You can't run steam with no compositor whatsoever, but you can use the steam deck's solution of using their gamescope micro compositor for everything. You should be able to install gamescope and just run gamescope -e {other CLI options} steam (assuming you're using the native Arch package and not the flatpak).

My experience using gamescope for steam has been very mixed, but I've seen a tutorial somewhere on doing exactly this.

Gamescope isn't necessarily the best option for every game, and having a normal compositor (which, for now, must support XWayland) is just a much more flexible solution.

This may also be possible with something more general like xwayland-satellite, but frankly steam and all its games still run on the X11 protocol, so if you really don't need a GUI you might be able to install a vanilla X11 instance and hook to that directly. I can't speak to either of those options directly.

But is this worth it, in a practical sense? No. You have a reasonably powerful system, and the only performance you'd be saving is a few percent of a single core on the CPU, which in your config is absolutely not worth it.

Back in the olden days we used to run games buikt with SDL on the console without a desktop. But they have to be built for it and Steam doesn't fit that bill.

If you mean running a game directly without any display server of whatever running, i don't think that's possible, but the closest thing to that might be gamescope i think? Gamescope should be able to run directly as a graphical session instead of it being nested inside an X server/wayland compositor, but gamescope still runs on wayland regardless.

FWIW the SteamDeck running official SteamOS does have a full desktop environment, it's just hidden by starting Steam in Big Picture mode.

So... you could benchmark the "gain" but I doubt it's significant, if any.

Also if you do like to play with hardware for gaming across networks checking Selkies or Moonlight to stream from your machine to your machine, no intermediary, little latency or overhead.

You still need X11 or Wayland somehow. I would suggest something that can run in "kiosk" mode. That's essentially what you want - boot a single app and run that.

If you don't care about wayland, just install xorg-xinit (since you said Arch) and put this in ~/.xinitrc: exec steam -bigpicture

Run startx to launch it on its own. There may be other dependencies you need for steam or for games, but you don't need a whole DE.

If you want, you can even enable auto-login and then set up auto-start by adding this to your ~/.bashrc (or whatever shell you use):

if [[ -z $DISPLAY ]]; then
  startx
fi

You cannot eliminate X11/wayland overhead. You need a display manager of some sort. I suspect most games/proton will require X11 or at least xwayland and a wayland compositor. You probably do want to use a window manager of some sort as well or you do lose out on a lot of controls like window placement and sizing. Some games might do weird things if they dont directly launch in full screen mode. And steam itself would probably want to be run in big picture mode to make it go full screen. If you want something designed for gaming then you might try gamescope which is what the steamdeck uses as its window manager in the game mode.

There are probably other areas with a higher impact that you can optimize more before really worrying about a lack of window manager though.