Hoo Research ｜Arweave Research Report
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Author: Hoo Research
Abstract: As a groundbreaking decentralized storage platform, Arweave has a new understanding of decentralized storage and is dedicated to creating a permanent preservation of human knowledge and history. Recently, Arweave has established a deep partnership with Solana, whose ecosystem has enormous data needed to store, especially metaverse data. There are many projects in the decentralized storage feature, but why did Solana choose Arweave? What are the features and strengths of Arweave? This report will firstly focus on Arweave’s core technology, and research its mechanism, economic model, operation practice, ecological development and the current situation of industry competition.
Library of Alexandria
The Great Library of Alexandria in Alexandria, Egypt, was one of the largest and most significant libraries of the ancient world. With hundreds of years’ flourishment, the Library of Alexandria was at the height of the Ptolemaic era and then perished in history. It was said that the library had been destroyed by two fires: one was when Julius Caesar conquered Alexandria and burned the main library in Brucheium; the other was when Antony (83?-30 B.C.) gave 200,000 volumes of books plundered from the library in Bergamand to Queen Cleopatra VII of Egypt (69–30 B.C.) to compensate Caesar for the loss of the library. It was soon destroyed again.
— Quoted from Wikipedia
Professor Mostafa El-abbadi, a historian and the author of The Life and Fate of the Ancient Library of Alexandria, once said: “prior to the construction of Library of Alexandria knowledge was regional to a great extent, but it became international since the first international library was completed.” The historical significance and value of the Library of Alexandria not only has a far-reaching influence on the development and work of libraries, but also can be shown in the creation, spread of knowledge and the inheritance of human cultures.
Arweave, the research project of this report, is known as the blockchain of the Library of Alexandria. Its permanent preservation and unalterable storage mechanism shoulder the mission to spread knowledge and inherit cultures. This report will focus on Arweave’s core technology, and research its mechanism, economic model, operation practice, ecological development and the current situation of industry competition.
Project Introduction
As a groundbreaking decentralized storage platform, Arweave has a new understanding of decentralized storage and is dedicated to creating a permanent preservation of human knowledge and history. Arweav’s vision is to create an unalterable data platform with once pay to store permanently and retrieve freely. Meanwhile, Arweave has also developed a REST API that develops various applications to satisfy file storage needs, thereby creating its own ecology.
In fact, Arweave is not a chain, but a more complex graphical structure. Arweave changes the data structure of traditional blockchain rather than each node needing to store all the blocks. it only needs to verify a previous random block at the same time every time it comes out, which is called Blockweave, together with the Blockshadow mechanism — Arweave improves on POW by creating the first POA consensus mechanism, which optimizes the problem of power wastage in POW. In the P2P network layer, Arweave uses a Wildfire scoring or censorship mechanism to ensure the stability of the network and promote the efficiency of data sharing among nodes. These are the four core technologies in the Arweave project, and it can be seen that Arweave’s technical innovations are focused on improving efficiency and expanding throughput.
Project Mechanism
Arweav’s mechanism can be broadly divided into three parts:
First, four core technologies are developed that build the foundation of Arweave network:
Blockweave & Blockshadow: Blockweave requires no need to verify all blocks when create new blocks, but previous random block must be verified at the same time; while a Blockshadow, on the other hand, is the information sent to other nodes for newly created blocks, which contains only the hash information of all previous blocks and the wallet list of all transactions, rather than the transaction file in a traditional POW. Arweave’s system keeps the blocks in a state of continuous verification, where the data in the Blockshadow is continuously verified, and new miners can start weaving new blocks without verification, thus increasing the TPS and improving the scalability of the whole chain. The data structure of Blockweave is shown in the following figure.
