Circle опубликува бяла книга за Arc Network – може ли новата икономическа механика да го превърне в "слой за клиринг и координация" за институционални плащания със стабилни монети?

Original Author: ShirleyLi, Researcher at Web3Caff Research

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Compliance Note: Stablecoins are virtual currencies (Tokens). You must be aware that issuing or participating in investing in Tokens is subject to varying degrees of stringent regulatory requirements and restrictions in different countries and regions. Notably, issuing Tokens in Mainland China constitutes "illegal issuance of securities," and providing services related to cryptocurrency trading, such as order matching, is also considered "illegal financial activity." (Readers in Mainland China are strongly advised to read the "Compilation and Key Points of Laws and Regulations Related to Blockchain and Virtual Currencies in Mainland China"). The following content is solely an objective analysis of Arc Network's development progress and market feasibility strategies, intended to explore and analyze how blockchain-supported application scenarios can develop responsibly under global regulatory environments. Therefore, please do not use this information for making any decisions, and strictly adhere to the laws and regulations of your country or region, refraining from participating in any illegal financial activities.

Stablecoins have always been a crucial component of the on-chain financial ecosystem. Recently, with the rapid development of scenarios like RWA and cross-border payments, their role is evolving from a simple on-chain medium of exchange to a vital value bridge connecting traditional finance and the on-chain economy in some countries and regions globally. Consequently, stablecoin payments are emerging as a new form of financial infrastructure.

In May last year, Circle announced the launch of Arc, a Layer 1 public chain specifically designed for payment stablecoins and their underlying ecosystem, aiming to provide enterprises with a high-performance, predictable, and compliant enterprise-grade stablecoin gateway. The advent of Arc could also transform Circle's native stablecoin, USDC, from a single-purpose payment token into the utility token for its public chain. Previously, Circle released the Arc Litepaper, detailing the operational logic of this blockchain at the product level, and Web3Caff Research provided an in-depth analysis:

As an L1 public chain, Arc makes the following innovations focused on enterprise-grade users:

• USDC as Native Gas Token: Arc first introduces USDC as the native Gas token for its public chain to eliminate the impact of token price volatility, making interaction cost prediction directly related to the base fee per unit of Gas. To further reduce volatility, Arc dynamically adjusts the current base fee using the Exponentially Weighted Moving Average (EWMA) of historical block utilization, preventing sudden sharp fee increases due to network congestion. Additionally, when users pay with other stablecoins, Arc uses Circle Paymaster to automatically front the interaction fee with its native stablecoin and deducts the equivalent value in other stablecoins from the user's account. This provides flexibility for multinational corporations and users in non-dollar regions, positioning Arc as a potential global multi-currency financial settlement public chain.
• High-Performance Consensus Design: In the on-chain context, because transaction finality takes time, enterprises cannot immediately start processing an order, as subsequent automatic processing by financial/business systems might need to be reversed, incurring additional handling costs – an unacceptable scenario for real business operations. To address this, Arc employs the Malachite consensus mechanism (a Tendermint Byzantine Fault Tolerance mechanism). Under this mechanism, once a payment is confirmed and committed by two-thirds of the validators, it is instantly finalized and irreversible. Furthermore, Arc's validators are not anonymous staking nodes but a curated set of reputable institutions capable of meeting compliance requirements across different global regulatory systems. In the future, Arc will also introduce a Multi-proposer mechanism, allowing multiple validators to generate block proposals in parallel within the same time window, which are then aggregated into a single block during the consensus phase. This can further enhance the payment system's throughput and reduce latency in financial processing.
• Enterprise-Grade Privacy: To ensure the confidentiality of core business information, Arc provides enterprises with optional privacy capabilities, implemented in phases. As secure technologies like Multi-Party Computation and Homomorphic Encryption mature, Arc plans to introduce more complex privacy settings on-chain, such as privacy order books and private financial strategies, operating automatically via private on-chain contracts.

To further understand the operational logic of the Arc blockchain, we recommend reading: "Market Pulse Analysis: Circle Ventures into the Public Chain Arena – Can Its L1 Network Arc Become the First Compliant Chain for Payment Stablecoins?".

