a16z Talks to Circle Founder: Arc is More Than Just a Public Chain, It is the Foundation of the Machine Economy

Written by: a16z crypto
Compiled by: Luffy, Foresight News

Circle's initial goal was to bring the US dollar to the internet, allowing it to circulate anywhere. After more than a decade of deepening its efforts in this field, the company's co-founder and CEO Jeremy Allaire began to ponder: What will happen when internet users increasingly become AI?

He engaged in a dialogue with Chris Dixon and Robert Hackett to explore the underlying logic of this new machine economy and how credit, commerce, and global financial infrastructure will be affected. Below is the content of the conversation:

Why Develop a New Chain, Arc?

Robert Hackett: Today's guests are Jeremy Allaire, co-founder and CEO of Circle, which has just launched its self-developed blockchain Arc mainnet; and Chris Dixon, founding partner of a16z crypto.

Jeremy, I have known you since my time as a reporter at Fortune magazine. I have witnessed Circle's many transformations: from Bitcoin consumer business, to a payment product similar to Venmo called Circle Pay, to trading operations and the acquisition of exchanges. Ultimately, you created the globally influential stablecoin USDC. And now, you are launching this new public chain, Arc.

First, I want to ask, why does the world still need another blockchain? What is lacking in the existing infrastructure, and what can the new chain achieve that was previously impossible? What experiences along the way led you to the decision to build your own blockchain?

Jeremy Allaire: It goes back to the founding of Circle. At the end of 2012 to 2013, what attracted me to this field was the concept of programmable money, where the network itself becomes a computer that can run applications.

Our idea was to build an internet dollar protocol, akin to the "HTTP protocol of the currency domain." To achieve this goal, we needed a computer network to build higher-level protocols, scale, and ensure usability.

Our philosophy gradually solidified: to ensure that the digital dollars we issue and the accompanying protocols can run anywhere. We want USDC to be as accessible as Spotify or Netflix, where users can use it directly upon obtaining a device. As long as there is a blockchain network, digital dollars can operate normally and be easily integrated. After that, we built an interoperability layer to connect various networks and ensure the secure flow of assets.

When stablecoins first emerged, people found that they addressed the pain points of fund transfers, and the demand for non-speculative real-world use cases began to grow.

Subsequently, regulators began to scrutinize this sector, and if global financial institutions were to connect to the blockchain, the blockchain itself must meet a series of standards.

We started communicating with many institutions focused on stablecoins and their practical applications, only to find that there was no blockchain specifically designed for this upcoming mainstream era.

So we decided to build a brand new operating system and network—Arc. This infrastructure can meet high standards and gain recognition from central banks: this network can carry real funds and investment contracts.

We hope to create a network owned by a broad range of stakeholders, where users of the network are also its owners. And during the process, we clearly realized that the primary users, software deployers, and operators of this network in the future are likely to be AI.

Thus, we began to research various related issues and continue to explore. The core direction of our product design is to transition towards an intelligent agent economy, which is the background of the project.

Arc: A Compliant Financial Underlying Network for Global Multi-Party Participation

Robert Hackett: Chris, you have seen countless funding pitches for new blockchain projects. What makes you believe that the market still has room for a new public chain?

Chris Dixon: When we invest, the most important factor is the team that Jeremy has built.

I also resonate with his vision. I have mentioned in many articles and speeches that this is a new type of computer—a global financial computer, containing immense platform potential that can give rise to new applications.

Additionally, I believe Jeremy has a profound understanding of regulation and the international landscape. Currency has a strong network effect; USDC itself has significant influence, and the dollar is widely recognized globally. Arc has the opportunity to become a foundational network for global currency.

Jeremy, I want to hear about your international layout. How do you consider the complex environment of various governments and regulatory bodies?

Jeremy Allaire: The uniqueness of Arc lies in the fact that to operate network infrastructure and participate in staking validation nodes in the future, operators must meet stringent standards for operations, information security, and compliance.

Infrastructure operators must adhere to these standards and sign service level agreements to enable the network to achieve definitive settlement outcomes in a very short time. This is crucial for real fund transactions.

On the other hand, we envision a native internet economic operating system capable of supporting a complete range of economic activities. Its functions go far beyond payments; various financial contracts, economic contracts, and governance decisions can run on it.

To achieve internet-level scale, the network must have diverse geopolitical and geoeconomic distributions. The operation and governance of the infrastructure must maintain credible neutrality for all stakeholders, which is one of our commitments.

Leading institutions in global capital markets, asset management, and payment sectors, as well as large banks covering markets in Europe, America, and Asia, have already participated. This is just the beginning; we hope to attract more diverse infrastructure participants.

We look forward to a future where major geopolitical regions can operate this infrastructure, holding substantial economic rights within the network, with local leading enterprises utilizing this infrastructure. This is crucial; without a diverse ecosystem, it is challenging to achieve internet-level adoption. Tools like blockchain and distributed governance can support this goal, and this is our core driving force. Of course, everything is still in the early stages.

Moat: Stablecoin Liquidity, CCTP Cross-Chain Infrastructure

Robert Hackett: Jeremy, how do you view your moat and competitive barriers?

Jeremy Allaire: First is the stablecoin network, including USDC, euro stablecoins, and other digital assets we issue. We also have tokenized Bitcoin products and leading tokenized government bonds and money market products. USDC is undoubtedly the core of the entire system.

The more applications that connect to the network, the stronger its utility becomes. Subsequent developers will naturally choose this network because the ecosystem is rich enough to form a powerful utility flywheel.

