Arc X Spaces: Why We Are Building Arc

@arcSep 28, 2025

The Spaces unpacked why Circle is building Arc, an open, EVM-compatible Layer 1 purpose-built for stablecoin finance and broader internet-scale finance. Host Sam Seely guided a fast-paced discussion with Nikhil (Chief Product & Technology Officer), Rachel (VP of Product Management), and Gordon (Chief Economist & Head of Research). They argued the timing is now due to surging enterprise and developer demand, prohibitive onboarding costs on existing chains, and the need for features like deterministic instant finality, predictable dollar fees, and opt-in compliant privacy. Arc is positioned as a neutral, multi-chain liquidity hub—not a USDC‑only “Circle chain”—with USDC as native gas, paymasters to enable other stablecoins, and deep interoperability via Circle Mint, CCTP, and Gateway. Governance will begin under Proof of Authority for stability, with a roadmap to explore delegated Proof of Stake with permissioned validators. Finality is irreversible at the consensus layer; refunds and chargebacks belong at the application layer. The bigger vision is an “internet operating system for the economy,” moving money, contracts, and organizations natively on-chain. Private testnet is live with builders; public testnet is slated for the fall.

Why Circle Is Building Arc: Summary and Analysis of the Twitter Spaces Discussion

Participants and Roles

Sam Sealy — Director of Community Growth at Circle; host and moderator
Nikhil — Chief Product & Technology Officer at Circle
Rachel — VP of Product Management at Circle
Gordon — Chief Economist and Head of Research at Circle

Context and Objectives

Arc is Circle’s new open, EVM-compatible layer-1 blockchain purpose-built for stablecoin finance and commerce, with the ambition to support much broader economic activity online. The session aimed to answer community FAQs and deeper, harder questions about Arc’s role, design, roadmap, and relationship to the wider crypto ecosystem, especially Ethereum and other chains.

Motivation and Vision (Rachel)

Personal motivation rooted in lived experience in Venezuela’s hyperinflation and economic collapse: censorship resistance and monetary stability via public blockchains and stablecoins provided life-saving, open-internet access to value.
Arc is conceived as a continuation of frictionless value exchange on the open internet, engineered to remove key frictions for stablecoin-native finance and commerce.
Vision: an open EVM layer-1 with stablecoin-native finance at its core, scaling reliably to billions of users by marrying censorship resistance and monetary stability with high performance and usability.

Why Build Arc Now? Timing and Market Conditions (Nikhil)

Circle is a 12-year-old, engineering-led company; USDC launched in 2018.
The timing historically “didn’t feel right” for mainstream stablecoin finance; now market readiness and momentum have arrived.
Example of prohibitive onboarding costs: a partner with ~10M wallets faced ~$130M in costs on an existing high-performance chain—untenable if the ambition is 1–5B users.
Arc aims to solve real cost, performance, and usability constraints to enable global-scale financial services on-chain.
The opportunity is vast and non-zero-sum: blockspace will be provided by many actors; Arc contributes unique capabilities into a multi-chain world.

Is Arc Just a USDC-Only Chain? (Gordon)

No. Arc is an open, EVM-compatible L1 designed as neutral infrastructure for stablecoin finance across currencies and issuers, and more broadly for tokenized money (e.g., tokenized deposits) and assets.
USDC is the native gas token for simplicity and predictability, but paymasters will enable fees in other fiat-denominated stablecoins and local currencies.
Arc brings Circle’s broader platform: USDC (and other Circle stablecoins), Circle Mint for issuance/redemption, and established interoperability tooling (e.g., CCTP and Gateway) for developers.
Strategic positioning: a liquidity hub for stablecoin finance, tokenized money, and tokenized assets that developers can build on.

Multi-Chain Strategy and Relationship to Other L1s/L2s (Nikhil)

Circle’s core incentive is to grow USDC utility and circulation (stated ~$74B), not to cannibalize existing ecosystems.
Circle invests heavily in on/off ramps and regulatory licensing globally—essential to USDC’s utility.
Arc is designed to complement, not compete with, other L1/L2 ecosystems. The addressable market for these services is multi-trillion (cited ~$4T), and no single chain can fulfill all use cases.
Arc is one piece of Circle’s multi-chain strategy, helping USDC grow by providing unique features and connectivity.

