Author: Teng Yan, Chain of Thought; Translation: Golden Finance xiaozou
Earlier this month, SpaceX successfully launched its Starship 4 rocket, the most powerful rocket ever built.
This engineering marvel features a super-heavy booster with 33 Raptor engines providing a total takeoff thrust of 72 MN. To put this into perspective, that’s twice the thrust of the Apollo program rockets and three times the thrust of NASA’s space shuttles.
I have always been fascinated by the growth of deep tech companies. What seems like overnight success is backed by years of hard work and millions of dollars in R&D funding.
But industry insiders know that for a deep tech company to succeed, many low-probability events must come together perfectly. SpaceX, founded 22 years ago as a startup with big dreams, is a good example of this path to success—success is the result of hard work and progress.
Such huge success is very rare in the crypto space.
Only a handful of crypto companies that emerged during the ICO boom (2017-2018) are still around. Our crypto industry is young and nascent, and has only been in the spotlight for a short time, and this mentality often seeps into founders’ plans for their companies.
That’s why it’s so exciting to see an OG item cross over to new heights and become one of the most exciting releases of the year.
1. Arweave and AO Computer are closely connected
Arweave was launched in 2018 as a decentralized permanent data storage solution. Despite its fundamental importance, data storage has struggled to find compelling use cases and large-scale adoption.
Data storage isn't something sexy. It's a commodity.
AO computer is Arweave's most ambitious project.
AR stands for storage layer.
AO stands for computing layer.
AO aims to be a secure, scalable, trustless, customizable computing platform - a hyper-parallel computer.
The main idea is deterministic virtual machines + persistent data storage = reproducible state. This was envisioned four years ago and has now been implemented into AO's participant-oriented computing environment.
I want to emphasize that the AO computer is very different from most other blockchains available today. It only exists because of the foundational work done by Sam (founder) and the Arweave team over the years. Just like deep tech startups need a solid foundation to succeed, the AO would not be possible without Arweave's secure decentralized storage network.
I am happy to see them succeed.
2. Not another Ethereum or Solana
Ethereum and Solana are globally synchronized state machines with a globally shared state.
The AO computer is a globally shared message-passing machine with local state.
Global shared state is the default mode of current blockchain. It enables consensus and trust among participants and maintains the integrity of the ledger. However, this is not enough to support future artificial intelligence applications.
The AO Computer framework differentiates itself from Ethereum and Solana through two main features: scalable computing power and a flexible security model.
Scalable computing
In both Ethereum and Solana, adding more computing resources (new nodes) does not enhance the network’s output. Ethereum still processes 12-15 transactions per second, regardless of how many validator nodes there are.
However, the AO computer framework provides a way to scale dynamically. As more computing resources are integrated into the network, the computational output scales accordingly. This is because AO processes run locally in parallel and are not constrained by global state.
· safety
Ethereum uses a unified security model where every transaction is equally protected in its Proof of Stake (PoS) network. While this ensures consistency, it can be inefficient and costly for low-value transactions such as gaming.
The AO computer framework introduces a flexible security model that allows developers to tailor security requirements to the specific needs of their processes.
3. Supercomputers
Imagine you have a giant supercomputer made up of many smaller computers distributed around the world.
This large networked computer can do many things at once, like run games and apps. The smaller computers communicate with each other using a messaging system. The best part is that each small computer is not slowed down by the rest of the network, while still enjoying the security and trust of the blockchain.
This is the simple concept of AO computer.
The AO computer framework breaks down the typical blockchain node architecture into smaller modular components. These components include:
· process
· Message passing unit
Scheduling unit
Computational unit
Each component plays a key role in the overall function of the system.
At a high level, AO can be summarized into the following three core concepts:
-Multiple processes can be run in parallel.
-Process maintains sovereignty.
-Asynchronous messaging supports coordination and communication between processes.
Parallel processing
The core of the AO framework is the process, which is the application on the platform. These processes run independently and in parallel. A single process has no memory and cannot see the local state of other processes.
This isolation allows complex computations to be performed on powerful machines, expanding the design space far beyond the limitations of traditional smart contract protocols (fees, gas limits, block sizes).
Compute units play a key role here. They provide the necessary computing power to keep the AO process running efficiently.
Application sovereignty
A distinctive feature of AO is the sovereignty it grants developers.
Each process runs autonomously, allowing developers to choose their computing tasks, virtual machines, and security parameters without interference from other processes.
Developers can adjust security measures based on the value and sensitivity of a particular transaction or calculation.
Asynchronous messaging
This is the glue that holds the network together. Communication in the AO protocol is managed through asynchronous messaging.
Processes exchange messages to coordinate operations and receive necessary data. All applications follow common messaging standards to ensure consistency and interoperability.
The messaging unit forwards these messages and works with the scheduling unit (similar to a rollup sequencer) which sorts the messages and records them on Arweave.
4. AO’s trillion-dollar opportunity lies in the field of AI
Computational requirements, data storage, and bandwidth: The LLaMA-3 model requires a lot of computational resources (RAM, GPU power). Ethereum is not optimized for the large-scale data storage and high bandwidth required for LLM inference.
