Arc: Bringing the offchain onchain

Transcript

Hey. How's it going? Um My name is Drake Reading. I work at Circle. I am senior manager of the Arc ecosystem. Arc is the new layer one blockchain launched by Circle. Fully EVM compatible, USDC is gas, permissionless to build on, permissioned validator set. I was getting lunch with some friends recently and I mentioned to them that I was going to be speaking in the main stage at a crypto conference. Um those friends jokingly asked me if I was going to be announcing the new iPhone. Uh much at my expense, good laughs were had.

Um I can tell you I'm not doing that today. I am certainly not Steve Jobs. I definitely don't have some revolutionary new hardware device to present to you today. So, uh temper expectations. Um what I do have is what I think, you know, is is we're we're fast approaching what I think might be the iPhone moment for DeFi though. Um and that conversation was great framing for me to start thinking about how do we get to the iPhone moment for DeFi? Where are we at today? What's missing? How does this compare to recent technology cycles and launches, right? Um So, that's really kind of how I want to

frame today's conversation and and how I think that Arc, um you know, might be part of this seminal sort of moment where we really start to hit the mainstream in DeFi and how the design decisions we're making are going to enable tokenized assets, DeFi protocols, open source code uh to enable the next generation of traditional finance to come on chain today. So, where are we at right now? This we might call sort of the BlackBerry moment of DeFi, I think.

We've gotten very clear there's some product market fit around borrow lend protocols, trade swap um and vault infrastructure, right? These are the on chain primitives that I think everyone in crypto is quite excited about right now. Um And increasingly are the focus of conferences like this, right? Um you know, previously uh I feel like I I've been at ECC before and and other conferences, there there really was like a plethora of infrastructure for infrastructure coming out, right? Um we we heard a lot of about these very hyped launches. These things came out and they were not ready for prime time, right? Um there's a lot of kind of cheap games you can play in crypto to

launch new protocols and primitives. And uh you know, DeFi was getting built on top of these things that really were not any kind of serious backbone for um the type of activity that the, you know, hundred trillion dollar plus financial sector is is built for, right? Um I think there's analogies to BlackBerries to uh you know, if anybody remembers the the the LG flip phones, the chocolates that were coming out, you know, it was super hot in uh in 2008. So, 20 years in here, I think uh to to crypto, I think that uh we're kind of ready for this next uh era

to just get started with. And so, you know, we we've learned where uh DeFi works and where it doesn't. And I think where DeFi is really really a new unlock is this borrow lend vault trade swap use case, right? Um disintermediate banks direct access to pools and other users to borrow, lend, and earn yield ultimately on all sorts of assets, right? Um this goes beyond native tokens, this goes into stablecoins. Obviously, USDC is a huge part of the launch of Arc. And also tokenized real world assets. So, we'll talk about kind of how all of that fits in to this existing moment.

Um So, last couple years we've had all these L2s launch, we've had, you know, these very very uh permissioned chains launch where validators don't actually validate transactions. Uh assets are value represented instead of, you know, real on chain um token tokenized coins. And I think that we now are at a moment with Arc where we can bring the best of both worlds to the new chain we're launching.

What kind of features do we think makes this important for right now? Um first and foremost, EVM compatibility. We're here at ECC. I would be uh very would be very remiss of me to not talk to developers first and foremost, right? The existing applications you're building on any other chain in crypto, you can easily port over. We're fully EVM compatible, right? Um We think that EVM is just it this is the source of of all development, of all serious protocols, of all serious activity happening on chain today. So, we're very excited to support the Ethereum uh protocol with our own EVM implementation. Um On top of the EVM components and compatibility, uh we got very opinionated about what the next

generation of blockchains might look like and the kind of features that institutions enterprises payments web two companies are going to look for. So, we start with um our consensus and execution model. Um we're using Malachite for consensus, which we think is really interesting uh and helps contribute to what we call deterministic sub-second finality. So, um the feedback that we've gotten from a lot of institutions is if I move my activity onto um maybe like a single sequencer uh layer two or a fully permissioned uh chain how do I know that the operator of that is going to be a good faith actor? And of course, there's guardrails that you can build around that and uh there's challenge periods, ZK proofs, etc. But um this is something

that that we at Circle we're hearing feedback on all the time. So, Malachite consensus, Wrath execution. It's cheap, it's fast, and it's USDC for gas. That's our next point. So, um a lot of the enterprises that Circle has been working with over the last few years said, you know, we get the stablecoin story but uh this is just too this is too clunky, this is too complicated. I can't get uh the rest of my organization comfortable with actually using native tokens for some of these things, right? So, uh we like to say that we're CFO friendly.

