This is not a competition of speed and functionality, but a re-selection between "open protocols" and "branded rails."

Author: Charlie

Two stablecoin Layer 1s shook the entire crypto and fintech world in one day.

Stripe's "Tempo" was revealed from stealth mode, while Circle officially announced "Arc" in the rhythm of its financial report.

On the surface, both are public chains optimized for payments.

But the underlying logic is completely different: one is a payment service provider that controls the distribution capabilities of merchants and developers, while the other is the issuer of USDC, attempting to upgrade a stablecoin into a network.

The Battle of L1 and L2

First, let's answer the most straightforward question: why not learn from Coinbase (Base) or plan your own L2 like Robinhood?

If your advantage lies in distribution, in "one-click migration" of a massive existing user base and merchants onto the chain, then L2 is the most straightforward solution.

Inheriting Ethereum's security and tool ecosystem, launching quickly, and also gaining the benefits of sequencer economics.

The rise of Base is not technically stunning; the key lies in Coinbase's traffic entry and application integration. This methodology has already been validated.

So why are Stripe and Circle both talking about L1?

Because "payment chains" are becoming an independent track.

A group of L1s centered around Tether (Stable and Plasma) is pushing a narrative: stablecoins need a native, payment-oriented foundation—stablecoins as gas, predictable fees, sub-second settlement—rather than always being "guests" residing on general-purpose public chains.

The pressure on Circle is evident: if competitors' dollar stablecoins start binding their own settlement layers, USDC cannot forever be just "a token"; it must also become "that rail."

Interpreting Circle

Zooming in, Circle's actions are not simply "defensive."

Arc and the Circle Payments Network (CPN) are working in the same direction, more like moving Visa's "network of networks" strategy onto the chain.

Open, EVM-compatible, USDC-native, focused on payments and foreign exchange, and also preparing for capital market scenarios.

Its core lies in a strategic concession: if Circle chooses to give more front-end revenue to issuing/distributing partners, taking only a thin network-level fee in exchange for stronger network externalities.

This is precisely the winning strategy of card organizations in the past: lower fees, first spread, win trust, and lay down endpoints.

In this lens, "Arc vs Stable/Plasma" is more critical than "Circle vs Coinbase."

If Tether's payment chain establishes "stablecoin native + low-friction payment experience" as the industry standard, Circle cannot merely be a bridge to others' rails; it must have a truly reliable track of its own.

At the same time, openness is not just a slogan: the distribution and threshold of notarization nodes, the public nature of developer tools, and the ease of cross-chain and exit determine whether Arc is "public infrastructure" or just a rebranded proprietary channel.

Otherwise, it will fall into the deadlock of "decentralization—scalability—re-centralization."

Interpreting Stripe

Returning to Stripe, whether Tempo is suitable for L1 depends on whether it is "truly open."

If Tempo is fully public, minimally permissive, EVM-compatible, and natively interoperable, Stripe can turn its distribution power into a cold-start engine for a public network.

Not building a "merchant garden," but lighting up a public road that is fair to all participants.

Conversely, if governance, validation, and bridging are closely tied to Stripe itself, the ecosystem will soon raise concerns about dependency risks: what is a "shortcut" today may become an unavoidable "toll booth" tomorrow.

Visa has long provided the industry with a textbook: to establish universal trust, one must first achieve interoperability to create brand value.

Therefore, the judgment of "who should do L1, who is more suitable for L2" corresponds to the business model.

For issuers like Circle, moving to the network layer is inherently reasonable.

USDC as gas, optional privacy, deterministic settlement, and built-in FX are attractive for cross-border B2B, platform-type merchants, and certain capital market workflows; competitive pressure also forces it to quickly convert "scale" into "network power."

For PSPs like Stripe, having already grasped the "last mile," a Layer 2 is often the better solution.

Carrying less governance and security burden of an L1, while enjoying the composability and developer goodwill of a Layer 2; unless Tempo writes "openness" into its system and technology from day one.

Offense vs Defense

There is a popular judgment in the market regarding the L1s of the two companies: Stripe is on the offense, while Circle is on the defense.

This judgment is intuitively correct but not complete.

Stripe can indeed leverage its distribution advantage to compress cold-start costs and light up demand at a command; Circle indeed does not control the end-user, with activities scattered across multiple chains and partners.

But if we view Arc + CPN as the on-chain version of the "Visa methodology," Circle is more like rewriting the rules of the game using a network strategy.

Commoditizing the peripheral links and standardizing the core settlement layer.

Even if the bulk of front-end revenue is given to issuers, exchanges, or PSPs, it must yield a larger network surface.

In this way, it does not need to chase the volume of Base but rather redefine its own chessboard.

The real systemic risk is "fragmentation disguised as progress."

If every large company builds a "semi-open" payment chain, we will return to the era of dedicated networks before the internet.

Barely interoperable through adapters, with high costs and poor resilience.

The criteria should not be TPS, but: is it reliably open; is it easy to exit; is it equally friendly to "non-partners"?

Whether it can scale without sacrificing the openness of the protocol is the key to breaking free from the deadlock of "decentralization—scalability—re-centralization."

On the execution level, here are a few "hard indicators" recommended for both companies.

For Circle: pull up the public test network according to the rhythm; refine the process of "USDC as gas" serving real merchants to the point where it can be used without training; publish transparent, externally participatory validation node standards; ensure CPN clearly maintains a multi-chain principle to avoid short-sighted incentives that "redirect traffic to its own chain."

For Stripe: either pivot to L2 like Celo, or push the openness of Tempo to the extreme: introduce external validators early, open-source the client and key modules, decouple chain-level governance from the company organization, and treat "network of networks" as a fundamental principle rather than a market slogan.

Distribution still determines speed, but it cannot come at the expense of the protocol commons.

Conclusion

This is not a competition of speed and functionality, but a re-selection between "open protocols" and "branded rails."

Circle's path resembles an "offensive" cloaked in "defense"; if Stripe wants to do L1, it must make openness a structural commitment, or the smartest developers will vote with their feet.

What truly matters is not who first shouts a higher TPS, but who can establish universal trust across entities while maintaining composability.

This is the correct answer to "scaling without sacrificing the openness of the protocol."

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