Latency and performance: Ethereum’s transaction speeds hinder the low-latency, high-throughput environment required to effectively use AI models. No user wants to wait 12 seconds (Ethereum’s block time) for a result.
Cost: On-chain AI inference is very expensive.
So I was very excited when AO announced last week that the Large Language Model (LLM) can run on smart contracts, bringing intelligence directly to the blockchain. This will enable the integration of human-like decision making in a trustless network.
· Memory
Running an AI model requires loading model parameters into memory. The more parameters there are, the higher the memory requirement.
Running a relatively small model like Llama-3-8B requires at least 12GB of memory. GPT-4 has over 1.76 trillion parameters, and GPT-5 is expected to have 50 trillion parameters. AI models are only going to get bigger.
Today’s blockchains are very limited in terms of memory. From a protocol level perspective:
Ethereum has 48KB of memory for executing smart contracts
Solana has 10MB of memory
Even the Internet Computer (ICP), which is entering the field of artificial intelligence, has only about 3B of memory, and its artificial intelligence application capabilities are limited.
AO uses WebAssembly in its execution environment and now supports WASM64, which can support high-performance applications. Currently, AO has a memory limit of 16GB and a protocol-level cap of 18EB. This enables it to run heavy calculations such as Llama-3 or Phi 3 (non-quantized) reasoning.
· data storage
WeaveDrive is a new feature that enables AO applications to access all data in Arweave as if it were a local hard drive.
By acting as a local file system in smart contracts, WeaveDrive improves the efficiency and accessibility of data storage and retrieval. More dApps will be incentivized to upload and store data on Arweave.
The AO computer framework enables direct on-chain execution of large AI models by leveraging the full computing power of a single machine.
By combining an unbounded execution environment with efficient and accessible data storage, AO significantly expands the design space for on-chain applications, especially those that are computationally intensive and AI-driven. This facilitates the development of autonomous agents with smart contract-like guarantees.
The integration of cron jobs (a feature not natively available on most blockchains) and autonomous agents will significantly facilitate on-chain activity, facilitating more complex dynamic interactions.
As we move closer to an era in which AI is ubiquitous, many are underestimating the significance of this breakthrough.
Llamaland is an MMO AI game based on AO computer.
In Llamaland, users can submit petitions to the Llama King, an AI agent that uses a large language model (LLM) to review their petitions and decide how many meme coins to allocate to each user. Notably, the entire process is performed entirely on-chain, making it the first implementation of LLM to run entirely on-chain.
Although it’s not live yet, you can keep an eye on its development.
5. Building the Permaweb
On June 6, Arweave released 3 important announcements:
Forward Research acquires Odysee
Autonomous Finance launches AgentFi
AO provides $35 million in financing for builders of the AO ecosystem
The most notable move in my opinion was the acquisition of Odysee, which most people underestimated.
Odysee is the biggest Web3 social app no one has heard of.
Odysee has over 7 million monthly active users (20 times Farcaster's monthly active users) and 2.2 million website visits per month. Odysee is a more open version of YouTube that uses blockchain technology to provide creators with greater control and freedom. Unlike YouTube, which relies on traditional advertising revenue sharing, Odysee rewards creators with LBRY Credits (LBC).
Odysee is a dark corner of the internet where free speech is valued and content is less filtered. Its "Wild West" is particularly noteworthy because it offers more unfiltered controversial content.
According to SimilarWeb, a large portion of its users come from Europe, especially France, Spain and Germany. While it can't match YouTube in terms of scale, Odysee still attracts a large number of users who may be potential users of the AO app.
Odysee will now build on the Arweave infrastructure to add its platform to the permaweb, giving creators 100% control over their content.
AO is currently running on its testnet, using the Proof of Authority (PoA) security mechanism. Most applications on the mainnet will adopt the Proof of Stake (PoS) mechanism. The mainnet launch date has not yet been determined.
Over the past three months, its testnet has had about 7,000 active users per day, 3,000 to 4,000 processes, and 182 million messages sent. While these numbers aren’t staggering, they’re enough to indicate a small but active community.
· Dexi
Dexi automatically collects and organizes data on asset prices, exchanges, liquidity, etc. You can think of Dexi as a blockchain-based Bloomberg. It is managed by a network of autonomous agents, hosted on Arweave, and connected to all available liquidity pools.
Dexi is permissionless and extracts data directly from the Dexi Aggregator. This setup ensures censorship resistance and all information can be verified on-chain.
· 0 orbit
0rbit is a decentralized oracle network with two main components: an AO module and a node network that can fetch data from anywhere on the Internet. This is the key infrastructure for building useful applications on AO.
The AO module interacts with the 0rbit node to send data requests and receive results. Anyone can run a node and contribute to the network. Data is obtained asynchronously from the internet, meaning that processes do not have to wait for a response.
Currently, 0rbit can get new information from user-defined website APIs and price information streams from Coingecko's API.
