Original Article Title: How Gas Works on Arc

Original Article Author: Circle

Original Article Translation: Sleepy.txt, BlockBeats

Editor's Note: Throughout the evolution of blockchain, the Gas mechanism has always been one of the most challenging issues for businesses and developers when implementing applications. The unpredictability of fees, the cost structure closely tied to cryptocurrency market price volatility, make it difficult for blockchain to be seen as reliable infrastructure. The emergence of Arc is a systematic solution to this pain point: it designates USDC as the native Gas, overlays a fee smoothing algorithm and enterprise-grade accounting logic, attempting to transform the blockchain usage cost into a predictably priced dollar amount similar to SaaS. In scenarios such as payments, fund management, and capital markets, this transformation not only signifies operational simplification but also a restructuring at the financial infrastructure level. This article will delve into the Gas mechanism design of the Arc network and its potential implications for future applications.

The following is the full article content:

Every type of transaction, whether it's swiping a credit card, sending a wire transfer, or exchanging currencies, requires a cost to utilize the underlying infrastructure. These fees help cover the resources that make the payment possible. Blockchain is no exception: every operation on the network requires a small transaction fee to sustain its operation. In the on-chain environment, these fees are referred to as "Gas." On many mainstream blockchains, Gas fees are priced in the native volatile asset of the blockchain (such as ETH, SOL, etc.), and the dollar cost of a transaction depends on:

How much Gas your transaction consumes: This is the fixed computational work that your transaction requires, based on the specific operation it performs on the blockchain.

The protocol's base fee per unit: This is the price the network sets for each Gas unit, which may fluctuate based on the blockchain's congestion levels at any given time.

The market price of the native token: This refers to the dollar value of the blockchain's native Gas token on the open market, which continually fluctuates and directly affects the actual cost of Gas.

Among these factors, the market price of the token is usually the most significant source of uncertainty. Its value can sharply fluctuate between the time of transaction planning and actual execution—this, at best, can cause accounting difficulties and, at worst, can introduce a level of volatility that is impractical for many businesses to handle.

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 financial, payment, and enterprise teams often say, "We need predictable fees that we can plan for," and "Our treasury team cannot hold volatile crypto assets to pay Gas fees."

The Arc was specifically built to eliminate this barrier.

Arc Design: USDC as Native Gas

One of the most significant and important innovations of Arc is that USDC is the network's native Gas token. Every transaction fee is paid in USDC, a stablecoin pegged to the US dollar, rather than a speculative asset. Since USDC is designed to maintain a stable value, enterprises do not have to worry about their blockchain operating costs fluctuating with the crypto market.

As mentioned earlier, users experience fee volatility due to network conditions and Gas token price fluctuations. These variables together can make it nearly impossible to accurately predict the dollar cost of a transaction in advance.

By eliminating token price volatility from the equation, Arc makes predictable, dollar-denominated fees possible, reducing accounting complexities and operational friction.

How Arc Maintains Low and Stable Fees

Arc goes beyond just dollar pricing; it also stabilizes the level of fees. Inspired by Ethereum's EIP-1559, Arc's fee market has been adjusted for predictability:

Fee Smoothing: Arc does not adjust the base fee per block; instead, it updates the base fee using an exponentially weighted moving average of block utilization, which is bounded within strict limits. This suppresses short-term spikes, ensuring fees do not fluctuate sharply due to brief demand surges.

Bounded Base Fee: Fences limit how quickly fees 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 network fees.

Circle Paymaster and Multi-Currency Support

Future roadmap initiatives include enhancements to the Circle Paymaster, allowing other regulated stablecoins (such as EURC) to be used as Gas through the paymaster routing (meaning users can pay transaction fees in EURC or other assets, which will automatically be routed and converted to USDC in the background via the built-in stablecoin FX engine), offering global enterprises local currency options without compromising fee predictability.

Imagine Arc as an enterprise-grade network, where Gas is just another item priced in US dollars. You wouldn't accept a processing fee that unexpectedly surged by 20% due to the speculative token price; for many critical use cases, we believe the blockchain shouldn't operate that way either. Arc removes this variable, allowing you to confidently plan, price, and scale. Here's how low-cost and predictable Gas fees priced in USDC can benefit your business:

Predictable Unit Economics

Finance teams need to allocate extra capital to cover such risks: when replenishing their native Gas token holdings, the dollar value of these tokens may have significantly fluctuated—meaning the cost of maintaining the same coverage level could be several times what they anticipated spending. Since Arc prices each transaction in USDC and uses a smoothed moving average, the fees you approve at an operational meeting should reflect on your ledger, allowing budgets and forecasts to lock in at a fixed dollar amount rather than a moving target. You can model transaction costs like any other SaaS or payment track input.

Cleaner Accounting and Compliance

The accounting cascading effect could be equally significant. Every time a business pays Gas with a volatile asset, they may need to record a taxable event and potentially calculate adjustments based on market value. Arc's USDC fees are designed to be treated like dollar operational expenses, without a currency conversion layer, and no capital gain risk. This also aligns with how finance teams are already thinking about costs (i.e., in dollars), reducing internal friction among product, finance, and treasury management.

No Forced Exposure to Volatile Assets

Financial management policies can also become simpler. Some corporate treasury departments are prohibited from holding volatile crypto assets, forcing the operations team to go through a broker or exchange every time they need the native Gas token. With Arc, the only asset you need to hold on your balance sheet is USDC, a fiat-backed stablecoin designed to fit most cash equivalents categories, reducing policy friction and counterparty risk.

Enhanced Customer User Experience

Predictable Gas fees unlock a smoother end-user experience. Customers no longer need to acquire separate tokens, watch price charts, or top up volatile balances before interacting with the application. Developers can even sponsor or entirely abstract fees, deducting a few cents' worth of USDC in the background, making the "blockchain part" of in-app payments disappear, making the product feel as straightforward as any web or mobile service.

What This Unleashes for Builders

The Arc is an open, EVM-compatible Layer 1. 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 alarm but something you can lock into project sprint budget. This provides a solid foundation for the following applications:

Global Payments and Spending: Payroll engines and market custodians can provide a reliable per-transaction cost from Denver to Denmark, enabling long-term stable fixed-fee pricing.

Stablecoin Forex and Programmatic Fund Management: Automated rebalancing, arbitrage, and sweep operations can run 24/7 without pausing for Gas repricing or letting Gas volatility erode profits.

Capital Market Workflows: DvP/PvP trades, margin calls, and collateral movements can benefit from the culmination of deterministic finality and predictable cost, allowing finance teams to near-real-time reconcile blockchain transactions with their ledger entries.

Because Arc natively integrates with the wider 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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