AO Launches Soon: Can Arweave Regain Momentum?
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AO Launches Soon: Can Arweave Regain Momentum?
In-depth analysis of Arweave's permanent storage architecture, AO's hyper-parallel computing model, and how they jointly drive the future development of on-chain autonomous agents.
Navigating Web3 tides with focused insightsOriginal: Arrington Capital
Translation: Yuliya, PANews
On February 8, 2025, the AO mainnet is set to launch—an important milestone for both the AI and cryptocurrency communities. AO aims to provide a highly parallel computing layer for agent-based applications, with Arweave’s permanent data storage network playing a pivotal role. This article will dive into Arweave’s architecture for permanent storage, AO’s ultra-parallel computing model, and how the two together can drive the future of on-chain autonomous agents. It will also examine the challenges facing AR and AO, market dynamics, and ways to participate.
Overview of Arweave
Arweave is a decentralized, permanent data storage network. Users pay a one-time fee to store data permanently. Unlike other storage networks that require ongoing payments (such as Filecoin), Arweave uses a unique block structure called the "blockweave." Each new block links not only to the previous block but also randomly to an earlier historical block, ensuring miners must hold the full historical data to generate new blocks—thus enabling long-term data preservation.
Arweave’s native token, AR, is used to pay for storage and reward miners. When users upload data and pay fees, approximately 85% of the tokens are deposited into a fund dedicated to future miner rewards. This design decouples miner incentives from user activity, strengthening confidence in permanent data storage.
Growth Trajectory
Since its launch in June 2018, Arweave saw significant growth in usage starting in 2021. The chart below tracks weekly data uploads since the network's inception:
Data storage peaked in September 2021, bottomed out in June 2023, and has been steadily climbing since. The next chart breaks down monthly uploaded data by type.
Arweave Usage Over Time (by size)
In 2021, the rise of NFTs drove the first major surge in demand for Arweave storage. Creators began uploading JPEGs and images directly to Arweave instead of relying on centralized hosting services, causing Arweave’s usage to spike. Thanks to its permanence and decentralization, Arweave became the ideal choice for storing NFT artwork data.
Since 2023, a series of new use cases have emerged. Among all categories, applications now consume the most storage space. These are primarily bundler applications that batch multiple transactions and data before posting them to Arweave. Examples include Bundlr (the team has rebranded to Irys.xyz and plans to launch their own data chain alongside the bundler) and Ardrive Turbo. The data these apps bundle includes content previously categorized as images, videos, or other blockchain data. Beyond these bundlers, other projects are leveraging Arweave’s permanent storage, including Lens social app Hey, publishing platform Mirror, and AI application Ritual.
In terms of transaction volume, while Arweave charges based on data size, growing use cases measured by transaction count may indicate the network’s future direction.
Arweave Usage Over Time (by number of transactions)
Transaction volume shows that the two fastest-growing use cases within the blockchain ecosystem are Redstone and AO.
Redstone
Redstone is one of the fastest-growing oracle networks in crypto, providing price data for multiple assets across all major EVM chains. Its rapid growth stems from expanding partnerships and product capabilities.
AO
AO is a parallel computing and message-passing layer built on top of Arweave. Although still in testnet phase, its mainnet is scheduled to launch in February 2025. AO is designed to provide efficient computing infrastructure for agent-based applications, leveraging Arweave’s permanent storage to support on-chain autonomous agents.
Criticisms of Arweave
Despite recognition of Arweave’s storage model, it faces criticism—particularly regarding its relatively low fee revenue. Below is a comparison of PE ratios across different blockchains:
In terms of price-to-fee ratio, Arweave ranks just above Avalanche among L1 chains. A lower ratio indicates users pay higher fees relative to the network’s fully diluted valuation (FDV). These figures reflect total fees generated but do not account for miner payouts or contributions from Arweave’s endowment fund. Since Arweave allocates a larger share of fees to miners, its short-term profitability may appear smaller compared to other chains.
AR Token Performance
In 2024, AR experienced notable growth following the announcement of the AO project. After the announcement, Arweave’s token price surged from under $10 to over $40 per token. The market showed strong interest in AO’s potential impact on crypto and anticipated increases in Arweave activity.
Starting February 2024, AR holders began accruing AO tokens simply by holding AR in their wallets. Currently, 33% of newly minted AO tokens are being distributed to holders and will become transferable upon the AO mainnet launch in February 2025.
After the mainnet launch, AR holders will continue to receive one-third of AO’s token emissions until the cap of 2.1 million AO tokens is reached. These rewards are calculated every five minutes at a monthly rate of 1.425% of the remaining supply, meaning issuance will decline over time.
AR Price (USD)
As overall markets declined, AR’s price also fell during the summer. Compared to other tokens with AI-related value propositions such as RENDER, TAO, and NEAR, AR has underperformed. On-chain capital flows may be a key factor behind this trend.
Since September 2024, market observers have noted a large holder continuously selling significant amounts of AR. While there are clues about this investor’s identity, it remains unconfirmed. The wallet address dRFuVE-s6-TgmykU4Zqn246AR2PIsf3HhBhZ0t5-WXE received over 10 million AR tokens in November 2021 (total AR supply is under 66 million). This wallet had transaction history prior to 2023 and still held 5 million tokens by 2024 (worth approximately $80 million at the current price of $16).
