Tokenomics

Token Identity

Token Functionality

$ARC is designed as a utility token within the ARC ecosystem, serving as the foundational economic layer for a decentralized network of AI-driven projects. The lynchpin of $ARC's value proposition is its role in powering a decentralized ecosystem where projects leverage ARC's Matrix encryption and framework, enabling secure, privacy-preserving AI computations through homomorphic encryption techniques.

The functional design of ARC Token is comparable to established utility-token ecosystems such as SingularityNET (AGIX), serving as an access and transaction medium within a technology platform rather than as a financial instrument – thereby enhancing network efficiency and adoption without introducing investment characteristics.

Token Utility ($ARC v2)

Provides gated access to advanced solutions built on ARC’s Privacy-First AI technology, with a primary emphasis on the Matrix framework. Matrix employs homomorphic encryption via the CKKS scheme, enabling secure computations on encrypted data without decryption, thus preserving privacy in AI workflows. This allows developers and enterprises to integrate zero-trust, end-to-end encrypted AI models while maintaining compliance with standards like GDPR and HIPAA. Comparable to Ocean Protocol's OCEAN token, which provides access to decentralized data sharing, $ARC unlocks Matrix-powered tools for projects in healthcare, finance, AI-driven and privacy-preserving applications, and beyond, fostering a collaborative ecosystem.

Enables participation in decentralized governance through a community-driven decision-making process (focused on ecosystem proposals, without conferring ownership or financial rights). $ARC holders can propose and vote on matters such as certain project integrations, ecosystem grants, and partnerships within the ARC AI ecosystem, without altering the core Matrix protocol standards. The governance design draws inspiration from Bittensor (TAO), where participants engage in protocol-level coordination through decentralized voting mechanisms. These votes relate solely to network parameters and resource allocation, not to ownership or profit participation, thereby maintaining the token’s classification as a utility governance token rather than a security.

Participation supports the network's security and operations, with variable distributions funded by usage fees from Matrix API calls and by users’ contribution to the network (ARC Rewards functionality). ARC Rewards underpins the decentralized Matrix network, reducing circulating supply and enhancing network resilience and redundancy. ARC’s model reflects the utility-driven adoption seen in networks such as The Graph (GRT), where usage metrics (e.g., 12,402 active subgraphs as of Q1 2025, +9.8 % QoQ) evidence genuine functional demand rather than speculative activity – consistent with utility-token classification principles under FINMA and MiCA frameworks.

Supports ongoing ecosystem development, with fees funding grants for projects that build on Matrix's framework, such as privacy-preserving AI agents in sectors like healthcare, finance, and AI-driven and privacy-preserving applications. This echoes Fetch.ai's FET token, which funded agent development in its ecosystem, leading to sustained utility and market fit.

Note: $ARC was recently upgraded from v1 to v2 to incorporate enhanced smart contract functionalities for better integration with Matrix's blockchain-based verifiable proof-of-actions. Current and legacy token addresses are available on arc.ai. Tokenomics refer to $ARC v2.

Exhibits

Overall Utility Exhibit

Plug-in Exhibit

Supply & Distribution

Supply

Total supply: 1,030,000,000
Circulating supply: 1,030,000,000
Max Supply: 1,030,000,000

Distribution

Breakdown
- 85% community: Allocated to incentivize adoption, including airdrops to early Matrix integrators and liquidity providers.
- 10% operations: Reserved for protocol maintenance, such as funding Network Contributor infrastructure and smart contract audits.
- 5% team: Dedicated to core developers working on Matrix's homomorphic encryption optimizations and AI model integrations.

Vesting: No vesting schedules, enabling immediate utility for ecosystem participants.

Locked Supply: 500M tokens are held in a multisig wallet and will be progressively transferred to the migration portal as holders upgrade from v1 to v2, ensuring a controlled release tied to actual demand.

$ARC v1 has been in circulation since March 2022. Migration to $ARC v2 is ongoing at a 1:1 ratio, facilitated by an Openzeppelin standard migration contract.

