Why can USDC be used as Gas?

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 challenging issues for enterprises and developers when implementing applications. The unpredictability of fees and the cost structure closely tied to the volatility of the crypto market make it difficult for blockchain to be regarded as reliable infrastructure. The emergence of Arc is a systematic solution to this pain point: it designates USDC as the native Gas, adds a fee smoothing algorithm and enterprise-grade accounting logic, and attempts to transform blockchain usage costs into predictable dollar pricing, similar to SaaS. In scenarios such as payments, fund management, and capital markets, this shift not only simplifies operations but also reconstructs financial infrastructure at a fundamental level. This article will provide an in-depth analysis of the Gas mechanism design of the Arc network and its potential significance for future applications.

The full content is as follows:

Every type of transaction, whether it's swiping a credit card, sending a wire transfer, or exchanging currencies, requires a cost to use 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 keep things running. In on-chain environments, these fees are called "Gas." On many mainstream blockchains, Gas fees are denominated in the blockchain's volatile native assets (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 protocol's base fee per unit: This is the price the network sets for each unit of Gas, which may fluctuate depending on the level of congestion on 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 on the open market, which fluctuates continuously 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 fluctuate sharply between the time a transaction is planned and when it is actually executed—which, at best, causes accounting headaches and, at worst, creates a level of volatility that makes blockchain impractical for many enterprises.

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, payments, and enterprise teams often say: "We need predictable fees that we can plan for," and "Our treasury 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 notable 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 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 rising and falling with crypto market volatility.

As mentioned earlier, users experience Gas fee volatility due to changing network conditions and fluctuations in the market price of Gas tokens. These variables combined can make it nearly impossible to know the dollar cost of a transaction in advance with accuracy.

By removing token price volatility from the equation, Arc enables predictable, dollar-denominated fees—reducing accounting complexity and operational friction.

How Arc Keeps Fees Low and Stable

Arc doesn't just stop at dollar-denominated pricing; it also stabilizes the level of fees. Arc's fee market is inspired by Ethereum's EIP-1559 but is adjusted for predictability:

Fee Smoothing: Instead of adjusting the base fee block by block, Arc 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 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 likelihood of congestion—another driver of fees on other networks.

Circle Paymaster and Multi-Currency Support

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

Think of Arc as an enterprise-grade network where Gas is just another line item denominated in dollars. You wouldn't accept a card processor whose fees could unexpectedly spike 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 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 reserve extra capital to cover the risk that, 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 uses a smoothed moving average, the fees you approve in your operations meetings should be reflected on your books, allowing budgets and forecasts to be locked in at fixed dollar amounts, not moving targets. You can model per-transaction costs just like any other SaaS or payment rail input.

Cleaner Accounting and Compliance

The accounting chain reaction can be just as important. Every time a business pays Gas with a volatile asset, it may record a taxable disposal and may need to calculate mark-to-market adjustments. Arc’s USDC fees are designed to be treated like dollar operating expenses, with no FX conversion layer and no capital gains risk. This also aligns with how finance teams already think about costs (i.e., in dollars), reducing internal friction between product, finance, and treasury management.

No Forced Exposure to Volatile Assets

Treasury management policies can also become simpler. Some enterprise treasury departments 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 most cash-equivalent categories, reducing policy friction and counterparty risk.

Better Customer User Experience

Predictable Gas fees enable 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 fully abstract fees, deducting a few cents of USDC in the background, making the "blockchain part" of in-app payments disappear and making the product feel as simple as any web or mobile service.

What This Unlocks for Builders

Arc is an open, EVM-compatible Layer 1. This means teams can bring existing tools to 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 a line item you can lock into a sprint budget. This provides a solid foundation for the following applications:

Global Payments and Spending: Payroll engines and marketplace escrow can offer reliable per-transaction costs from Denver to Denmark, enabling long-term stable fixed-fee pricing.

Stablecoin FX and Programmatic Treasury Management: Automated rebalancing, arbitrage, and sweep operations can run 24/7 without pausing to reprice 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 to 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, etc.), enterprises can coordinate value flows between on-chain and off-chain systems within a single enterprise-grade framework.