On September 6, this wallet transferred the remaining 5 million tokens to two new addresses. These addresses subsequently moved the tokens to exchanges, suggesting they may belong to market makers. Of the 5 million tokens, around 1.35 million remain in addresses believed to be market makers, pending further exchange deposits.
The fact that both addresses sent tokens to the same destination exchange address suggests a single market maker operation. This wave of selling represents a substantial portion of circulating supply—over 7% of total AR tokens. Market analysts believe downward pressure on AR could ease once the remaining tokens are fully sold.
Overview of AO
AO is a decentralized “ultra-parallel” network that breaks through traditional limitations on the scale and type of on-chain computation, while maintaining verifiability of all operations. At its core, AO features a message-passing layer that supports independent and parallel processes, leveraging Arweave for permanent data storage to ensure all updates and interactions are permanently recorded.
"AO" stands for "Actor-Oriented," allowing developers to build modular programs (actors), where each actor can choose its own virtual machine (VM), consensus mechanism, and payment model, while communicating with others via standardized message formats. This design enables cloud applications (like Amazon EC2) to integrate with AO’s decentralized network and collaborate with decentralized smart contracts toward shared goals.
Key Features of AO
Existing Applications
Some AO agents are already in use. For example, one agent continuously optimizes yield across multiple lending protocols; another automatically executes dollar-cost averaging strategies on DEXs based on user-defined parameters. These agents use trusted execution environments (TEE) to protect user privacy, allowing private key custody and fully autonomous operation without additional input.
Auto-Wake Functionality
Unlike other Layer 1 networks, programs on AO can autonomously “wake up” without external calls. This design enables fully autonomous services. For instance, a yield optimization agent can reallocate assets to higher-yield strategies while the user sleeps—no manual trigger required.
AO Architecture
1. Processes:
A process is equivalent to a single “actor” on AO, starting from an initial state and recording all received messages. Data is stored on Arweave, ensuring it cannot be lost or censored. By separating data logging from actual computation, AO can handle tasks much larger than typical blockchains.
2. Messages:
Messages are the means of interaction between processes and users, transmitted across the network with unique IDs for tracking. Message delivery requires correctness, ensuring permanent record-keeping while offering flexibility in flow control.
3. Scheduler Units:
Scheduler Units assign incrementing time-slot numbers to messages and ensure they are uploaded to Arweave, maintaining a consistent sequence of message records. They can be either centralized or decentralized depending on use case requirements.
4. Compute Units:
Compute Units execute the actual processing of processes. They freely select which processes to compute, creating a competitive market for computational services. Upon completing work, they return signed proofs of state changes.
5. Messenger Units:
Messenger Units handle message transmission across the network, ensuring messages are passed from Scheduler Units (after being recorded on Arweave) to Compute Units until all operations are complete.
Challenges Facing AO
AO faces several key challenges. Every network eventually needs to establish dominance in one or two verticals. For example, Arbitrum focuses on DeFi, Solana excels in Meme coins and DePIN, and IMX targets gaming. Arweave has historically centered on content storage, blockchain archiving, and oracle data permanence. AO aims to redefine decentralized content and DeFi, particularly in advancing AI agents within DeFi—a domain presenting significant hurdles.
1. Slow Adoption in DeFi
While AO seeks to merge DeFi with AI, adoption of AI agents in DeFi remains slow, with no breakthrough applications yet. The closest attempts involve bringing machine learning models on-chain for yield optimization. However, these models tend to be simplistic, mainly comparing yield forecasts and strategy-switching costs. In contrast, large language models exhibit high non-linearity and nondeterminism, still struggling with basic computational tasks.
2. Non-DeFi Blockchain Background
Arweave is not traditionally a DeFi-focused public chain, and past attempts to build DEXs on it have failed. Therefore, AO must attract both Arweave’s existing community and new user groups. The team’s tokenomics reflect a deep understanding of this challenge—for example, rewarding users who bridge DAI and stETH to attract capital. Currently, AO’s TVL stands at $578 million; maintaining active engagement of this capital is crucial.
Tokenomics and Participation
After the mainnet launch in February 2025, anyone can contribute computing resources or deploy their own processes and agents. Cross-chain bridges will open, enabling the transfer of any token onto the AO network. As more participants join and develop advanced AI or automation services, AO’s decentralized and efficient architecture will unlock new possibilities in domains requiring trust and high computational power.
Airdrop Mechanism
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Total Supply & Release Schedule: AO has a total supply of 21 million tokens, released in halving intervals.
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Airdrop Eligibility: AR holders receive AO airdrops proportionally based on holdings; users who bridge DAI and stETH are also eligible.
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Distribution Method: Since February 27, 2024, 1.03 million AO tokens have been distributed to holders and bridgers; AR balances are recorded every 5 minutes to determine allocation.
Ways to Participate
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Hold AR Tokens: One-third of newly issued AO tokens are allocated to AR holders
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Bridge DAI or stETH: Two-thirds of AO tokens are currently allocated to cross-chain users
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Use AO Mainnet Applications: Multiple trading and lending platforms will be available post-launch
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Provide Computing Resources: Anyone can permissionlessly contribute computing power to various processes on AO
* Disclaimer: Arrington Capital is an early investor in Arweave and holds AR and AO tokens.
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