Why Circle, Stripe ditch Ethereum for new Layer-1 enterprise-grade protocols

• Circle and Stripe look beyond Ethereum, announcing plans to build their own Layer-1 blockchain protocols.
• Circle's Arc Layer-1 blockchain protocol is designed to offer enterprise-grade stablecoin payments, currency and capital markets.
• Stripe's Tempo, in partnership with Paradigm, focuses on high-performance payments stablecoin infrastructure.

Circle, the issuer of the second-largest stablecoin, USDC, and Stripe, an Irish-American financial services and software as a service (SaaS) provider, have both announced plans to build their own Layer-1 blockchain protocols, seemingly ditching the largest smart contracts protocol, Ethereum (ETH).

Circle's Arc protocol, unveiled during the company's first earnings release since its Initial Public Offering (IPO) in June, is designed to support stablecoin applications, currency payments, as well as capital markets. 

On the other hand, Stripe's Tempo protocol is a high-performance, payments-focused blockchain that will be developed in collaboration with crypto venture capital firm Paradigm, according to Fortune Crypto.

Why Circle, Stripe snubbed Ethereum

Ethereum (ETH) is the largest Layer-1 blockchain for smart contracts, boasting a history of uninterrupted operation since its inception. Ethereum has, over the years, become a household name for enterprise-grade smart contracts, boasting large and active developer communities. 

Ethereum's transition to a Proof-of-Stake (PoS) consensus mechanism cemented the protocol's support for Decentralized Applications (dApps), with ongoing scalability enhancement making it a leading choice for businesses eyeing expansion into Decentralised Finance (DeFi).

Despite the Ethereum blockchain's capabilities, Circle and Stripe prefer to build their Layer-1 protocols from the ground up, raising many questions among crypto enthusiasts. 

However, according to Barry Plunkett, co-CEO of Interchain Labs, the decision to steer clear of Ethereum, despite its advantages, is primarily to ensure control while betting on themselves.

"Building a Layer-1 is the best way to do that. Not to mention that open, transparent Layer-1s give these companies a great balance of control and connectivity. Interoperability between Layer-2s and other chains like Solana relies on third parties, and often struggles from finality issues due to fraud/Zk proving windows and Ethereum's slow finality," Plunkett told FXStreet.

Layer-1 blockchain protocols ensure transaction settlement happens in real-time and "deterministically," which, when combined with the necessary know your customer (KYC) and anti-money laundering (AML) guidelines, means compliant-first financial services.

"Thanks to the Circle IPO and coming regulation, they see stablecoins as a powerful and safe technology that can help them cut costs, streamline operations, and earn more on their cash reserves or customer deposits," Plunkett.

Stripe's Tempo's details remain vague, as shared by Crypto Fortune, with more information expected in due time. However, Circle's Arc will be an Ethereum Virtual Machine (EVM)-compatible blockchain utilizing USDC as the native gas fees token. 

Arc will be integrated across Circle's product suite and services. Interoperability with the company's new and existing partner blockchains would ensure seamless adoption ahead of the protocol's public launch this fall.