🤔 What is Arweave ?
Arweave is a decentralized protocol to store data permanently, with a single upfront fee.
It is a decentralized network that connects:
- People who have disk space to spare
- Those who need permanent data storage
💡 What role does AR token play ?
AR token is the native currency of Arweave ecosystem. It is used to pay for:
- Storage space
- Transaction fee
- Interact with apps
📝 Origin of Arweave
- Sam Williams and William Jones founded Archain in 2017. The company changed the name to Arweave in 2018.
- The team launched Arweave mainnet in June 2018.
- They raised over 22 million US dollars during seed rounds in 2018-2020.
- Sam William:
- Sam was born in Berlin, Germany.
- He is a computer science graduate from University of Nottingham.
- He came up with the idea during 2016 presidential election to overcome fake news.
- He pitched the idea to William Jones, who was a fellow Ph.D. student at the University of Kent.
- They dropped out of university in 2017 to work on Arweave.
- William Jones:
- He was born in United Kingdom.
- He has a bachelor of science in mathematics and a master’s degree in computer science from University of Kent.
- He met Sam William at University of Kent while doing Ph.D. in computer science.
- He dropped out and co-founded Arweave with Sam William in 2017.
😌 What problems does it solve ?
Humans have always tried to record history for future generations.
However, there does not exist any means to record the history in a permanent way that cannot be altered by a group of future generations to mold public opinions for their benefit.
Current solutions have following drawbacks:
- No barriers to entry: Anyone can use the internet to voice their opinions. Some people misuse the opportunity to spread fake news. Fake news has existed since the dawn of humans. However the tools available today: internet, deepfakes, etc makes it difficult to discern truth from fake.
- One-time upfront cost: None of the cloud storage solutions can provide a plan to store data permanently. As a result, developers keep paying a monthly subscription to cloud companies indefinitely.
- Cost-effective and efficient: Traditional cloud storage companies have to incur an upfront cost in building and maintaining server farms. However, all the available servers are not being used to their maximum capacity all the time.
- Stealth editing:
- Even the trusted news publishing sites edit their old articles. Writers do not have to take responsibility for what they publish because they can always go back and edit their articles.
- Governments and Corporations can pay or force these news publishing sites to change the contents in case they do not like the published articles.
- Link rot: Internet is fragile. Publishers do not have any guarantee that the page they are linking to will be around in the future.
- We use a number of applications like email, social media apps, messaging services etc. There is no guarantee that these applications will not change their platform and policies in the future.
- Imagine having access to all the knowledge ever created: Humans have always tried to preserve knowledge.
Arweave offers solutions to these problems by storing data permanently that cannot be tampered with.
It will make job future archaeologists and historians so much easier 😌
🤖 How does it work ?
How does it make permanent data storage is possible ?
Date storage technology is improving exponentially:
As a result, cost of storing data has been falling at the rate of approx 30% yearly.
Arweave calculates the cost of storing the data for the next 200 years assuming that cost of storing data will only fall at the rate of .5% every year.
Users have to pay this upfront cost. This amount is collected in an endowment fund that generates interest on capital. This interest is paid out to nodes for storing the data.
Arweave uses blockweave data structure. It is similar to blockchain but unlike traditional blockchains, it refers to a random previous block in addition to the previous block.
This random block is called “recall block”. This ensures that nodes store maximum old blocks and not just the previous block.
Proof of access
Arweave uses proof of access consensus mechanism. Each node has to incorporate data from the recall block that proves they are storing old data. This is different from traditional proof of work where:
- Nodes have to solve random puzzles.
- Invest in expensive hardware to solve these random number puzzles which do not have any intrinsic value other than determining the winner.
Whereas in proof of access:
- Nodes are incentivized to store maximum old data to increase their chances of recalling the challenge recall block.
- Nodes invest in buying storage space that stores useful data.
Each node tries to store maximum data. However, it is technically not possible for all the nodes to store all the data. Hence nodes have to ask other nodes to provide the data. Each node stores a ranking table of all the nodes on basis of how quickly and reliably they shared the requested data.
The node is incentivized to return the favor to nodes that helped it in the past and maintain a healthy ranking so that other nodes help it in the future.
This establishes Nash equilibrium where nodes are incentivized to share data reliably and quickly.
Blocks in Arweave do not store the actual complete data. The blocks store just sufficient data to be able to reconstruct the actual data.
This makes the process of building blocks faster and establishing consensus quicker. This increases the throughput of the blockchain(Arweave).
It can happen that malicious users use Arweave to upload illicit content like child porn etc. Arweave tackles the problem by:
- It provides tools to nodes that enable them to decide what content they want to store.
