How Gas Works on Arc
Original author: Circle
Original translation: Sleepy.txt, BlockBeats
Editor's Note: Throughout the history of blockchain development, gas mechanisms have consistently been one of the most challenging issues for businesses and developers implementing applications. Unpredictable fees and a cost structure closely tied to cryptocurrency market price fluctuations have made it difficult for blockchain to be considered reliable infrastructure. Arc offers a systematic solution to this pain point: using USDC as the native gas price, combined with a fee smoothing algorithm and enterprise-grade accounting logic, it aims to transform blockchain usage costs into predictable USD pricing, similar to SaaS. In scenarios such as payments, fund management, and capital markets, this shift represents not only operational simplification but also a fundamental restructuring of financial infrastructure. This article will delve into the Arc Network's gas mechanism design and its potential implications for future applications.
The following is the full text:
Every type of transaction, whether swiping a credit card, sending a wire, or exchanging currency, incurs a cost for using the underlying infrastructure. These fees help cover the resources that make payments possible. Blockchains are no exception: every operation on the network requires a small transaction fee to operate. In an on-chain context, these fees are called "gas." On many major blockchains, gas fees are denominated in the blockchain's volatile native asset (e.g., ETH, SOL, etc.). The dollar cost of a transaction depends on:
How many units of gas your transaction consumes: This is the fixed amount of computational work required for your transaction, based on the specific operations it performs on the blockchain.
The protocol’s per-unit base fee: This is the price set by the network for each unit of gas, which can fluctuate depending on how congested the blockchain is at any given time.
Market price of the native token: This refers to the USD value of the blockchain’s native Gas token on the open market, which fluctuates continuously and directly affects the actual cost of Gas.
Of these factors, the token’s market price is often the most significant source of uncertainty. Its value can fluctuate dramatically between when a transaction is planned and when it actually executes—creating accounting headaches at best and levels of volatility that make blockchain impractical for many businesses at worst.
Gas fee volatility can significantly complicate accounting processes and business models, making it difficult to set consistent pricing for customers. This is why finance, payments, and enterprise teams often say, "We need predictable fees we can plan for" and "Our treasury teams can't hold volatile crypto assets to pay for gas fees."
Arc was purpose-built to remove this barrier.
Arc’s Design: USDC as Native Gas
One of Arc's most notable and important innovations is USDC, 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. Because USDC is designed to maintain a stable value, businesses don't have to worry about their blockchain operating costs rising and falling with crypto market fluctuations.
As mentioned previously, users experience fluctuations in gas fees due to changing network conditions and changes in 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 removing token price volatility from the equation, Arc enables predictable, USD-denominated fees—reducing accounting complexity and operational friction.
How Arc keeps fees low and stable
Arc doesn’t just stay in USD; it also stabilizes fees. Arc’s fee market is inspired by Ethereum’s EIP-1559, but tweaked for predictability:
Fee Smoothing: Instead of adjusting the base fee on a block-by-block basis, Arc updates the base fee using an exponentially weighted moving average of block utilization, which is constrained within strict bounds. This dampens short-term spikes so that fees don’t fluctuate wildly due to brief bursts of demand.
Bounded Base Fees: Guardrails limit the speed at which fees can move, further stabilizing long-term costs.
Throughput and Finality: Sub-second deterministic finality (powered by the Malachite consensus engine) and high throughput provide ample block space at high speeds, reducing the potential for congestion - another driver of fees on other networks.
Circle Paymaster and multi-currency support
Future roadmap projects include enhancements to Circle Paymaster that allow 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 are automatically routed through a built-in stablecoin FX engine and converted to USDC in the background), providing global businesses with local currency options without compromising fee predictability.
Think of Arc as an enterprise-grade network where gas is just another item denominated in USD. You wouldn't accept a card processor whose fees unexpectedly jump 20% due to speculative token prices; for many important use cases, we believe blockchain shouldn't work that way either. Arc eliminates this variable, allowing you to plan, price, and scale with confidence. Here's how low and predictable gas fees denominated in USDC can benefit your business:
Predictable unit economics
Finance teams need to set aside additional capital to cover the risk that by the time they replenish their native gas token holdings, the USD value of those tokens may have fluctuated significantly—meaning the cost of maintaining the same level of coverage could be several times their expected expenses. Because Arc prices each transaction in USDC and uses a smoothed moving average, the fees you approve in your operations meetings should be reflected in your book, allowing budgets and forecasts to be locked into fixed dollar amounts rather than moving targets. You can model per-transaction costs just like any other SaaS or payment rail input.
Cleaner accounting and compliance
The accounting knock-on effects can be equally significant. Every time a business pays for gas with a volatile asset, it may record a taxable disposition and may need to calculate a mark-to-market adjustment. Arc's USDC fees are designed to be treated like USD operating expenses, with no foreign exchange conversion layer and no capital gains risk. This also aligns with how finance teams already think about costs (i.e., in USD), reducing internal friction between product, finance, and treasury management.
No forced exposure to volatile assets
Treasury management policies can also be simplified. Some corporate treasuries are prohibited from holding volatile crypto assets, forcing operations teams to go through brokers or exchanges every time they need native gas tokens. With Arc, the only asset you need to hold on your balance sheet is USDC, a fiat-backed stablecoin designed to fit into most cash equivalent categories, reducing regulatory friction and counterparty risk.
Better customer user experience
Predictable gas fees unlock a smoother end-user experience. Customers no longer need to acquire separate tokens, observe price charts, or top up their volatility balances before interacting with an app. 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 feel 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 their existing tools into a familiar environment, now paired with predictable USDC gas prices. When every function call lands at a cost you can quote in USD, gas becomes less of a market risk and more of an item you can lock into your sprint budget. This provides a solid foundation for applications like:
Global Payments and Disbursements: Payroll engine and marketplace hosting can provide reliable per-transaction costs from Denver to Denmark, with long-term stable fixed-fee pricing.
Stablecoin FX and Programmatic Money Management: Automated rebalancing, arbitrage, and sweep operations can run 24/7 without pausing to repricing gas or letting gas volatility erode profits.
Capital markets workflows: DvP/PvP trades, margin calls, and collateral movements can benefit from the combination of deterministic finality and budgetable fees, so finance teams can match blockchain transactions with their ledger entries in near real time.
Because Arc is natively integrated with the broader Circle platform (such as USDC, EURC, USYC, Mint, CCTP, Gateway, Wallets, and more), enterprises can coordinate the flow of value across on-chain and off-chain systems in a single, enterprise-grade framework.