Proof of Access: Owning to the nature of Blockweave, Arweave improves POW to POA, without the need to store the entire continuous blockchain. Miners can store any block and generate new blocks based on the information of the calling block, so the POA mechanism is a natural product under Blockweave and Blockshadow technology. POA can ensure that miners store network data, but miners can also use remote servers such as AWS and Google Cloud to reduce costs, centralized servers obviously go against the Arweave decentralization concept, so POA consensus was upgraded to SPORA (Succinct Proofs of Random Access) in February of this year. Strengthened the weight of data retrieval speed in block rewards to curb miners using centralized servers, local hardware can retrieve faster will be able to obtain higher incentives (according to Blockweave mechanism, win block rewards by the stored block data and the efficiency of the retrieval call block data two aspects of impact, storage costs and lower than the cost of arithmetic, so miners will give priority to optimize the storage method, the new consensus to strengthen the (The latter reward weighting makes miners more inclined to use local hardware as a way to ensure that network storage data is decentralized). So the upgrade of the mechanism further ensures the decentralization of Arweave data storage.
Wildfire: Arweave uses the Wildfire system for the operation and maintenance of its infrastructure, the nodes. Wildfire is actually a scoring mechanism that guarantees good node bandwidth and server stability with mutual ratings between nodes.
As shown in the graphic above, nodes share data with neighboring nodes while scoring the performance of neighboring nodes, with higher ratings indicating more reliable data. The node that owns the file responds and enters the transaction pool in the form of a transaction. The node that digs a new block is eligible to select one of these transactions, and here the file is read from the selected node based on Wildfire’s high rating priority. Such an economic tool also promotes the efficiency of data sharing.
Secondly, Arweave has established a Storage Endowment for the long-term development of the network to guarantee permanent storage. When a piece of data is written to the Arweave network, users pay an upfront payment and incur interest in the form of storage purchasing power. Over time, the interest on this one-time upfront payment is made available to those who provide hard drive space, and storage is profitable.
Therefore, Arweave is financially guaranteeing a long-term development of the project by pricing the storage contribution and establishing a fund.
Finally, on top of Arweave’s core data storage layer is Permaweb, a collection of interconnected documents and applications, all of whose content is permanent. The Arweave network itself is built on HTTP (legacy web protocol), so browsers can access all data stored in the network. In addition, once the data is submitted, it cannot be altered in any way by anyone (including the uploader) (it cannot be tampered with).
Token Economy
AR is the native token in the Arweave network with a total supply of 66,000,000.
- 55,000,000 AR were created in the Genesis block at the network launch on June 8, 2018.
- 11,000,000 AR are gradually flowing into the market as block mining rewards.
On June 6th, 2018, the initial token of Whitelist was issued 8,700,000 AR.
On June 11th, 2019, Arweave received a seed round investment of $5 million from A16z crypto, Multicoin Capital and Union Square Ventures in exchange for AR tokens.
On May 6th, 2018, Arweave received another seed round investment of $8.3 million from Andreessen Horowitz, a16z crypto, Coinbase Ventures, and Union Square Ventures in exchange for AR tokens.
Profit Sharing Token: Arweave is developing a Profit Sharing Community (PSC) to empower founders, contributors and users, which aims to provide a better web experience. PSC can be considered as an open-source company where participants can spend any amount of time contributing to the project at any time and receive an immediate profit bonus. It costs AR for users to interact with Permaweb, and this expense includes miner fees, storage fund fees and tips, which in turn provide a source of income for community founders and contributors in the form of PST, which can be paid as dividends in tokens or sold directly on the open market.
Strengths and Weaknesses
After understanding the project mechanism and token economy, we can roughly learn about the strengths and weaknesses of Arweave.
From the project mechanism, on the one hand, Arweave’s core technology is mainly implemented to optimize network efficiency, both throughput and network stability are guaranteed, and according to BlockBeats’ research, the actual user experience is also very smooth, and the design fits the habits of users in the web2 era without causing a high threshold for users outside the blockchain, and on the other hand, Arweave’s never tamperable is a double-edged sword. The advantage is that it prevents information from being maliciously changed and facilitates the establishment of a non-tamperable decentralized database and is open to those who wish to review and challenge its quality, while the disadvantage is that developers are required to upload files without any errors or omissions, which will inevitably cause a large number of abandoned files to be stored on the network. The disadvantage is that developers are required to upload files without any errors or omissions, which inevitably results in a large number of abandoned files being stored on the network.
