Arc is the layer 1 blockchain designed by Circle. It’s purpose-built to support real-world financial flows (payments, currency exchange, lending etc.) with stablecoin fees, sub-second finality, and future opt-in privacy built directly into the protocol.
At Cycles, we’re building an open clearing network for on-chain finance. The protocol maps financial obligations between participants, represents them in a shared graph, and resolves them in the most efficient way possible to clear the maximum amount of debt for the greatest number of participants using the least amount of liquidity. Cycles Pay and Cycles Prime are the first of many applications that will plug into a shared clearing graph on Arc.
Why Arc
Cycles Pay is the first private payment app for businesses. We’re building it so SMEs and freelancers can issue and receive invoices, pay employees and counterparties, and earn yield without exposing any sensitive financial information. Cycles Pay has been in public beta on Neutron for about a month, and has seen about 20,000 email signups and 3,500 full wallet setups. Around 20 businesses are also actively using the app and sending invoices in our private beta.
Speed is key to a good payment experience, and Arc delivers on that front. It is capable of sub-second block times and over 3,000 transactions per second, with deterministic finality in under 350 milliseconds, using a geographically distributed set of validators. This is designed from the ground up for the financial use cases we care about. Unlike most blockchains where finality is probabilistic and subject to reorgs, a transaction on Arc is either unconfirmed or it is 100% final, no in-between (which is important for payments).
Another major reason for our decision is Circle’s existing stablecoin network. USDC is already integrated in Cycles Pay and nearly every on-chain payment app. Arc is optimized for the USDC ecosystem and holders, with a compliance-first approach. For us, that means building on infrastructure that businesses can trust. Arc also features USDC-denominated gas and integrations with all the offramps, wallets, and cross-chain liquidity.
Since we’re building a clearing network, integrations are everything: the more businesses sending and receiving through connected applications, the more obligations flow through the graph, and the more powerful clearing becomes. Many of the applications that will launch on Arc will be purpose-built fintech and payment platforms, perfect for growing a clearing network.
A big reason for Cycles Pay’s early success is privacy. Businesses can’t operate on a public ledger. Exposing transaction amounts, payment frequencies, and counterparty relationships gives competitors information they shouldn’t have. On Neutron, we built our own privacy stack, and we’ll be porting that to Arc initially. But Arc is also building privacy directly into the network. When ready, we’ll transition to Arc’s solution, which will allow us to offload the maintenance burden of running our own privacy stack, and redirect that engineering focus toward clearing, credit, and other features.
Everything we’ve described above is just as important for Cycles Prime as it is for Pay. Prime is our clearing product for large financial institutions: crypto exchanges, prime brokers, market makers, and lending firms that settle large volumes with the same counterparties repeatedly. Prime reduces the liquidity those institutions need to hold by identifying multilateral netting opportunities across their settlement obligations, freeing up capital that would otherwise sit idle. We’re currently running a pilot for Prime with our anchor partners FalconX and Lynq, two of the most well-known players in digital assets. If you represent an institution with significant bilateral settlement flows and want to learn more, reach out to us at prime@cycles.money.
Lastly, we have a high level of trust in the Arc team. Cycles was incubated by Informal Systems, the same company that built Malachite, the high-performance consensus engine that powers Arc. Cycles moving to Arc means we’ll be deploying on infrastructure that is being developed by our ex-colleagues, and working closely with them once again.
It should be noted that we’re migrating to Arc for the reasons laid out above (throughput, compliance, payment ecosystem, the privacy roadmap), not because we’re done with Cosmos. We’ll continue using the Cosmos tech extensively and we’ll continue to interoperate with Cosmos chains. Arc uses a Tendermint-based consensus, the same that powers the Cosmos ecosystem. Savings accounts in Cycles Pay are powered by Hydro. Hydro will launch an outpost on Arc to service the depositors, but its core contracts will be migrating to the Cosmos Hub after Neutron enters long term maintenance mode.
What’s next
The participants of the Cycles Pay beta have provided us with incredible feedback, which we’ve used to improve the app while it was still on Neutron, and ensure that the version that launches on Arc provides a delightful user experience. We’re grateful to everyone that has helped us out by testing the app, submitting feedback, and reporting bugs. The product has onboarded real businesses, handled actual payments, and is now ready for Arc. We thank the Neutron team for all of their support since we started building Cycles. Launching on Neutron gave us access to a reliable CosmWasm chain at exactly the right time. Transactions were fast, the chain worked smoothly throughout our beta, and the team was professional and responsive throughout.
For current beta users, if you still have funds on Neutron, the app will soon prompt you to bridge them over to Arc. The process will be simple, and the app will guide you through it. If you’ve already moved your funds or are starting a fresh account, the app will soon start using Arc by default. All points earned during the Neutron beta will also be transferred to Arc, with bonus points added as a thank you for participating early. The private beta for businesses remains open until we launch on Arc. If your company wants to start using Cycles Pay ahead of mainnet, reach out at pay@cycles.money.
Our new EVM contracts are currently being audited, and we intend to be live on Arc on day one of mainnet, with a production-ready product and customer base. The clearing network we’ve been building needed the right infrastructure to reach its potential. That infrastructure is Arc and we’re excited to take this next step.