Relationship with Ethereum (Gordon)

Circle is not abandoning Ethereum; USDC originated there and its Ethereum circulation remains the largest.
Circle will continue investing in Ethereum via engineering, integrations, liquidity programs, and tooling.
Arc is EVM-compatible and designed to interoperate with Ethereum L2s. The intent is to expand the overall pie, onboard net-new users with simplified UX, and facilitate cross-ecosystem experimentation.

Design Choices Driven by Real-World Pain Points (Rachel)

Recurring pain points observed across thousands of partner/customer conversations:

Volatile/unpredictable fees degrade UX for treasury teams and end users.
Unclear definitions of finality create confusion and operational risk (e.g., explaining L2 finality to bank CFOs).
Lack of privacy on public blockchains is a barrier for enterprises and sensitive use cases (e.g., payroll, B2B transactions, liquidations).

Arc’s protocol-level innovations:

USDC as native gas: dollar-denominated, predictable fees, easier corporate accounting and no need to hold volatile assets for gas.
Deterministic, subsecond settlement finality: blocks are irreversible once finalized, powered by Malachite (an open-source, high-performance consensus engine) with definitions aligned to PFMI regulatory standards for payment finality.
Opt-in, compliant privacy: selective shielding of balances/transactions, enabling enterprises to satisfy audit, accounting, and regulatory needs without compromising developer experience or performance.

Consensus and Governance Roadmap (Rachel)

Launch under Proof of Authority (PoA) to ensure early network stability and a trusted validator set.
Roadmap includes exploring and transitioning to Delegated Proof of Stake (DPoS), while maintaining a permissioned validator set initially.
Goals: stronger economic security, broader validator decentralization, governance flexibility, and long-term robustness so Arc can operate as internet infrastructure independent of Circle as it scales.

Differentiation vs Other Stablecoin-Focused Chains (Nikhil)

Circle brings extensive experience operating the largest regulated, fastest-growing stablecoin, and the heavy lifting of licensing and regulatory engagement worldwide.
Deep on/off ramps and multi-chain interconnectivity differentiate Arc’s practical utility.
Arc’s subsecond finality and connectivity can power liquidity across diverse ecosystems and DeFi protocols.
Positioning: if you’re building stablecoin-centric applications, Circle’s operational track record and infrastructure stack make Arc a compelling choice.

Beyond Stablecoin Finance: The Larger Economic Vision (Gordon)

Stablecoin finance is the first step; the broader vision is “internet finance,” migrating traditional intermediation and coordination activities on-chain.
High-performance, deterministic finality reduces information asymmetry, scales coordination among individuals and firms, and lowers friction in how labor and capital organize.
Early days, but Arc’s foundation aims to support wide-ranging economic activities moving on-chain.

Finality vs Refunds and Dispute Resolution (Gordon)

Consensus-layer finality is deterministic and irreversible: once a transaction is finalized on Arc, it cannot be reversed at the base layer.
Refunds/chargebacks are handled at the application layer via smart contracts (e.g., escrow, programmable dispute resolution). Businesses should design workflows and contracts that implement these policies above the base chain.

Launch Timeline and Calls to Action (Sam, Rachel)

Private testnet is live with selected builders; public testnet planned for the fall.
Start at arc.network and follow the Arc account for pinned resources, the light paper, news, videos, and ongoing updates.

Key Takeaways

Arc is an open, EVM-compatible L1 engineered for stablecoin-native finance and commerce, with USDC as gas for predictable, dollar-denominated fees.
Deterministic, subsecond finality and opt-in, compliant privacy address enterprise-grade needs without sacrificing UX and performance.
Arc complements Circle’s multi-chain strategy; it is not an “exit” from Ethereum nor a competitor to all L1/L2s. It aims to expand the pie and onboard new users.
Roadmap: start under PoA; explore transition to DPoS with increased decentralization and governance flexibility while maintaining security and reliability.
Refunds/chargebacks are implemented at the application layer (escrow, programmable dispute processes), not by reversing base-layer finality.
Circle’s unique assets—regulated stablecoin operations, global licensing and on/off ramps, and interoperability tooling—differentiate Arc among stablecoin-centric chains.
Long-term vision: Arc as foundational infrastructure for “internet finance,” enabling broader economic coordination and activity to move on-chain.