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The Arc Reactor is a unique form of power source designed by Howard Stark and Anton Vanko. There are two main versions of the Arc Reactor: the original, full-scale, industrial version and the miniaturized “chestpiece” version that was perfected by Tony Stark.
During the later years of his life, sometime after his involvement in World War II, Howard Stark developed the idea for an alternative power source that could provide clean energy to benefit his humanitarian views for the future of mankind. Howard began working alongside Anton Vanko and together they eventually designed the first Arc Reactor, which Howard began to develop through his company, Stark Industries.
While Howard saw the Arc Reactor as a way to create a new, cleaner method to replace nuclear power, Anton only saw it as an idea he could sell to get rich. Due to this, Howard accused him of espionage and had him deported back to Russia, an event that later motivated his son, Ivan Vanko, to use the Arc Reactor technology to seek revenge on Tony Stark for ruining their lives.
Eventually, a large Arc Reactor for industrial energy production was created to power Stark Industries Headquarters in Los Angeles. Howard developed a theoretical new element which would be the key to completing the perfect Arc Reactor based on the Tesseract. However, he was unable to synthesize it due to being limited by the technology available at the time, and the Arc Reactor project soon hit a standstill. Knowing he wouldn't be able to complete the Reactor in his lifespan, Howard left a blueprint of his theoretical new element hidden within a model of Stark Expo 1974 along with a recorded message to his son hoping he would rediscover it and finish his work. The message along with his original research were left at S.H.I.E.L.D.'S custody so they could one day give them to Tony Stark.
In the years after Howard's death the Arc Reactor project became a non-priority to the company as it was steered towards mainly producing weapons, with the then acting CEO, Obadiah Stane, dismissing the clean energy project as a "publicity stunt".
During the Ten Rings attack and capture of Tony Stark, a bomb exploded near Stark, causing shrapnel to enter his body near his heart, threatening his life. However, Dr. Ho Yinsen created a way to stop the shrapnel by using a powerful electromagnet and a car battery. Stark knew that to stand a better chance of survival he had to replace the relatively weak car battery. Thus, he adapted the design of the large Arc Reactor that powered his factory and created a miniaturized reactor that could fit in his hand, giving him a compact and powerful power source that fit directly into his chest and was guaranteed not to fail from normal use.
In order to escape from the Ten Rings captivity, Stark and Dr. Yinsen created a rudimentary suit of powered armor to help them escape. Once Stark got back to America, he and his AI J.A.R.V.I.S. created a much more powerful version of the miniaturized Arc Reactor, modified to independently power more advanced versions of his armored suit, which he later dubbed the Iron Man suit.
Obadiah Stane commissioned William Ginter Riva and other Stark Industries scientists to duplicate a miniature version of the Arc Reactor to use it in his own suit of powered armor; however, they could not, believing the technology was not yet possible. Stane admonished that Stark was able to do it himself in a cave using even less resources. Ultimately, Stane stole the Arc Reactor from Stark's chest to power his Iron Monger Armor.
During the Duel of Los Angeles, Stark and Pepper Potts destroyed the Iron Monger suit and killed Stane by overloading the Arc Reactor powering the Stark Industries facility, discharging a massive amount of electricity through the suit and electrocuting Stane, who then fell into the exploding reactor.
Soon, Stark eventually learned that the Palladium cores from the Arc Reactor were poisoning him as the Arc Reactor burned through them, which was accelerated by his use of the Iron Man armor.
Tony attempted to fix this completely by finding a possible substitue for Palladium with on success. After finding out about this Nick Fury gave Tony his father's original research regarding the new element which would complete the reactor. With it, and after finding the blueprints within the Stark Expo model, Tony was able to synthesize the element. This created the “perfected” version of the Arc Reactor Howard originally envisioned, and along with saving Tony's life.
Return to Alternative Power
Eventually Tony Stark decided to continue his father's ideals to use the Arc Reactor to provide clean energy for the world. In order to capitalize on this ideal, Tony Stark created a redesigned Industrial Arc Reactor to power the newly-built Stark Tower in New York City. The tower was completely removed from the city's power grid and ran entirely from the Arc Reactor in order to make Stark Tower a “beacon of clean energy” and show the world the capability of Arc Reactor technology on a large scale. Even though it was only a prototype, the building was capable of maintaining itself for an entire year.