Fast forward to May this year, six months after the Arc testnet launch, Circle released the Arc blockchain whitepaper. This document further elaborates on the design logic of the ARC Token as Arc Network's native coordination asset and hints that the Arc mainnet is expected to launch this summer.

As mentioned earlier, Arc Network currently uses a PoA (Proof of Authority) mechanism, where a curated group of reputable institutional nodes handles network validation and block production. However, this model carries some centralization risk and is more suitable for the project's early launch phase. As network adoption scales, Arc Network will likely transition to a PoS mechanism. Yet, USDC, being a stablecoin, is not suitable for staking. Therefore, Circle is considering introducing a new token system – the ARC Token – as the native coordination asset for the Arc Network, responsible for coordinating the interests and behaviors of various network participants (validators, developers, users, institutions, etc.).

According to the whitepaper design, ARC holders can participate in network governance voting based on their staked weight, collectively deciding on network fee rates, inflation rates, and burn logic. Additionally, they may gain certain protocol access and interaction rights in the future. However, the whitepaper explicitly states that Arc Network's governance model will not be entirely a DAO model; institutional coordination mechanisms will be retained. For highly sensitive matters like security responses, compliance, validator onboarding, and protocol upgrades, Circle and designated institutions will primarily be responsible in the network's early stages.

Meanwhile, transaction fees paid by users using stablecoins on the Arc Network will be automatically converted into ARC Tokens. A portion of these will be distributed as rewards to validators and stakers, while another portion will be burned. Compared to traditional public chains requiring users to directly hold the native Gas token, this design might better align with the usage habits of institutions and enterprises.

For the Arc Network, the application scope of the ARC Token may expand further in the future. For instance, it could be used to build dedicated transaction channels, coordinate and manage asset flow and data interoperability between different blockchains, and support Circle Paymaster's multi-asset Gas scenarios, enabling users to pay network fees using various stablecoins.

Source: ARC: The Native Asset of the Economic OS

However, it's important to note that the ARC Token system is currently in the discussion and design phase and may undergo significant changes in the future. Furthermore, Circle has repeatedly emphasized that ARC itself is not a security or an investment product and does not represent any equity or profit rights.

On specialized blockchains like Arc Network, centered around stablecoin payments, large-scale economic activity often originates from banks, payment institutions, corporate users, and capital markets. As laws and regulations concerning stablecoins, on-chain assets, and on-chain financial activities are established and refined globally, the path for these institutions to participate in building on-chain infrastructure is becoming clearer. This trend is also altering the competitive logic of Web3 infrastructure. The era of purely competing on network performance and transaction fees is fading. Instead, the liquidity, compliance, stability, sustainability, and ecosystem extensibility of the network will become the new competitive battlegrounds.

Of course, this transformation will not happen overnight, and the future development of the Arc Network still faces several potential challenges.

For example, Arc Network's current overall architecture still retains a strong centralized character. Although Circle attempts to establish a longer-term economic coordination and governance mechanism for the network by introducing the ARC Token and gradually steering it towards PoS, this system is still in the discussion phase and not yet formally implemented. Its specific governance structure and economic model therefore carry significant uncertainty. Concurrently, the ARC Token mechanism itself introduces additional governance and security risks to the Arc Network. For instance, can the economic model's design match real network demand? Could large-scale staking by major nodes lead to a re-concentration of network governance power? These questions await further official discussion and optimization.

Furthermore, while stablecoin regulatory frameworks are gradually improving globally, specific regulations still vary significantly between countries and regions. This means Arc Network must continuously adapt to evolving compliance requirements in the future.

Currently, traditional public chains like Ethereum, Base, and Solana are aggressively expanding towards on-chain financial infrastructure, stablecoin payments, and institutional-grade applications. This can be seen as a signal of change among leading Web3 entities, including Circle. However, it remains to be seen who will ultimately succeed in building the next generation of global on-chain financial infrastructure.

Key Point Structure Diagram:

References:

[1] Introducing the ARC Whitepaper: Exploring Arc’s Native Coordination Asset

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