Arweave - an old dog with new tricks?
Discussing Arweave's rebirth
Founded in 2017, Arweave has spent most of its life as a decentralised storage provider. With a vision similar to Filecoin, Arweave seeks to displace centralised storage providers like Google, Amazon and Microsoft by storing files permanently across a distributed network of computers. Arweave uses a graph of blocks to store its data whereby each block is linked to two earlier blocks.
This storage offering has been successful by all accounts with the network steadily growing over time:
In fact, in a partnership between Solana and Arweave, Arweave effectively acts as a storage backup for all Solana state or a “decentralised permanent data storage solution of ledger data, ensuring the data can be always retrieved as required”. Decentralised Storage Protocols like Filecoin and Arweave have also been slated to be potentially important pieces of the Crypto x AI revolution. With the emergence of AI, Decentralised Storage becomes particularly prevalent given the need for Data Sovereignty, Data Provenance and Increased Storage Demand which we discuss at length in our recent Filecoin report. While the AI narrative is an interesting one and can certainly be supportive for the AR token from a price perspective, we believe the most recent AO Computer development is even more impactful.
The AO Computer
On February 13th the Arweave team announced AO, “the hyper parallel computer”…
The AO Computer is a parallelised system which aims to merge the Web 3 benefits of trust minimisation with the scalability and speed of traditional Web 2 computing environments. Their parallelised system should allow AO to offer an experience similar to what Solana and MOVE-based virtual machines claim to offer: extremely high speeds and low transaction costs. Some commentators suggest that the architecture will allow even better results than those shown by existing Web 3 architectures like Solana/Move and will be very similar to Web 2 systems. The technical details about how the AO Computer functions and has been implemented can be seen on their spec page, the following visual shows a rough schema:
AO has the additional edge of being able to read/write data from Arweave’s decentralised storage solution. The combination of having built in storage along with next generation parallelised compute could usher in some very interesting potential use cases for AO specifically as it pertains to AI. We are already seeing Autonomous bots being deployed on testnet:
The AO architecture is very well designed to support the autonomous agents use case, the applications could range from tokenised gaming as seen in the testnet example to AI chatbots. Machine learning and deploying AI models at scale could be another potential usecase.
Testnet data is rolling in and teams building on AO are already popping up, for example, Liteseed who are building a faster and better way to upload data. It is still very early days for AO but the potential is significant and from a market perspective, this has allowed for AR to begin repricing from a middleware/storage provider to a fully fledged L1 ecosystem token. Given that Filecoin have their Filecoin Virtual Machine, the launch of AO puts AR on a similar footing to FIL in terms of having an execution offering. While Filecoin are far ahead in terms of their storage metrics this could still put pressure on the valuation differential.
Other Key Drivers
The steady growth of the underlying storage network, narrative overlap with Crypto x AI and the launch of the AO computer are all very compelling fundamental reasons to consider AR. Beyond these more fundamental-related drivers, there are a few other very supportive structural factors which could make this token an attractive token to hold (NFA)…
AR supply is fully circulating meaning that all team and investor tokens are liquid so there is no vesting or steep supply overhang to be concerned about. Having spoken with funds around the industry it is clear that there is not a great deal of supply for this token (read: no sellers), a lot of the large OTC desks either don’t trade it or don’t have any available for sale. We have already seen significant moves in AR and this could continue if more funds become interested in the story. Another potential catalyst on this front would be a Coinbase listing as AR is not yet tradeable on the exchange nor is it a supported asset for Coinbase Custody - this would be meaningful for institutional adoption and likely accretive for AR price.
On a final note, with the launch of AO computer, many who have been following Arweave since genesis will have recognised that the team are clearly taking a different marketing approach to that they have taken in the past. They are aggressively marketing now more than ever with branding and high quality marketing videos. The team now clearly “get it” from a narrative perspective which is a huge pivot in the project.
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