CoinWorld reported:
1. Building a Value Internet Based on Distributed Ledger
The traditional internet based on the TCP/IP protocol family is known as the Information Internet, as it efficiently and cost-effectively enables the expression, replication, and transmission of information. For example, chatting and sending pictures on WeChat, uploading and publishing videos on YouTube, and remote office work on Feishu.
The emergence of blockchain has brought about a revolution in the underlying protocol architecture of the Internet. Taking the three-layer protocol stack of the Bitcoin blockchain as an example, as shown in Figure 1-1.
Figure 1-1 Three-layer technology stack of BTC
$BTC can be expressed and transmitted, relying on the script software that runs Bitcoin, which is built on top of the underlying Bitcoin blockchain. Generally speaking, a blockchain is formed by linking different blocks together with hash pointers. Each block records transactions and related data, including block version, hash value, Merkle root, user address, transaction amount, and transaction time, etc. A single block can be regarded as a page of transaction records, and the connection of all blocks forms a complete ledger.
At the same time, since blockchain is built on P2P network and POW consensus mechanism, it has characteristics of decentralization, transparency, permissionless, verifiability, traceability, anti-loss, and tamper resistance. Therefore, the BTC blockchain is essentially a distributed ledger about $BTC, with global consensus.
Importantly, the three-layer protocol stack built on the distributed ledger of $BTC has achieved the protocolization of currency, creating the world’s first programmable encrypted digital currency, which means that currency no longer depends on centralized third parties and can be issued, traded, paid, and transmitted on the Internet. It can be said that this marks the beginning of the Value Internet.
Bitcoin’s innovation has led people to discover blockchain (distributed ledger) and based on this, reconstruct the Internet at various levels through software protocols, promoting the formation and prosperity of the Value Internet, as shown in Figure 1-2.
Figure 1-2 Distributed ledger promotes the formation and development of the Value Internet
These software protocols are all accompanied by native Tokens and have built tokenomics around Tokens, achieving the assetization of protocols. Therefore, the protocol framework of the entire blockchain realizes the protocolization of currency, the assetization of protocols, and the integration of currency, assets, and software protocols into a unified Value Internet.
In summary, compared with the traditional Information Internet, the blockchain-based distributed ledger has promoted the formation of the concept of the Value Internet and has conducted in-depth exploration and innovation around “value” in practice.
2. Token-Oriented Distributed Ledger – Building a Financial Value System
Since the birth of Bitcoin, blockchain has developed for 15 years and has gone through several cycles. Why is its main application still focused on the issuance of encrypted digital assets and decentralized finance (such as DeFi, NFTFi, GameFi, SocialFi, etc.) based on encrypted digital assets? Let’s explore the logic behind this based on the two largest public chains, Bitcoin and Ethereum, in terms of current market value.
Public chains are the core infrastructure for the development of ecosystems, and other protocols, smart contracts, or DApps are built on the public chains.
Different public chains are essentially different distributed ledgers. It can be said that to a large extent, the underlying architecture of distributed ledgers determines and limits the construction of upper-layer applications.
Bitcoin was originally created by Satoshi Nakamoto. Its design was intended to be a peer-to-peer electronic cash system, focusing on realizing the transfer, payment, and simple transaction functions of $BTC. The design of Bitcoin is very conservative and deliberately limits its scalability. Therefore, before the advent of smart contracts, Bitcoin had almost no ecosystem and was just a distributed ledger oriented towards $BTC.
Compared to Bitcoin, Ethereum does have stronger scalability, mainly manifested in its ability to support the construction of various smart contracts and decentralized applications (DApps). This has triggered a series of trends in the blockchain field, such as ICO, DeFi, NFT, etc. These technologies and applications have not only made the Ethereum ecosystem prosperous but also attracted widespread attention and participation globally.
However, it is obvious that although the industry had high expectations for Ethereum’s “breaking out” at that time, the entire ecosystem was still mainly focused on the issuance of encrypted digital assets and decentralized finance closely related to assets, to the extent that the Ethereum public chain has generally developed into a settlement layer for financial applications.
Returning to the essence that the Ethereum public chain is a distributed ledger, perhaps we can better understand its current development status. If we regard this distributed ledger as a production system, the core element it processes is Token. Compared to the distributed ledger of Bitcoin, Ethereum supports various types of Tokens, such as FT, SFT, and NFT, numbering in the tens of thousands. These Tokens exist on Ethereum in the form of smart contracts, allowing them to participate in various complex processing, transactions, and circulation processes. This establishes a closely related, combinable, and prosperous financial system.
Looking at other public ledger accounts besides Bitcoin and Ethereum, they have basically not deviated from this framework paradigm: Token is the core element of the ledger, but they each have their own focus on computing power, privacy, cross-chain asset, protocol interoperability, etc., to meet different application scenarios and user needs.