Some other interesting things I found on AO include AMMs (Bark, Permaswap, ArSwap), Trunk (AO meme coin), and Astro (overcollateralized stablecoin using AR as collateral). AO is still in its early stages and many projects have not been production tested or have not yet seen a lot of transactions.
6. AO Token Economics
AO tokens were launched on June 14, and minting is retroactive to February 27, 2024. I like the way it is issued fairly, with no investor or team allocation.
The minting schedule shows a distribution pattern similar to Bitcoin, with no pre-mine and a total of 21 million coins. New minting is halved every 4 years, but it is a smooth process, unlike the sudden halving event.
The new AO tokens will be distributed as follows:
Arweave token holders (36%)
Bridgers of pledged assets such as stETH and SOL (64%)
So far, about 1 million tokens have been minted, most of which have been distributed retroactively to AR token holders. AR token holders will continue to earn AO tokens at 5-minute intervals. AOCRED tokens from the testnet can be converted to AO at a ratio of 1000:1.
Important: AO tokens are not transferable or tradeable until 15% of the total supply has been minted, approximately February 8, 2025. This allows time for the fledgling ecosystem to develop and the mainnet to launch, and AO tokens will be used to secure the network.
· Mint AO by holding AR
I did some calculations on the expected return per AR token. The calculations here assume 1 AR = $30.
· Holders who stake 1 AR token will receive approximately 0.016 AO tokens over the next 12 months.
Over a 12 month period, there were approximately 4.2 million AO in circulation.
The AR holding APY is modest, ranging from 2.5% to 50% depending on the expected FDV, which in turn depends on market conditions when the token becomes tradable in the next year. Assuming good market sentiment in 2025, a FDV of $10 billion might be quite reasonable, which would imply a 25% APY.
Minting AO by bridging assets such as stETH
Holding 0.01% of the bridge’s total locked value (TVL) for 12 months will earn you approximately 210 AO tokens.
As of June 25, approximately $320 million of bridged stETH has been used to mint AO, with APYs ranging from 33% - 600% depending on TVL and FDV. APY estimates are volatile and heavily influenced by the total value of the bridged assets (TVL) and the expected token FDV.
This is a very attractive low-risk yield opportunity for those holding stETH today.
APY will decrease as more users realize this and bridge their stETH. The idea of bridging stETH minting is a win-win for both the AO team and users.
Bridging stETH could generate significant revenue (~$30M per year on $1B in deposits) which would fund ecosystem projects and other development activities.
It is crucial to monitor the TVL of the bridge asset as it may create a balance with the AR token price. If the TVL remains relatively low, more people may sell AR to miners using staked assets and vice versa.
The total supply of the parent token AR is 66 million, with 65 million tokens in circulation. AR has potential anti-inflationary properties because AR used for data storage goes into an endowment fund, which only releases AR tokens when mining becomes unprofitable.
7. My opinion on AO
When thinking about whether a protocol will be successful, I like to break it down into smaller pieces.
I asked myself this question: What is the most important thing for AO to achieve the same success as Solana?
High demand for AI agents and crypto applications: Given the rapid development of AI over the past two years, this seems to be the current trajectory. Other blockchains are developing off-chain computation using techniques such as zkML/OpML, but currently only AO can support full AI computation directly on-chain.
Composability with major blockchains: AO must be tightly integrated with other major blockchains. It is unrealistic to expect existing developers and applications to fully migrate to AO. Therefore, building bridges and communication pipelines with existing ecosystems is critical.
Develop a social layer: Ultimately, the success of a blockchain will not be about transaction speed or low fees. Cultivating a passionate developer community and attracting users is key to gaining widespread adoption. Monitoring developer activity and social media sentiment can serve as some indicators.
I will be keeping a close eye on these three areas and adjust my opinion of AO accordingly.
8. Other ideas
AO computer conducts decentralized computing in a completely different way from traditional blockchain. It may succeed or fail. But the ability to perform large-scale computations on-chain is an important unlocking in the AI era.
AOs use an actor-oriented approach. These platforms are used for systems that require high concurrency, modularity, and scalability. While the actor model has theoretical advantages, its widespread adoption and large-scale success remain to be proven. Challenges include handling unexpected failures and maintaining consistency across distributed actors.
AO is in its very early days. Most users I found on the testnet were trying text-based chat and games. Tools still need to be built, which takes time. It is not easy to port applications directly from other chains due to the different architectures and languages used. Overall, AO feels like early Solana in 2021, when it only had a few applications and a lot of skepticism.
Requires long-term conviction: AO requires a high degree of conviction. Short-term traders may have a hard time finding an immediate catalyst as the token will not be traded until 2025.
Demand for Arweave: AO will create continued demand for AR, both as a growth catalyst and as a new platform for application development. Every process on AO will write data on Arweave and drive the utility of AR.
AI and crypto are undoubtedly the two most important technological paradigm shifts of this decade. The intersection of AI and crypto will be disruptive. In the future, we may look back and wonder why we didn’t pay more attention to this aspect.
My intuition tells me that AO will be the vanguard force leading the team forward.
