> ## Documentation Index
> Fetch the complete documentation index at: https://docs.arc.io/llms.txt
> Use this file to discover all available pages before exploring further.

# Stable fee design

> Arc's fee market uses EWMA-smoothed base fees denominated in USDC and minimal priority fees, keeping transaction costs predictable and resistant to short-term demand spikes.

Arc's fee market builds on [EIP-1559](https://eips.ethereum.org/EIPS/eip-1559)
but replaces per-block base fee recalculation with an exponentially weighted
moving average (EWMA) of block utilization. This smoothing mechanism ensures
that short demand spikes do not propagate into sudden fee jumps, keeping
transaction costs stable and easy to estimate. The base fee targets
approximately \$0.01 per transaction under normal conditions.

For why Arc uses USDC as its gas token, see
[Stablecoin native model](/arc/concepts/stablecoin-native-model). For runtime
parameters and RPC calls, see [Gas and fees](/arc/references/gas-and-fees).

## How EWMA fee adjustment works

Standard EIP-1559 recalculates the base fee every block based on whether the
previous block exceeded or fell short of a target gas utilization. This approach
can produce sharp fee swings when a single block fills quickly.

Arc replaces this per-block step function with an EWMA over a configurable
smoothing window. Instead of reacting fully to one block's utilization, the
protocol blends recent utilization into a running average. The base fee then
adjusts proportionally to the smoothed signal rather than the raw per-block
value.

```text theme={null}
utilization_ewma(n) = alpha * block_utilization(n) + (1 - alpha) * utilization_ewma(n - 1)

base_fee(n) = adjust(base_fee(n - 1), utilization_ewma(n), target_utilization)
# adjust() scales base_fee proportionally to (utilization_ewma / target_utilization),
# clamped to [minimum_base_fee, maximum_base_fee]
```

* `alpha` controls how quickly the average responds to new data. A smaller alpha
  means more smoothing and slower reaction to spikes.
* `target_utilization` is the equilibrium point the protocol steers toward. When
  the EWMA exceeds the target, the base fee rises; when it falls below, the base
  fee decreases.

The result is a fee curve that trends toward equilibrium gradually, making cost
estimation straightforward even during bursts of activity.

## Key parameters

| Parameter                    | Value                     | Notes                                                           |
| :--------------------------- | :------------------------ | :-------------------------------------------------------------- |
| **Base fee target**          | \~\$0.01 per transaction  | Design-time target under normal load                            |
| **Testnet minimum base fee** | 20 Gwei                   | Transactions below this threshold are rejected from the mempool |
| **Maximum base fee**         | 1e-3 USDC per gas unit    | Hard ceiling that bounds worst-case cost                        |
| **Gas throughput**           | 20 M gas/sec              | Protocol-level capacity limit                                   |
| **Smoothing method**         | EWMA of block utilization | Replaces EIP-1559 per-block recalculation                       |

<Info>
  These parameters reflect the current testnet configuration and may be adjusted
  before mainnet launch. See [Gas and fees](/arc/references/gas-and-fees) for
  the latest runtime values.
</Info>

## Priority fees

Like standard EIP-1559, Arc transactions include a priority fee (tip) in
addition to the base fee. The tip incentivizes the sequencer to include a
transaction promptly. Under normal network conditions, a minimal or zero tip is
sufficient because the base fee alone covers inclusion.

Set `maxPriorityFeePerGas` to `0` for most transactions. During periods of
sustained congestion, a small tip can signal higher urgency. Query
`eth_maxPriorityFeePerGas` on the Arc RPC for a recommended value.

## Why smoothing matters

Without smoothing, a single high-utilization block can double the base fee
instantly, and a series of empty blocks can drop it just as fast. This
volatility forces developers to build retry logic, fee-bumping heuristics, and
complex estimation strategies.

With EWMA smoothing:

* **Gradual adjustment.** Fees move in small increments, so a short burst of
  transactions does not cause a sudden price shock.
* **Bounded range.** The hard ceiling at 1e-3 USDC per gas unit ensures that
  even sustained congestion cannot push fees to extreme levels.
* **Simple estimation.** You can call `eth_gasPrice`, `eth_feeHistory`, or
  `eth_maxPriorityFeePerGas` on the Arc RPC and trust that the returned values
  will remain accurate for a reasonable submission window.

## Developer benefits

Building on Arc's stable fee design simplifies cost management and removes
common integration challenges.

<CardGroup cols={2}>
  <Card title="Predictable costs" icon="dollar-sign">
    Transaction fees target \~\$0.01, and EWMA smoothing keeps them stable. You
    can quote costs to users with confidence.
  </Card>

  <Card title="Congestion resistant" icon="gauge-high">
    Short-term demand spikes are absorbed by the smoothing window, so fees don't
    surprise your users during traffic bursts.
  </Card>

  <Card title="Enterprise ready" icon="building">
    Dollar-denominated, bounded fees mean transaction costs map directly to a
    known USDC amount. No post-hoc conversion is needed for cost tracking or
    reconciliation.
  </Card>

  <Card title="Flexible fee payment" icon="coins">
    Sponsor transactions on behalf of users through [account
    abstraction](/arc/tools/account-abstraction) or accept fees in multiple
    stablecoins without custom workarounds.
  </Card>
</CardGroup>