Contract Address

$ARC v2 contract address (Ethereum): 0x672fdBA7055bddFa8fD6bD45B1455cE5eB97f499

The contract is built on audited code and follows upgradeable proxy patterns, enabling future enhancements without disrupting the ecosystem.

Demand Drivers

$ARC holders (both regular $ARC holders and Network Contributors) gain exclusive access to a growing suite of projects and AI agents developed using ARC's Efficiency AI technology, including Reactor (a multi-modal AI assistant with real-time data sourcing) and Matrix (homomorphic encryption for business AI privacy and compliance). The ARC Token’s use case follows a functional-access model comparable to SingularityNET, where tokens serve solely as a medium for accessing AI services. This design underpins genuine network usage and adoption without introducing any investment or profit-expectation characteristics, maintaining clear compliance with utility-token classification standards.

$ARC will be mandatory for Network Contributors that power ARC’s AI solutions, particularly the decentralized Matrix network. Contributors perform encrypted computations and must participate with $ARC to be eligible for variable distributions funded by API usage fees. The ARC Matrix approach aligns with advances such as Zama’s fhEVM, where homomorphic encryption ensures that sensitive computations remain confidential even within public smart-contract environments. This reinforces compliance with data-protection and confidentiality requirements under frameworks such as the Swiss FADP, EU GDPR, and FINMA Circular 2023/1 on operational resilience.

$ARC facilitates Network Contributions in the decentralized Matrix network, where contributors leverage blockchain smart contracts to enforce verifiable proof-of-actions, ensuring tamper-proof audit trails for encrypted AI processes.

The $ARC token operates as a functional access medium to ARC Matrix infrastructure. Users may remit service fees in $ARC or in fiat and regulated digital payment instruments (CHF, USD, EUR, stablecoins) for usage-based activities such as encrypted computation, model inference, and data exchange.This structure creates functional - not financial - demand and maintains the token’s utility classification under FINMA and MiCA guidelines.

ARC Rewards mechanisms for regular $ARC holders and Network Contributors introduce lock-up periods, algorithmically reducing circulating supply based on network load and encouraging long-term holding. Research on token participation indicates that higher aggregate participation ratios enhance platform productivity and user base growth, as seen in various AI crypto projects.

Enables ARC Rewards and voting on selected proposals within the ARC AI ecosystem, for example, contract upgrades or funding new AI agents.
- ETH Allocations: Certain protocol usage fees from Matrix by ARC and related ARC products may be used to fund utility-based rewards for participants who actively contribute to network operations. Rewards, settled in $ETH, are distributed through automated smart contracts according to measurable parameters such as participation activity and uptime. These allocations are designed as operational incentives that enhance network resilience and usage efficiency and do not represent profit participation or investment yield.
- Partner Utility Credits: Ecosystem projects and partner launches, such as AI-driven and privacy-preserving application protocols using Matrix encryption to secure trades or healthcare apps processing sensitive data, will allocate a portion of their native tokens to $ARC participants (both regular $ARC holders and Network Contributors). If a project has no native token, a portion of its usage fees may be allocated instead. The ARC Rewards structure broadens participant engagement and access to network activities, reinforcing ecosystem sustainability through functional participation incentives rather than financial returns. Comparable approaches, such as Streamr’s DATA token, which compensates contributors for active involvement in decentralized data-streaming, have demonstrated that utility-based incentives effectively drive adoption without creating investment characteristics.
- Matrix Network Contributor: To act as a Network Contributor within the decentralized Matrix network, participants will need to commit and actively utilize a defined amount of $ARC, establishing a verifiable connection between network functionality and token engagement. Contributors perform operational roles, including homomorphic computation, key distribution via zero-trust protocols, and blockchain-based compliance logging that strengthen the network’s privacy and reliability. Compensation is activity-based, reflecting measurable computational output (FLOPs) or validated service performance. This framework promotes operational participation, not financial investment, and thus remains within utility-token classification principles. Real-world precedents, such as Cypher’s FHE-EVM, show that this model effectively aligns incentives while maintaining compliance with data-protection and decentralization standards.

