institutional investors

Deterministic finality ensures that asset movements at the trading venue are final and traceable.

Agent financial workflow

Smart financial agents can perform programmatic disbursements, manage liquidity buffers, and respond autonomously to market conditions.

tokenized capital market

Developers can work with regulated issuers to design the infrastructure for issuing tokenized stocks, bonds, and private fund shares.

Arc’s EVM compatibility lowers the barrier to adoption by allowing you to build these applications with familiar tools.

Arc is focused on privacy

Arc incorporates a privacy model tailored to regulated finance, where confidentiality and auditability must coexist.

Phase 1: Confidential Transfer

The first privacy feature only protects the transaction amount. Addresses remain public, allowing for analysis, sanctions inspection, and compliance monitoring while protecting commercially sensitive data such as payroll, trade amounts, and liquidity movements.

Authorized auditors or regulators can access encrypted data through the view key. Additionally, each agency maintains visibility into its own customer activity, including upstream and downstream flows that support AML requirements and travel rules.

Phase 2: Private state and sensitive computation

Arc plans to expand beyond confidential transfers to include:

• private order book
• Confidential transaction execution
• Encrypted financial workflow
• Private automation strategy

These features rely on modular cryptographic backends, starting with TEE and expanding to MPC, FHE, and ZK-based systems as the technology matures.

road map

Arc’s roadmap extends functionality, security, and governance capabilities across multiple phases.

mainnet beta

The mainnet beta version introduces:

• Stable gas fee structure
• Confirmed payment in less than 1 second
• Fundamentals of programmable FX engines
• Integration with Circle products: CPN, USDC, EURC, USYC, Mint, Wallets, Contracts, CCTP, Gateway, Paymaster

Enhanced privacy

The upgrade introduces confidential transfer and later programmable privacy, allowing for private contract logic and sealed states.

MEV mitigation

Planned features include:

• encrypted memory pool
• Batch transaction processing
• Multiple proposer system for fair ordering

Improving consensus

Malachite incorporates a multi-proposer design with a two-phase Tendermint variant to reduce latency.

Transition to proof of stake

As highlighted in Litepaper, the move to an institutionally permitted PoS model increases decentralization within controlled parameters, provides governance flexibility, and ensures that the network can operate independently of Circle over the long term.

conclusion

Circle offers Arc as a layer 1 blockchain designed for stablecoin-native financial activities, offering predictable fees, deterministic payments, and configurable privacy. Its architecture integrates a high-performance consensus engine, a gas-stable unit of account, and a modular privacy model suitable for regulated institutions.

Arc positions itself as a payments-focused blockchain that supports tokenized assets, FX workflows, and corporate treasury operations in compliance with regulatory and operational standards.

source of information

• circle blog – Introduction to Arc Blockchain
• arc light paper – Features, roadmap and usage examples
• arc blog – Public testnet announcement
• coin desk public relations – Testnet deployment
• arc documentation – Explore Arc blockchain
• Website – Arc Blockchain Resources