Uh rather than having to custody a native protocol token to uh use for gas, on chain activity, etc., it's USDC. Cheap fast um and again, easy to use. So, you know, some some publicly traded corporations and and large enterprises really don't feel comfortable holding tokens yet today still. So, we think that will change over time, but for now, USDC as gas is a great starting point. And all of the work that we've built around using USDC as the backbone um for a lot of the activity happening on chain across over 30 different chains today have been informing our own road map for how we optimize uh activity uh on on Arc here.

The next one up is uh what we kind of call like our asset menu. So, you know, I'll pause for a second. So, so Arc we're we're positioning this as the economic operating system for the internet. Um this is the kind of pitch that we're giving to again, just uh large institutions across the planet right now. And uh with this OS framing and with this kind of iPhone backdrop I think that crypto does not have a very good app store today, right? We have we have dApps, of course, on different chains, but I think part of our vision with Arc is having as much uh activity and as many assets as possible.

Um every enterprise we work with, we want to help them build their own custom um experience for earn, uh for borrow lend, and for trade swap, you know, these these kind of critical DeFi use cases that we we've established. And so, part of that means that we're going to uh stay neutral and work with everyone, right? Uh we want to have every asset, every vault every wrapper, every protocol uh all kind of available on Arc so everyone can bring their existing apps into uh our own app store here and build fully custom, unique experiences for uh themselves, for their own balance sheet assets, and for their customers.

So, deep bench of assets here. Um Last thing is the validator set. So, like I mentioned, we are we did pursue a permissioned validator set and I think that this is something that really really matters for institutions and enterprises. And we think again that there is a happy medium between fully closed source um chain where validators don't actually produce any uh blocks uh and are really more of an access point versus uh working with high quality enterprises and institutions to uh actually secure our blockchain, produce blocks, right?

And and be part of the core consensus. So, um we'll be launching with a permissioned set. Today, Circle is operating all of our testnet nodes. Uh when we go to mainnet, we'll be including a handful of some of the largest enterprises uh around as part of this uh new economic OS for the internet. So, that includes names like Visa, who has publicly announced that they will be operating a validator node on Arc. Um and we're very excited to share more names soon. We think that this uh accountability around a smaller set is uh validator set is ultimately uh another tool for how we get more comfortable with moving the real opportunity on chain, which is everything else that is not touching a blockchain today, right?

Um so, what does that look like? I mean Here's some numbers. There's about $100 billion in total value locked in DeFi protocols today, right? Um the entire crypto token ETP and ETF market is only about 125 billion. Um what we find a lot more interesting are trillion-dollar opportunities and 10 to 100 trillion-dollar opportunities. Here's some examples. Money market funds, over $8 trillion today. None of this is touching uh a chain today, right? We have We have some early uh issuers, you know, touching starting to do this, doing some tokenized representations, but it really is not touching anywhere close to this overall

opportunity and just the demand that exists from the rest of the off-chain economy to have access to unique sources of yield uh and differentiated product experiences around it that they can, again, hold for themselves or offer to their customers. $2 trillion in fixed-income ETFs, right? Uh over 10 trillion in repo. Uh repurchase agreements between banks are critical for helping the off-chain economy meet their short-term short-term financing needs. So, we think that this is an area that's super interesting and um hopefully more to come in the future on that.

So, back to the moment, right? I think that we've we've seen I think people in crypto are tired right now, right? I think I think when you come to these conferences now, um there's real demand for real products that work and solve actual customer needs. Um we're hoping that with Arc we can help step in and fulfill that, right? And like we said, connecting this opportunity off-chain that absolutely dwarfs the existing on-chain economy, um but using first principles, best design principles, best-in-class execution that we've learned from the operation of other blockchains today, right? USDC is issued. I think we're the most widely issued asset in crypto across chains with over, you know, 30 different um protocols supporting us today. So, this

is not uh about, you know, minimizing the other work. It's just about using some of these design principles in conversation and the feedback that we've learned from our enterprise go-to-market function to build a truly unique experience and kind of have this iPhone moment right? One-click earn opportunities. Totally custom stack. Um you know, the the support of a a publicly traded US company like Circle to help you do anything that you ever wanted to do on chain and on Arc. Last thing I I guess you know, like we said, this this is the

this is the I what we hope is the iPhone moment. Um >> [sighs] >> We are on testnet and we're going to mainnet soon. And so, if anything I've said today was off track, um we really want to work with the builders and the developers out here and get you guys building on Arc the same way that iPhone got everyone to port over to iOS, right? Um if what I said today doesn't resonate and you're a builder, you are an institution looking to go on chain for the first time, or you're another protocol trying to find potentially find a new home, uh we'd love to talk with you and prove uh why we think that this is going to be the last blockchain deployment that you'll ever need.

Thank you for coming out.