Original Title: How Gas Works on Arc
Original Author: Circle
Original Translation: Sleepy.txt, BlockBeats
Editor's Note: Throughout the development of blockchain, the Gas mechanism has always been one of the most troublesome issues for enterprises and developers when implementing applications. The unpredictability of costs and the cost structure closely tied to the volatility of the crypto market make it difficult for blockchain to be seen as a reliable infrastructure. The emergence of Arc provides a systematic solution to this pain point: it sets USDC as the native Gas, layering a fee smoothing algorithm and enterprise-level accounting logic, attempting to transform the cost of using blockchain into a predictable dollar pricing similar to SaaS. In scenarios such as payments, fund management, and capital markets, this transformation not only simplifies operational aspects but also reconstructs the financial infrastructure. This article will delve into the design of Arc Network's Gas mechanism and its potential implications for future applications.
The following is the full content:
Every type of transaction, whether it's swiping a credit card, sending a wire transfer, or exchanging currency, incurs costs for using the underlying infrastructure. These fees help cover the resources that make payments possible. Blockchain is no exception: every operation on the network requires a small transaction fee to maintain its operation. In an on-chain environment, these fees are referred to as "Gas." On many mainstream blockchains, Gas fees are priced in the volatile native assets of the blockchain (such as ETH, SOL, etc.), and the dollar cost of a transaction depends on:
How many units of Gas your transaction consumes: This is the fixed computational workload required for your transaction, based on the specific operations it performs on the blockchain.
The base fee per unit set by the protocol: This is the price the network sets for each unit of Gas, which may fluctuate based on the congestion level of the blockchain at any given time.
The market price of the native token: This refers to the dollar value of the blockchain's native Gas token in the public market, which continuously fluctuates and directly affects the actual cost of Gas.
Among these factors, the market price of the token is often the most significant source of uncertainty. Its value may fluctuate sharply between the planned transaction time and the actual execution time—this can cause accounting troubles in the best case and create levels of volatility that make blockchain impractical for many enterprises in the worst case.
The volatility of Gas fees can significantly complicate accounting processes and business models, making it difficult to set consistent pricing for customers. This is why finance, payment, and enterprise teams often say, "We need predictable fees that can be planned" and "Our fund management team cannot hold volatile crypto assets to pay Gas fees."
Arc was specifically built to eliminate this barrier.
Arc's Design: USDC as Native Gas
One of Arc's most significant and important innovations is that USDC is the network's native Gas token. Every transaction fee is paid in USDC, a stablecoin pegged to the dollar, rather than a speculative asset. Since USDC is designed to maintain stable value, enterprises do not have to worry about their blockchain operating costs rising and falling with the volatility of the crypto market.
As mentioned earlier, users experience fluctuations in Gas fees due to changes in network conditions and the market price of Gas tokens. These variables combined can make it nearly impossible to accurately know the dollar cost of a transaction in advance.
By eliminating the volatility of token prices from the equation, Arc makes predictable, dollar-denominated fees possible—reducing accounting complexity and operational friction.
How Arc Keeps Fees Low and Stable
Arc does not just stop at dollar pricing; it also stabilizes the level of fees. The fee market of Arc is inspired by Ethereum's EIP-1559 but adjusted for predictability:
Fee Smoothing: Arc does not adjust the base fee block by block; instead, it uses an exponentially weighted moving average of block utilization to update the base fee, which is constrained within strict boundaries. This suppresses short-term spikes, so fees do not fluctuate dramatically due to brief demand surges.
Bounded Base Fee: Guardrails limit the speed at which fees can move, further stabilizing long-term costs.
Throughput and Finality: Sub-second deterministic finality (supported by the Malachite consensus engine) and high throughput provide ample block space at high speeds, reducing the likelihood of congestion—another driver of fees on other networks.
Circle Paymaster and Multi-Currency Support
Future roadmap projects include enhancements to Circle Paymaster, allowing other regulated stablecoins (such as EURC) to be used as Gas through paymaster routing (i.e., users can pay transaction fees with EURC or other assets, which will automatically be routed and converted to USDC in the background through a built-in stablecoin forex engine), providing global enterprises with local currency options without compromising fee predictability.
Imagine Arc as an enterprise-grade network where Gas is just another item priced in dollars. You wouldn’t accept a card processor where fees could unexpectedly spike by 20% due to speculative token prices; for many critical use cases, we believe blockchain shouldn’t work that way either. Arc eliminates this variable, allowing you to confidently plan, price, and scale. Here’s how low and predictable Gas fees priced in USDC can benefit your business:
Predictable Unit Economics
Finance teams need to reserve extra capital to cover risks like this: when they replenish their native Gas token holdings, the dollar value of those tokens may have fluctuated significantly—meaning the cost to maintain the same coverage level could be several times what they expected to spend. Since Arc prices each transaction in USDC and employs a smoothed moving average, the fees you approve in your operational meetings should reflect the costs on your books, allowing budgets and forecasts to lock in fixed dollar amounts rather than shifting targets. You can model the cost of each transaction just like any other SaaS or payment track input.
Cleaner Accounting and Compliance
The accounting chain effects can be equally important. Every time a business pays Gas with a volatile asset, it may record a taxable disposition and may need to calculate fair value adjustments. Arc's USDC fees are designed to be treated like dollar operating expenses, with no foreign exchange conversion layers and no capital gains risk. This also aligns with the way finance teams already think about costs (i.e., in dollars), reducing internal friction between product, finance, and fund management.
No Mandatory Exposure to Volatile Assets
Fund management policies can also become simpler. Some corporate treasury departments are prohibited from holding volatile crypto assets, forcing operational teams to go through brokers or exchanges every time they need native Gas tokens. With Arc, the only asset you need to keep on your balance sheet is USDC, a fiat-backed stablecoin designed to fit most cash equivalent categories, reducing policy friction and counterparty risk.
Better Customer User Experience
Predictable Gas fees free up a smoother end-user experience. Customers no longer need to acquire separate tokens, watch price charts, or top up volatile balances before interacting with applications. Developers can even sponsor or completely abstract fees, deducting a few cents of USDC in the background, making the "blockchain part" of in-app payments disappear, and the product feels as simple as any web or mobile service.
What This Unlocks for Builders
Arc is an open, EVM-compatible layer one. This means teams can bring existing tools into a familiar environment, now paired with predictable USDC Gas. When every function call lands at a cost you can quote in dollars, Gas is no longer a market risk warning but becomes an item you can lock into sprint budgets. This provides a solid foundation for the following applications:
Global Payments and Expenditures: Payroll engines and market custodians can offer reliable per-transaction costs from Denver to Denmark, achieving long-term stable fixed fee pricing.
Stablecoin Forex and Programmatic Fund Management: Automated rebalancing, arbitrage, and sweep operations can run 24/7 without pausing to reprice Gas or letting Gas volatility erode profits.
Capital Market Workflows: DvP/PvP transactions, margin calls, and collateral movements can benefit from the combination of deterministic finality and budgeted fees, allowing finance teams to match blockchain transactions with their ledger entries in near real-time.
As Arc is natively integrated with the broader Circle platform (such as USDC, EURC, USYC, Mint, CCTP, Gateway, Wallets, etc.), enterprises can coordinate the flow of value between on-chain and off-chain systems within a single enterprise-grade framework.
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