- In case 51% of nodes refuse to store the content then the content is not stored by Arweave network. Hence only the data that is not acceptable in most of the countries and cultures will be rejected by the network.
- Gateways to access content also have the option of applying moderation filters. Users can choose appropriate gateways as per their moderation policies.
Permaweb - Permanent Web
Web applications built and content stored using Arweave is permanent and decentralized. The tools used to build such applications are:
- Arweave: Stores data permanently
- Gateways: Content delivery servers for data stored on Arweave
- GraphQL: Query language used by applications to query data stored on Arweave. Example: find posts by a particular user in a given timeframe.
- Smartweave: Smart contracts to allow developers to build applications and incentive designs for their applications.
🏛️ Governance model
The team launched ARCA(Arweave Community Fund A) DAO in 2020. The DAO consists of 17 members. Membership is not fixed, new members may join, members may leave.
Arweave funded the DAO with $25,000 in DAI. The DAO can spend these funds on any project it sees fit.
ARCA DAO does not govern Arweave protocol. It just controls meager amount of $25,000 that too was given by the Arweave team. The team has not revealed any dates for decentralizing the governance of protocol.
🤑 How much money does Arweave project have for future development ?
- Arweave team raised over 22 million US dollars during seed rounds in 2018-2020.
- The team kept 44% of the initial supply(55 million AR) for future development.
- However, the project does not have any ongoing source of revenue other than the funds already held.
- Newmarket: Arweave opens up a whole new market for permanent data storage solutions. Till now no such solution existed that allowed users to store data permanently.
- No competition: It does not have any competitors
- Startup ecosystem: Many startups have already started building apps using Arweave that fulfill unmet needs of the market.
- Switching cost: Users pay an upfront fee for storage. Moreover, they would not want to scatter their data over many solutions.
- Network effect: More developers will learn to build on Arweave as more startups decide to use Arweave. Startups will use Arweave as developers with knowledge about Arweave become widely available. This positive feedback loop has the potential to cause exponential adoption of Arweave ecosystem.
😨 Risks and challenges
- Arweave extrapolates old data(reducing cost of storing data) to calculate storage costs. Ideally costs for storing data should have been emergent property of supply and demand. This artificial regulation of market do not maximize net benefit to society and could have unintended consequences
- The project does not have any ongoing source of revenue. The team will find it hard to develop Arweave as their funds start to run out.
- The project does not have governance DAO. The protocol is maintained by the team. This exposes the project to risks like:
- Government crackdown
- Differences within the team etc
AR tokens have max supply of 66 million:
- 55 million AR tokens were created in the genesis block at network launch on 8 June 2018. They were distributed as follows:
- Funding rounds: 40%
- Advisors: 3%
- Team: 13%
- Future development fund: 44%
- 11 million AR will be introduced in circulation gradually as block mining rewards.
- Inflationary pressure: 11 million AR tokens will be gradually released as block minning rewards in the future.
- Deflationary pressure: Users pay an upfront cost to store data. These AR tokens are held in an endowment fund that pays only a small portion gradually to node operators. As a result, these AR tokens are taken out of circulation for the time period.
Token’s price increases due to demand pressure.
Demand pressure on AR token will come from:
- Users: They will acquire AR tokens to pay for permanent storage.
- Speculators: They will acquire AR tokens for future price appreciation.
Supply pressure on token decreases its price.
Supply pressure on AR token will come from:
- Node operators: They receive minning rewards for storing data. They will sell part of their rewards to cover their operational and hardware costs.
Cloud storage is a multi-billion dollar market that is growing at an exponential rate.
Similar decentralized storage projects like filecoin and Siacoin have multi-billion dollar market cap.
These projects give a rough idea of the overall storage market, even though they do not offer permanent storage solutions like Arweave.
🧐 Indicators to watch out for
- Google trends result for “Arweave”
- Their YouTube channel is growing:
- Their Twitter account is growing:
- Number of daily transactions transactions is growing:
- Users have started storing data on Arweave:
There were many attempts to speed up Bitcoin like Bitcoin cash, Bitcoin Satoshi Vision, Bitcoin gold. But all of them failed because of a single reason: To increase throughput these projects increased the block size to fit more transactions.
This reduces decentralization as only miners with enough storage space to accommodate these large blocks will be able to mine the blockchain. This problem can be solved by offloading storage of data to Arweave. Solana has partnered with Arweave to do just that. Other blockchain projects will also use Arweave to store their blockchain record.
Arweave has the potential to change journalism forever. It will make reporters accountable for their published content and give humanity a chance to store data permanently.
Internet connected people across space. Arweave will connect people across time.
Arweave is a fully functional product. All that remains for the team to do is: scale the existing solution.