So far, the cryptocurrency industry has developed decentralized finance (various blockchain-based intelligent digital contracts) from cryptocurrencies (assets), but has not yet developed a scaled encrypted digital economy, let alone its significance to the real economy and the sustainable development of society. In previous articles (see Appendix 1), I have discussed the interrelationships between currency, assets, finance, the economy, and social development. I won’t go into detail here, but their relationships can be abstractly represented by Figure 2-1.
Figure 2-1 Interrelationships between financial assets, contracts, and economic activities
In this figure, if the core element at the center is still only Token, then its capabilities, as developed in reality, mainly lie in the construction of today’s financial Value Internet. However, I believe that the Value Internet should not only be about financial value but also include economic value. If the core element is no longer just Token but Data, what kind of scene will it bring?
I believe this is precisely what Arweave is doing and worth further exploration.
3. Three Steps of Data – Building a Data-Oriented Distributed Ledger
Although Arweave has always been classified as a decentralized storage project, it does not compete at the same level as storage projects such as Filecoin, Sia, and Storj, because Arweave has the capability of “decentralized permanent storage” and can build applications based on the “Storage Consensus Paradigm (SCP)” to promote data storage on the chain, supporting the transformation of “data resources” into “consensus data” and further becoming “data elements.” Thus, the “Three Steps of Data” makes Arweave a data-oriented distributed ledger, providing innovative resources and scalability different from other decentralized storage projects, bringing feasibility to the innovation and development of the encrypted digital economy, as shown in Figure 3-1.
Figure 3-1 The Three Steps of Data build a data-oriented distributed ledger, bringing innovation and development
3.1 Data Resources: Decentralized Permanent Storage
Arweave can permanently store data of any type and size, including not only encrypted digital currencies or assets (Tokens, FT/SFT/NFT) but also documents, images, audio and video, web pages, games, legal contracts, program codes, and holographic states.
These data are stored on the chain with one-time payment, permanent storage, and open reading. Is this feasible? The Arweave Yellow Paper analyzes this from two aspects: economic feasibility and the feasibility of the permanent storage mechanism.
Regarding economic feasibility, the Yellow Paper mentions that the cost of storage has been decreasing at a rate of about 30% per year in the past few decades. The cost will eventually become a constant after an infinite number of years, providing an opportunity for permanent storage with finite costs and opening up the market for permanent storage. In terms of storage pricing, the protocol adopts a storage endowment mechanism to incentivize miners to permanently store any amount of data. In terms of actual costs, it costs about $2 to permanently store 1GB of data, which has good cost-effectiveness.
Regarding the implementation of the permanent storage mechanism, Arweave adopts the PoW + PoA (Proof of Access) mining mechanism to incentivize miners to mine valid data. The more data is stored, the higher the income, and storing rare data results in higher returns. These measures ensure a data replication rate of over 90%, so data will not be lost due to the failure of a single node or server malfunction, ensuring durability and reliability.
In summary, by adding permanent on-chain storage to arbitrary data, Arweave will accumulate massive on-chain data resources, build a public knowledge base in the process of human development, lay the foundation for forming common cognition, and provide possibilities for introducing SCP paradigms to build applications.
3.2 Consensus Data: Storage Consensus Paradigm (SCP)
Arweave introduces the Storage-based Consensus Paradigm (SCP), which is an abstraction and paradigm extraction of the SmartWeave concept. SmartWeave is the smart contract on Arweave, characterized by the separation of storage and computation, with storage on the chain and computation off the chain.
In terms of computation, SCP uses off-chain smart contracts that can run on any device with computing power, which means that computational performance is not constrained by on-chain consensus rules. The computational performance can be infinitely scalable, achieving excellent performance similar to traditional applications, and bringing possibilities for running blockchain applications that require large-scale data processing, intensive computing, and real-time interaction, such as machine learning, graphics rendering, online games, and social interaction. The concept of ultra-parallel computation AO is generated based on this and will be discussed further in the future.
In terms of storage, storage is consensus, forming consensus data. We can understand it in the following way:
First, the input of computation comes from the stored data in the Arweave blockchain, and the generated state in the computation is also stored on the chain and stored in the blockchain, similar to how a hard disk works in a computer. However, its role is not only to store various types of data but also to ensure that the stored data is resistant to loss, tampering, and traceability, making the stored data a trusted data source.
Second, the source program of the smart contract and all its input parameters are sequentially stored on the blockchain, ensuring that the computation produces deterministic states. This ensures that the computation only produces deterministic states, making the data generated by the computation consensus data, which can be trusted.
In conclusion, Arweave’s ability to permanently store arbitrary data accumulates massive on-chain data resources, and the introduction of the Storage Consensus Paradigm (SCP) enables the construction of applications that go beyond traditional decentralized storage projects. This brings feasibility to the innovation and development of the encrypted digital economy.As a professional translator, I will translate this news article into English using a descriptive tone. The translated content will be accurate and coherent, while retaining proper nouns and all 
references. The meaning will remain the same without any grammatical errors. No punctuation will be added at the end of the translation.
