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Introduction

Arweave has been a trailblazer in decentralized storage, providing an immutable data storage protocol on a blockchain-like structure known as the blockweave. The recent announcement of AO, a new scalable, distributed computing system which leverages the Arweave network, has sparked significant interest. We’ll dissect what AO is and how it contrasts with competitors. We’ll also delve into the value that AO brings to Arweave as an investment.

AO

The AO computer is a decentralized, actor-oriented computing platform built on the Arweave network. It creates a unified computing environment across diverse distributed nodes, allowing unlimited parallel processes to run simultaneously. These processes communicate and coordinate through an open message-passing system, forming a web-like structure of interconnected computations.

AO’s key innovation lies in its ability to support large-scale, unrestricted computation while maintaining network verifiability. Unlike traditional decentralized computing systems, AO does not impose protocol-level limitations on the size or form of computations. The platform’s modular architecture allows for the integration of various virtual machines, security models, and payment options, all unified on a global computing platform. This design approach makes AO highly adaptable and capable of supporting diverse workloads, from simple smart contracts to complex, data-intensive applications.

AO presents users with a revolutionary concept: a shared, decentralized computer that transcends traditional boundaries of server-specific execution and centralized control. Within this innovative ecosystem, users can initiate and run multiple processes with unprecedented freedom and security. Once activated, these processes operate with cryptographic assurances, guaranteeing unbiased and perpetual execution. 

What makes AO different from other decentralized computing systems?

• Because AO is not focused on maintaining a single global state, nodes can run independent processes in parallel. This means that adding nodes scales the computational power and throughput.
• Holographic state: rather than requiring consensus on the state (think output or result) of a process, AO focuses on ensuring that logs of process messages are written to and available on Arweave. This is a time and cost savings as you don’t need to compute a process to agree on what the eventual state will be. 

AO’s Advantages over existing architectures:

• Ethereum & similar smart contract platforms:
  • Ethereum and similar platforms rely on a shared memory model. All nodes have access to the same memory space, which acts as a single global state. This creates a bottleneck because nodes need to agree on the state before processing new transactions.
  • In contrast, AO ditches the shared memory model in favor of message passing. Nodes operate independently, communicating with each other by sending messages. This allows for parallel processing, where multiple threads can execute tasks concurrently.
• Akash & decentralized compute:
  • “These focus on decentralized compute hosting services but give up on trustless applications such as smart contracts.”
  • AO maintains smart contract capabilities using its holographic state mechanism:
    • Processes can be triggered by sending a message to wake up and perform an action.
    • Distributed networks of compute units offer cryptographic guarantees on correctness.

Components of the AO computer

The AO computer consists of several key components that work together to create a decentralized, parallel computing environment. Here’s a quick synopsis of the main units and their purposes:

• Scheduler Units (SUs) – Scheduler Units, are responsible for coordinating and managing the execution of processes within the AO computer. They handle task allocation, prioritization, and ensure efficient utilization of resources across the network. Scheduler Units play a crucial role in maintaining the parallel nature of AO’s architecture.
• Compute Units (CUs) –  Compute Units are the workhorses of the AO computer. These units perform the actual computational tasks and execute the processes assigned by the Scheduler Units. CUs can run various types of virtual machines and handle different workloads, allowing for flexibility in the types of computations that can be performed on the network.
• Messenger Units (MUs) – Messenger Units, facilitate communication between different processes and components within the AO computer. They handle the passing of messages between various units, ensuring that information flows smoothly across the network. MUs are essential for maintaining the actor-oriented nature of AO, where processes communicate through message passing rather than shared memory.
  

These components work together to create AO’s unique architecture, which allows for unlimited parallel processes and modularity. The system’s design enables users to choose the virtual machines, sequencing models, and message-passing security guarantees that best suit their needs. 

AO’s Value Proposition to Arweave

AO has the potential to significantly enhance Arweave investment potential. For starters, AO uses Arweave to store and make available all message logs related to processes. Therefore, any success that AO enjoys directly impacts demand for Arweave storage. 

Data uploaded to Arweave inflected upwards in June 2023, well before AO’s testnet went live in February 2024. With over 3,000 developers joining the AO ecosystem in just a few weeks, the future impact on Arweave storage demand can become quite substantial. In addition, AO’s computational scalability is well-suited for decentralized AI, which positions AO and Arweave to benefit from the growing trend of AI in blockchain. 

In addition, AO’s native token has no pre-mine. Rather, AO are issued to Arweave token holders as well as to bridgers of stETH to AO. This mechanism is designed to create a fair launch of the AO token, but also results in a yield for holding AR token, making AR a more attractive investment.  

AO Supply and Distribution:

• Total supply: 21 million tokens (similar to Bitcoin)
• Halving cycle: Every 4 years
• Distribution: Tokens are minted every 5 minutes (although the amount of newly minted tokens halves every 4 years, there is no abrupt “halving event”. Rather, the number of new tokens decreases slightly every month producing a smooth release schedule.)
• Monthly minting rate: 1.425% of the remaining supply
• As of June 13, 2024, 1.0387 million AO tokens were in existence

36% of AO tokens will be distributed to AR token holders over time. The other 64% of AO token issuance is distributed as rewards for bridging assets to the AO network. While bridging assets is currently more heavily rewarded than holding AR, it nonetheless creates an additional incentive to own AR. Currently, AO tokens are non-transferable until at least 15% of the total supply has been minted, estimated to occur in approximately 6-7 months.

Quantifying AR Yield from AO Issuance

To quantify the yield from AO issuance we need to make assumptions about AO’s valuation. As AO is defining its own category of decentralized parallel computing, albeit with some smart contract-like capabilities, there aren’t many comparisons available in the public markets. Pure decentralized computing systems tend to be valued lower than smart contract L1s. To take a conservative approach, we will comp AO to decentralized computing systems as a base case.

We’ll assume the average FDV of $1.2B for AO. This helps us derive the potential yield for holding AR due to AO issuance.

Conclusion

The introduction of AO is an exciting development that combines flexibility, parallel execution, computational scalability, and cryptographic guarantees. This new design promises to enable more complex applications than are currently feasible on typical smart contract platforms, including decentralized AI applications. Arweave has quietly developed a fervent community and the nascent AO ecosystem has already attracted a few thousand active developers.  The use of Arweave as a base-layer for the design of AO as well as the launch of the AO token brings added value to Arweave making it a more compelling investment going forward. 

This article has been written and prepared by Delleon, a member of the GCR Research Team, a group of dedicated professionals with extensive knowledge and expertise in their field. Committed to staying current with industry developments and providing accurate and valuable information.  GlobalCoinResearch.com is a trusted source for insightful news, research, and analysis.

Disclaimer: Investing carries with it inherent risks, including but not limited to technical, operational, and human errors, as well as platform failures. The content provided is purely for educational purposes and should not be considered as financial advice. The authors of this content are not professional or licensed financial advisors and the views expressed are their own and do not represent the opinions of any organization they may be affiliated with.