Our quarterly stablecoin minting and redemption scale reaches $150 billion, and we connect to major global banking systems. Ample liquidity in the on-chain primary and secondary markets provides strong competitiveness. The deep underlying liquidity of platforms like Binance, Coinbase, and Hyperliquid enhances capital efficiency, benefiting other products that require efficient capital.

This is the utility network effect and liquidity network effect. In addition, there is the infrastructure moat; we have built compliant infrastructure in multiple locations worldwide, which is a high barrier to entry.

There is also interoperability infrastructure; Circle's Cross-Chain Transfer Protocol (CCTP) is currently the most widely used cross-chain protocol across all blockchains and asset classes. Its popularity is due to USDC being the largest digital currency flowing across networks.

A major highlight of Arc is that any asset issued on Arc, whether tokenized equity, stablecoins, or tokenized credit products, can leverage CCTP's transfer capabilities.

In simple terms, we have built a highway for value transfer, where previously only USDC could travel. Now, all asset issuers can use this high-speed network to share interoperability and liquidity.

The stablecoin market is dominated by leading players, but it is not a monopoly. As the market scale grows from hundreds of billions to trillions of dollars, multiple networks will exist.

Returning to Arc itself, I believe the industry is entering a new stage. In my view, blockchain is essentially an economic operating system that attracts developers and assets to settle.

This sector still has vast space; currently, no single entity firmly occupies developers' minds. Compared to traditional internet platforms, the number of active developers on all public chains is very small, and the industry is still in its infancy. Therefore, my judgment is that no one has an absolute moat.

Additionally, the core participants in the future ecosystem will be AI developing software. Behind AI, there may be humans, or there may be scenarios where AI autonomously develops software; AI will act as an intermediary to complete various economic tasks.

AI + Blockchain, Giving Rise to New Credit and Economic Models

Chris Dixon: I believe that in the next 10 to 20 years, the digital economy landscape will be restructured, and the rise of high-performance blockchains (like Arc) coincides perfectly with this time window. I tend to use the framework of "physical applications" and "native applications" to understand the industry. In the early stages of new technology, people merely port existing scenarios onto the platform, such as trading and human payments.

But in a few years, the most exciting moments will arrive: developers will begin to truly unleash their imagination and create entirely new things.

Jeremy Allaire: I completely agree. We hope to provide a fertile ground for developers and entrepreneurs to innovate freely.

Credit is one example. The combination of a brand new blockchain operating system, fully reserved digital dollar infrastructure, and AI can create new credit tools, where both fund providers and demanders can be humans or machines. This type of credit market will resemble an advertising bidding platform rather than the traditional model of packaging bonds for sale.

Market structure, unit economic models, distribution patterns, and coverage will all change fundamentally. Tokenized real-world assets (RWA) have already allowed more people to participate in equity investments, giving assets more utility; we have already seen early signs of this.

Robert Hackett: Jeremy, what is the most unusual project you have seen being built on Arc by developers?

Jeremy Allaire: I recently saw a project called Fly Brain; I am not clear about the background of the development team. The project compiles all neural information from a fruit fly's brain and its real computational rules into 16MB of bytecode to run on Arc.

Developers use AI to build an interactive layer, and these "fruit fly brains" evolve and interact autonomously within the network. I haven't studied its token incentive mechanism yet, so I'm unsure of its design purpose.

My first reaction was, what is this even for? I even asked on X. The project comes with a lot of explanations, claiming it has the potential to aid scientific breakthroughs; of course, it could also just be a gimmick. But this project itself represents a trend: when AI combines with such computer networks and economic mechanisms, people will begin to attempt various imaginative innovations.

Robert Hackett: The fruit fly brain network on Arc gives a new meaning to "agent clusters."

Jeremy Allaire: There is also another project about to launch on Arc, specifically dealing with arbitration mechanisms for AI work.

This mechanism can extend from AI jurors and AI arbitrators to human arbitrators, accompanied by a staking security model. The original design is to address scenarios where AI hires AI or humans hire AI to complete tasks; when disputes arise, an arbitration mechanism is needed, along with rules for fund custody and payment release.

Chris Dixon: In a sense, blockchain can hedge against the centralization trend of AI.

Machines Become Major Participants in the Internet

Robert Hackett: Chris, you wrote "Read Write Own" a few years ago, when AI was still in its infancy. How have your thoughts changed since then?

Chris Dixon: In fact, the book discusses AI extensively, listing it as one of the core directions. My core argument is that while AI is powerful, it has an inherent tendency towards centralization—large companies with abundant capital and resources will form significant advantages. Blockchain can counterbalance this trend to some extent.

Open source is crucial; it is the most inclusive trend in the history of technology, with Linux being the best example. Blockchain is similar to open source; it is an open service that provides developers with a fair underlying environment, characterized by low fees and global accessibility.

Robert Hackett: Please depict the scene five years from now. What changes will occur in the global financial system under the fusion of these new technologies?

Jeremy Allaire: To be honest, at this stage, no one can provide a definitive answer. The speed of technological iteration has reached its peak in human history.

But I believe that in the coming years, a large amount of intellectual work and creative work, as well as various economic transactions and value exchanges, will be dominated by AI agents. This is the machine economy, and this infrastructure will support its realization. At that time, the scale of economic output will far exceed the present, and the number of products and services available globally will increase by several orders of magnitude. This is the world I envision five years from now.

Chris Dixon: As Jeremy said, many future scenarios are hard to imagine, but the trend direction is clear. The vast majority of participants in the internet will likely be machines. When these machines engage in activities, they inherently require economic capabilities, which is what I refer to as the network of the machine age.

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