Participation Impact

Expansion of ARC’s ecosystem, driven by projects adopting Matrix's privacy-first framework, generates direct demand for $ARC through API usage fees, Network Contributor rewards, and governance participation.

ARC Rewards, issued to regular $ARC holders and Network Contributors, are tied to real network activity (e.g., transaction volume in encrypted AI workflows). They incentivize participation over short-term speculation and strengthen network alignment. Tokenomics studies show that well-designed participation models promote network effects and sustainable ecosystem growth.

Incentive & Utility

Token rewards are dynamically tied to ARC Rewards, with variable distributions linked to network metrics like total encrypted data processed. This adaptive model, inspired by Ouroboros in Cardano's ADA, supports sustainable growth through peer-reviewed governance and participation.

Grants exclusive access to ARC’s cutting-edge solutions and AI agents, including those launched with Privacy-First AI technology, such as on-chain AI agents for automated, privacy-secured decision-making in decentralized applications.

Liquidity & Market Presence

$ARC is tradable on multiple exchanges (see listings on arc.ai and CoinGecko), with liquidity supported by automated market makers.

Active liquidity pools with professional market-maker support (e.g., Trireme and MEXC), utilizing constant product formulas (x*y=k) for efficient trading.

Expansion strategy targets additional Tier-1 and Tier-2 exchange listings, correlated with Matrix's rollout to increase trading volume and depth.

Liquidity growth is intrinsically linked to Matrix adoption, as more projects integrate the framework, expanding $ARC's utility and enabling holders to seamlessly access and monetize ARC-powered AI solutions.

Regulatory Compliance

$ARC is strictly structured as a utility token, conferring no equity, dividends, or financial rights, emphasizing its role in accessing technical functionalities like Matrix encryption.

Planned: Development of a comprehensive compliance framework, incorporating blockchain-based audit logs and zero-knowledge proofs to facilitate regulatory adherence in global markets.

Governance & Community

$ARC holders can participate in selected governance decisions via a community governance framework (on-chain voting facilitated through Snapshot.org), proposing and voting on project-specific matters where community input adds value, while core Matrix protocol standards remain outside the scope of governance. This model strengthens community engagement, aligns incentives with long-term ecosystem health, and leverages on-chain voting for transparent, tamper-resistant decision-making. Successful examples of token-based voting in other projects illustrate the effectiveness of community-driven growth.

Sustainability

Tokenomics are designed to scale with adoption from Matrix and Privacy-First AI, where increased transaction fees strengthen $ARC's utility and distribution pool. 2025 market outlooks suggest that utility tokens in AI and privacy-preserving application ecosystems, benefit from usage-driven demand and adoption, as evidenced by platforms like Sui and Solana.

Broader adoption of ARC solutions, such as energy-efficient AI models that minimize compute footprints, translates to heightened token demand and ecosystem vitality.

With a fully diluted supply and robust use cases through Matrix – enabling a decentralized hub for privacy-first AI projects – $ARC is positioned for long-term value preservation, supported by technical innovations in homomorphic encryption and on-chain governance.

Regulatory & Jurisdictional Note

This document is prepared jointly by ARC Labs AG (Switzerland) and ARC Inc. (Samoa), the entity responsible for token issuance and governance, and is distributed by ARC Inc. (Samoa). Participation may be restricted in certain jurisdictions (U.S., Canada, EU, Switzerland, and other restricted territories).

All ARC Rewards are utility-based participation mechanisms funded by network usage fees. They do not represent any form of financial return or income distribution.

This document is provided for informational and technical reference purposes only.

Certain elements described in this Tokenomics represent ongoing or planned developments that may not yet be fully implemented.

Version 1.0 – December 2025

Cookie Settings