In terms of token economics, the goal of Arweave pays attention to “long-term”. Based on the feature of “perpetual storage”, AR tokens are currently used for continuous mining and project financing, and the business model of “decentralized company” and PST are established to align the interests of founders, contributors, users and projects for common development and long-term development.
In terms of business model, permanent data storage is a brand new market that Amazon, Google and others have not yet explored. Arweave can help organizations store complete and untamperable knowledge and information, for example, Arweave and the U.S. National Oceanic and Atmospheric Administration are working together to store carbon dioxide detection values. However, Arweave only requires a one-time fee rather than a monthly renewal business model, and although the project claims that its own permanent storage is inexpensive, according to the 1kx organization seminar, its cost is actually based on storage time, currently AWS costs $20/month per TB, Sia is a minimum of $1/month per TB, and Arweave requires a maximum of $10,000/TB, so storage Arweave is more cost effective only if it is stored for nearly 10 years or more. Further, the side effect of high cost is that users may not consider the cost of more than 10 years on the one hand, and on the other hand, they may add “storage technology innovation costs will get lower and lower” into consideration, so Arweave is not the best choice for cost minimization.
In addition, the Arweave ecosystem can be extended to IPFS for backward compatibility, so developers building on IPFS can seamlessly transition to Arweave and get permanent storage. The project calls this the Arweave+IPFS Bridge. In short, IPFS users can choose the “upload service” when storing files, and after the IPFS gateway grabs the data and signs it as an Arweave transaction and packs it into an Arweave block, the nodes running the Arweave+IPFS Bridge The node running the Arweave+IPFS bridge will add this data to its own node, the process is as follows.
The nodes running the Arweave+IPFS system belong to both the Arweave and IPFS networks. So some articles also claim that Arweave is another incentive layer of IPFS (the first one is Filecoin), which also brings a broader ecology to Arweave.
Application
It is controversial of Arweave permanent storage’s application in the industry. The official application is for documents that are required to be kept for a certain number of years by regulations, provable media reports, academic research and immutable records. The need for permanent storage of data from applications such as games or social network DAPPs developed in the current ecosystem is not considered to be a hard and fast requirement.
Arweave’s storage business has recently expanded into an area of explosive growth: NFT storage, which typically requires off-chain storage of data that would be completely meaningless if it were lost or altered, an area in which Arweave is uniquely positioned as described in the previous article. According to Mechanism Capital, Opensea and Mintbase have started a strategic partnership with Arweave, and Metaplex, the NFT project on the Solana chain, has adopted Arweave as the default tool for metadata storage.
Some other blockchains also use Arweave as a backup for on-chain facts, for example Solana records de-statement records on Arweave.
Current Status of Application Ecology
As of early 2021, there are over 250 applications based on the Arweave protocol in areas such as finance, social networking, content distribution, authentication, storage archiving, DAO and infrastructure tools, to name a few, as shown below.
The projects on the Arweave ecosystem are not blooming, and the overall development profile is more closely aligned with the Arweave business model. For example, Verto is a decentralized exchange dedicated to trading PSTs, Mirror and others publish content that is stored permanently, Permanent Archives builds a permanent archive of political and historical information, and FOR Weave is a permanent storage anti-counterfeiting solution and has received over 7,000 academic certifications.
The Arweave project has been growing steadily for 3 years. As of mid-2021, on-chain tradings are growing further, and the overall project is currently in a rapid growth phase. Overall, the on-chain data shows that the Arweave project and its ecosystem have been developing well for three years and the current trend is in line with its goal of “longevity”.
Industry and Competition
The global market scale of the cloud storage industry has been growing steadily since 2015, while demand dictates supply, which indicates that the demand for data storage business is also expanding step by step. Among them, decentralized storage is able to mobilize the free storage space positively as compared to centralized storage. Rather than comparing the two, this report focuses on the current state and analysis of the decentralized storage industry to understand Arweave’s position in the decentralized storage market.
The following are the main projects currently available for decentralized storage:
IPFS is an earlier project that focuses on decentralized storage, which is a distributed file storage and distribution protocol that only deals with file storage and distribution, and all nodes are voluntarily providing storage space. Filecoin is a self-developed project by the IPFS team that provides nodes with FIL tokens as an incentive to continue IPFS’s contract-based decentralized storage model, and Filecoin even incentivizes miners to store verified data, which is superior to Arweave.
Sia is also a contract-based storage, which differs from both Filecoin and Arweave in that the data provider is not a miner, lowering the barrier to entry, simplicity and availability are the labels of its project, and according to The Block research, the volume of files stored is only about 10% of that of Filecoin. Storj is more similar to the centralized cloud storage project, it is just a supply-side incentive layer, also distributed node operations, node users can rent space for free and work with STORJ tokens for income, the project also advocates faster, cheaper and safer than traditional cloud storage services
Here are related data:
In addition to the differences in mechanism and consensus, Filecoin belongs to the latter in the decentralized storage track because of its large capacity but low threshold, and quickly took over the main market, which is certainly inseparable from the earlier IPFS operation. And Arweave’s innovative permanent storage and new incentive mechanism also has a place in the market and is indistinguishable from Filecoin in terms of storage scale (Arweave compatible with IPFS successfully diverted some users), but like Sia and Storj is far below Filecoin on the funding side.
Team
Investment and Financing & Cooperation
Arweave is invested by top investment and financing institutions such as Techstars, Multicoin, Coinbase and a16z, with strong capital behind it.
Summary
Arweav’s vision is to create an unalterable data platform with once pay to store permanently and retrieve freely. Arweave’s core technology is mainly implemented to optimize network efficiency, both in terms of throughput and network stability, but “never tamperable” is a double-edged sword. Arweave’s core technology is implemented to optimize the efficiency of the network, both in terms of throughput and network stability, but “never tamperable” is a double-edged sword, with the advantage of preventing malicious changes to information, facilitating the creation of a tamper-evident decentralized database and opening it up to those who wish to review and challenge its quality, and the disadvantage of requiring developers to upload files without any errors or omissions, which will inevitably result in a large number of abandoned files being stored on the network. The token economy is incentive for investors to hold for the long term, and the business model is to store Arweave for almost 10 years or more to make it more cost effective.
The Arweave ecosystem is built on its own DAPP platform, backward compatibility with IPFS, i.e. developers building on IPFS can seamlessly transition to Arweave and get permanent storage, and ecological cooperation, i.e. large-scale cooperation with Solana and Opensea, the US Weather Bureau, etc. Together, the ecosystem is aiming for “long-term growth” and is continuing to expand.
Filecoin, remains the leading decentralized storage project, and Arweave’s innovative permanent storage and new incentive mechanisms make it almost indistinguishable from Filecoin in terms of storage size (Arweave is compatible with IPFS and has successfully diverted some users), while other projects Sia and Storj are far below Filecoin in terms of funding.
Website：https://www.arweave.org/
References
Arweave White Paper, available at https://www.arweave.org/technology#papers
John Dantoni. Mapping out the Arweave’s ecosystem. The Block Research, available at: https://www.theblockresearch.com/mapping-out-arweaves-ecosystem-118779
Risk Warning
All articles of Hoo Research do not constitute any investment suggestions. Investment must take into account individual risk tolerances since it involves high risks and. It is strongly recommended to conduct an in-depth investigation of projects and make your own investment decisions carefully.
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