User-side generation and verification of statuses have become feasible, creating trusted terminals that submit trustworthy data to the blockchain. Together, they form the consensus data on the chain, indicating that data on the Arweave network is not just stored content but also carries a consensus value. It is not merely static information storage but has attained a higher level of functionality and significance, serving as an object for verification and participation in consensus, supporting various applications and smart contracts on the blockchain.
Therefore, Arweave is not only a storage platform but also a distributed ledger with data consistency consensus, offering a new paradigm and solution for the storage, sharing, and utilization of data on the blockchain.
Based on this, the Storage-based Consensus Paradigm (SCP) has made two significant contributions: first, it promotes data resources to become consensus data, laying the foundation for the transformation of data into productive materials; second, computational performance can be infinitely scalable, accelerating the release of productivity.
Data Elements: Circulation and Production Collaboration of Data
As mentioned above, decentralized permanent storage builds data resources, serving as the source of data. Based on the storage-based consensus paradigm, a mechanism is formed that creates consensus data, representing trustworthy data. How will this data be effective? This leads to discussions on the existence form of data on Arweave. In summary, regardless of the type or size of data uploaded to Arweave, it is considered an Atomic Asset, following the NFT paradigm of data on the Arweave chain. Viewing data as atomic assets on Arweave brings multiple advantages and solutions, especially in data circulation, production collaboration, and asset management.
Data identification and ownership confirmation
Each data uploaded to Arweave is considered an atomic asset with a unique transaction ID. This design makes data easy to identify and track since all asset data, metadata, and contracts are tied to the same transaction ID. Each data item can be clearly attributed to its creator or uploader, facilitating ownership confirmation.
Monetization and pricing of data
As atomic assets, data can be monetized as a new form of digital asset, allowing price discovery through circulation and trading in the market.
Distribution of benefits and collaborative innovation
With features like easy identification, ownership attribution, monetization, and pricing, atomic assets can have a clearer model for benefit distribution, automated and transparent execution through smart contracts. This makes data more easily usable by other applications or services, promoting collaboration and innovation.
Arweave, as a platform providing decentralized permanent storage, has endowed data with new forms and functions through the concept of atomic assets. This approach not only addresses fundamental issues like data identification, ownership, pricing, and benefit distribution but also unleashes the liquidity and potential applications of data, advancing the digitization of data assets in the digital economy.
These examples demonstrate how to leverage the concept of atomic assets on Arweave to drive innovative utilization of various data assets:
– Purchasing big data for specific scenarios to serve machine learning and artificial intelligence.
– Using audiovisual data as atomic assets to build copyright consumption markets and enable secondary development without permission.
– Utilizing gamers’ identity and experience data to establish trusted, decentralized player reputation systems.
Even web2 applications, combined with Arweave’s consensus data, can drive the transition from web2 to web3, promoting integrated development.
Moreover, platforms like Lens, Opensea, Mirror, Solana, Cosmos, Avalanche, and others have trusted and recognized Arweave’s decentralized storage and consensus data model by storing data on Arweave. This practice not only provides data persistence and verifiability to their users but also fosters the possibility of cross-chain interoperability and collaboration based on consensus data among various public chains and applications.
In conclusion, Arweave has moved beyond the development paradigm based solely on tokens, transitioning from data resources to consensus data, and further to data elements. Supported by SCP, Arweave has broken traditional constraints, creating new data production materials, unleashing high-performance computational power on a large scale, and reconstructing production relations among subjects in the process of data circulation, exchange, production, consumption, and value distribution.
Arweave is poised to bring new momentum to the innovative development of the cryptocurrency industry, constructing a genuine encrypted digital economic system.
Building an Economic Value System Based on AR+AO Framework with SCP
Typically, blockchain faces the challenge of an imbalance between strong verification and weak computation, known as the blockchain trilemma. However, SCP successfully eliminates this constraint by separating consensus (storage) and computation on Arweave, enabling unlimited scalability of computation. AO, based on the core theory of SCP, aims to achieve the interconnection and collaboration of large-scale parallel computers on the Arweave network, making it feasible for the realization of large-scale computational applications based on data.
AO’s Modular Architecture and Advantages
AO is a “verifiable distributed computing system” built on top of Arweave, implementing the Storage-based Consensus Paradigm (SCP). It consists of three basic units: Messenger Unit (MU), Scheduler Unit (SU), and Compute Unit (CU), as shown in the modular architecture in Figure 4-1.
Figure 4-1: Modular AO computing architecture (image from the AO whitepaper)
This modular architecture separates computation from storage, where MU, SU, CU, and Arweave are independent modules but interconnected and interact with each other.
– Messenger Unit (MU): responsible for sending information to the appropriate SU for processing, then delivering it to CU for computation, and returning the computation results to SU, repeating this process continuously.
– Scheduler Unit (SU): responsible for scheduling and message ordering, uploading messages to Arweave.
– Compute Unit (CU): accepts messages, performs computations, achieves state transitions, and uploads them to Arweave.
This architecture demonstrates advantages in computational performance, consensus data, and application innovation:
