Market Insights
Web3, the next generation of the Internet, will be built on three fundamental pillars: consensus, storage, and computation. Blockchain technology started the decentralized revolution, and Web3 expands this concept to decentralize the entire Internet.
Decentralized storage, represented by a peer-to-peer network, creates a global, trustless and immutable hard drive. As a leader in this field, Arweave provides a cost-effective solution that ensures permanence, immutability and censorship resistance to meet the growing needs of NFTs and dApps.
According to the International Data Corporation (IDC), the global data generation is expected to reach approximately 221,000 exabytes (EB) by 2026. For ease of understanding, 1 EB is equal to 1,048,576 TB, which makes the total amount of global data approximately 23.17 billion TB by 2026. Such a huge amount of data highlights the huge market potential of decentralized storage protocols such as Arweave.
Arweave is also moving into decentralized computing with its AO computer, a “super-parallel” computer designed to integrate large AI models with smart contracts. AO combines the speed of L1 blockchains such as Solana with the verifiability required for decentralized projects.
The global AI market is expected to grow to approximately $257.516 billion by 2032, with an annual growth rate of 19%. Decentralized AI solves transparency and control issues in machine learning, promotes a fair and accessible AI environment, and protects intellectual property and personal data. Arweave's progress in decentralized storage and computing puts it at the forefront of the Web3 movement, meeting key needs and expanding its market potential.
protocol
Arweave is a decentralized storage protocol designed to store data permanently with a one-time payment. It consists of two key components: blockweave and permaweb.
Blockweave, as Arweave's storage layer, handles storage orders and replicates data. It uses a consensus mechanism called Succinct Random Proofs of Access (SPoRA) to ensure that nodes provide cryptographic access proofs to previously uploaded data before accepting new data.
On top of blockweave is the permaweb, a human-readable layer that mimics the World Wide Web. Unlike traditional web data, content on the permaweb is immutable, ensuring that once uploaded, websites and dApps will remain unchanged.
Arweave supports smart contracts through its SmartWeave platform. Unlike traditional blockchain networks such as Ethereum, SmartWeave only calculates the contract state on the local machine that requests the contract to run. This design improves efficiency and scalability.
The native utility token of the Arweave network is AR. This token is used to pay for storage funds, which are used to compensate miners and ensure that storage and network capacity costs are covered indefinitely.
When storing files on Arweave, users pay a one-time fee, most of which goes into a storage endowment fund. The endowment fund is designed to cover storage costs indefinitely based on conservative assumptions of declining storage costs. Historically, the average annual decline in storage costs has been -30.57%, which supports the long-term viability of the protocol.
Miners in the Arweave network are rewarded through a combination of transaction fees, inflationary token issuance (which gradually decreases at a rate dependent on block weight), and donation payments.
Arweave's token economy consists of an initial issuance of 55 million AR tokens, with an additional 11 million tokens issued as inflation. These issuances will continue to decrease until the total circulation reaches 66 million AR tokens. The protocol does not use a token destruction mechanism and maintains a fixed supply.
Arweave’s “fork event” and the latest network upgrade
On December 18, 2023, Arweave founder Sam tweeted that Irys plans to fork Arweave, involving the deletion of data sets and resetting token supply. This caused strong opposition from the community. DataOS stopped using Irys, saying that its behavior violated the Permaweb principles. Community Labs founder Tate supported Sam and hoped that Irys would fork correctly, while Decent Land Labs decided to stop integrating with Irys, while everVision promised to continue supporting the ecosystem. On January 4, 2024, Irys founder Josh Benaron clarified that there was a misunderstanding and there were no plans to fork at present. Sam welcomed Irys back to the Arweave community.
Meanwhile, the Arweave fork on March 26, 2024, introduced coordinated mining, allowing multiple nodes to work together, improving efficiency and computing power. It also added support for pooled mining, allowing miners to share resources. The protocol changes increased the difficulty of single-block solutions to facilitate the generation of full data copies, introduced new pricing measures, and reduced the checkpoint depth to 18 blocks. Although initially controversial, these changes have been accepted and Arweave's price has risen due to improved performance and stability.
Arweave’s AO Computer
The AO computer combines blockchain security with the efficiency and scalability of platforms like Amazon EC2 to form a new computing paradigm. By leveraging the powerful foundation of Arweave, AO solves the scalability and efficiency challenges of zero-knowledge machine learning (zkML). It provides a transparent and verifiable computing system supported by Arweave's secure and permanent data storage.
AO uses parallel processing to run multiple programs simultaneously on a large scale, similar to multitasking on a computer but greatly amplified. This approach optimizes resource allocation, shifting resources from less active tasks to those that require more resources, similar to how a busy website distributes traffic to efficiently serve many users. Intelligent management makes operations smoother and faster, enhancing scalability and performance to meet growing demand.
The open data protocol on which AO is based provides a flexible and modular design, allowing easy upgrade and replacement of components such as sequencers and virtual machines.
The AOS system, as AO's decentralized operating system, allows developers to run command-line processes similar to smart contracts. It combines the familiarity of cloud server operations with the benefits of decentralized and trustless processing. AOS is written in Lua, a programming language used for popular games such as Roblox and Angry Birds, and supports the creation of blockchains compatible with various virtual machines, including EVM.
In AO, processes frequently interact with Arweave as autonomous agents for data storage, facilitating efficient data exchange for applications such as tokenized games or AI chatbots. Unlike typical smart contract platforms that rely on user triggers, AO allows contracts to self-execute at a predetermined time, paving the way for truly autonomous blockchain applications.
Competitors
In the decentralized storage space, Filecoin is Arweave’s main competitor. The main difference between the two is that Arweave focuses on long-term data storage, while Filecoin aims to disrupt the current storage market with low-cost temporary storage. Arweave is creating a new permanent storage market, while Filecoin needs to compete on price to succeed in the cloud storage market, as its main competitors are tech giants such as Amazon and Alibaba. It will be interesting to see how this competition unfolds in the coming years.
In terms of blockchain performance, Arweave reached over 600 transactions per second as of late February, making it the highest throughput permissionless blockchain. This achievement is especially remarkable because the AO computer is still in its early stages, with TPS (transactions per second) exceeding competitors such as Solana and Polygon.
Here are some AO testnet statistics:
Team, Funding, and Ecosystem
Arweave was founded by Sam Williams and William Jones during their PhD studies at the University of Kent. The project was inspired by a walk in Scotland, coupled with Jones’ technical insights. Their shared vision led to the creation of Arweave, a blockchain-based permanent data storage platform.
Arweave has successfully raised funds through multiple rounds of funding:
● Pre-seed round (October 2017): Raised $8.7 million.
● Seed round (December 2017): Raised $5 million.
● Community Token Sale Part 1 (March 2018): Raised $900,000 at $0.132 per token, achieving a 298x ROI.
● Community Token Sale Part 2 (June 2018): Raised $675,000 at $0.132 per token, also achieving a 298x ROI.
● Private placement round (February 2020): Raised US$8.3 million.
Notable investors include Coinbase Ventures and Andreessen Horowitz. A public token offering in 2020 further solidified Arweave's financial foundation. The project is guided by a DAO, ensuring community-led decision-making and voting.
Arweave’s ecosystem is a vibrant part of web3. As of Q3 2023, there are over 130 Arweave-based projects in Community Labs’ ecosystem graph. The network has surpassed 1 billion on-chain transactions, demonstrating its growing adoption and strong infrastructure.
Bullish fundamentals
● The launch of AO has elevated Arweave’s position as an important player in the AI field.
● AO enables decentralized applications to access data stored on Arweave, expanding the possibilities of machine learning and AI integration.
● Its ultra-parallel architecture facilitates efficient training and deployment of AI models, and AO’s modular setup provides an ideal backdrop for developing DeFi applications.
● Increased speculation regarding an airdrop for Arweave early adopters. The team is developing plans for an AO native token designed to complement the Arweave native token.
● AO Computer addresses the scalability and efficiency challenges of zkML, introducing a transparent, verifiable computing system supported by Arweave’s secure, permanent data storage.
● In 2023, Arweave’s network transaction volume increased significantly, processing approximately 100 million transactions per month, exceeding 2022 data.
● Future Growth: Arweave’s transaction volume is expected to rise further in 2024 as AO’s TPS and its applications in AI and ML grow, with AO transitioning from testnet to full operations.
Bearish fundamentals
● The AO testing phase may expose technical issues, including vulnerabilities and network access problems, which may hinder progress.
● AO’s ability to effectively scale AI models on-chain has not yet been demonstrated, and its overall functionality is questionable.
● Combining new AO tokens with existing AR tokens may be difficult and introduce additional uncertainty.
● Despite recent advances, Arweave may face challenges in scalability as demand for storage and computing power increases.
● The AO computer and its integration with Arweave are in the early stages, and unexpected technical and operational challenges may arise.
● Speculation about potential airdrops and token burnings could lead to significant fluctuations and unpredictability in the value of AR tokens.
