Arweave Review: Permanent Decentralized Storage

The 21^st century has seen an interesting shift in many businesses as innovators have found ways to make idle assets useful. Uber is a great example of this. They have transformed the taxi industry by using cars that would otherwise sit idle as taxi’s.

Airbnb has done something similar with the hotel industry by making it possible for owners to make money off otherwise unused rooms, apartments, and the like. Now there are also decentralized storage networks being created that look to disrupt the cloud storage industry by making idle computing resources useful.

Considering the huge growth in cloud computing over the past decade it is an industry well worth disrupting. Cloud computing has done away with the paradigm of physical servers at every business location, and has replaced it with a convenient technology.

It has also birthed some technology giants such as Amazon Web Services, Microsoft Azure, and Google Cloud. It’s estimated that the global market for cloud storage solutions will continue growing at 22.3% a year and reach $137.3 billion by 2025. That’s an enormous market, and it is also ripe for disruption.

Blockchain creators recognized this potential all the way back in 2016, and this led to the creation of several well known blockchain-based file storage projects such as Filecoin, Sia, and Storj. One project that is growing in the awareness of the blockchain community is Arweave. It has come a bit later to the party, with a mainnet launched in 2018, but is looking at decentralized file storage from a different perspective.

Arweave is targeting permanent file storage, which is an area that not even the legacy cloud computing companies can provide. So, rather than competing with the legacy providers on the basis of cost and performance, Arweave seeks to create a service that wasn’t previously available or even possible through the use of permissionless crypto-economic incentives.

The new model being introduced by Arweave is one that the legacy cloud computing services haven’t even been able to offer – permanent storage.

In this model users pay a single fee upfront and are then able to store their data forever. This creates an entirely new market that would likely be worth billions. Arweave accomplishes this through the use of crypto-economic game theory to incentivize miners in such a way that they can ensure the permanence, reliability, and availability of the stored data.

Arweave Technology

There are four core technologies that are behind the Arweave protocol, helping it to deliver a high throughput, low cost, permanent storage blockchain. These four technologies are:

• Blockweave
• Succinct Random Proof of Access
• Wildfire
• Blockshadows

While these technologies are separate, they are also intertwined, and each plays a pivotal role in creating a new type of network suited for both fast transactions and low cost permanent storage.

Blockweave

Blockweave is the data structure technology that allows nodes to join the Arweave network immediately, without any waiting period. When contrasted with other blockchains the Arweave chain gives nodes an option to store just a part of the full blockchain or the entire blockchain if they choose. This means that a new node doesn’t need to download and synch the entire blockchain. Instead it can download just the latest block. Inside that latest block are two new innovations.

Blockhash: A list of the hashes of all previous blocks. This will ultimately enable previous blocks to be validated more quickly since the overhead communication will be lessened.

Wallet list: A list of all active wallets. By including this, transactions can be verified without possessing the last transaction block.

These two innovations only work because Arweave aims to provide constant verification over the transactions.

Succinct Random Proof of Access

Succinct Proofs of Random Access (SPoRA) are a unique type of consensus that was added to Arweave in February 2021. Prior to this change the blockchain was running a hybrid Proof of Work consensus that added a reference to past network data. This was known as Proof of Access. The change allows Arweave to take advantage of two opportunities that improve the consensus mechanism.

The first change was to align mining profitability with speed of data access. With the prior PoA mechanism Arweave was able to achieve the goals of permanent storage and data access, but there was no significant incentive for miners to retrieve data quickly.

Because of this miners found an advantage in using the remote storage pool rather than maintaining a separate decentralized node of their own. With SPoRA miners have an incentive to replicate data more rapidly, which puts an end to CPU domination of the chain. Under SPoRA every joule of energy contributed to the network is required to be accompanied by a share of the dataset.

Thus, SPoRA creates a more decentralized and efficient blockweave by disincentivizing resource pooling among CPUs.

The second change reduces the amount of energy required in the maintenance of the network. While PoW is known as a very secure and reliable consensus mechanism, it is also well known to be extremely energy intensive. The SPoRA mechanism is significantly less energy intensive, which reduces the overhead for miners and creates a cleaner and more efficient system. Plus, all of the energy used in the SPoRA mechanism also contributes to data storage and retrieval. This creates a better balance between resource usage and utility of the blockchain.

Wildfire

Arweave also used its own innovation in order to create a network of nodes capable of storing data and providing access to that data. It is called Wildfire and it is the incentive system for miners to provide improved data access.

In essence Wildfire is a ranking system that helps in the rapid creation of blocks and distribution of data. You can think of it in terms of uploading and downloading data. The nodes that provide excellent upload and download access and speeds receive better ranking within the system. Nodes that provide subpar service are ranked lower, and the system removes those nodes with the lowest ranking, thus ensuring that the network remains responsive and quick.

Ultimately this leads to a meritocratic and honest system with a network topology optimized for fast and free data storage and retrieval.

Blockshadows

Other blockchains function by sending a hash of the block hash list and a hash of the wallet list, and ultimately this allows them to share the entire block and all its data to all the nodes in the network. Unfortunately this eventually leads to larger block sizes being required, and while this increases the number of transactions per block, it also slows the transmission rates across the network. Ultimately this can lead to an increase in the time required to reach consensus.

Arweave created a data communication system they call Blockshadows, which allows the network to partially strip down the data sent with each block, while still allowing nodes to reach consensus and validation. Blockshadows decouples transactions from blocks, rather than requiring massive amounts of data to be sent across the network with each block consensus. Arweave can reach a theoretical limit of 5,000 transactions per second using the Blockshadows method.

Arweave 2.0

Arweave 2.0 introduces two new features to the blockchain. These are Fast Write and Bundled Transactions.

Fast Write keeps the proof of a transaction occurring in a Merkle root accessible on the network while pushing data to local storage on nodes that wish to carry the information. This makes the network lighter and faster.

Bundled transactions are a Layer 2 technology. Each Arweave transaction can be moved off-chain, mixed with other transactions and then placed back onto the main chain as one large transaction.

Together these scaling technologies make storage on Arweave near “infinite” according to Arweave founder Sam Williams.

In truth these two technologies aren’t so different from the options that Ethereum is considering as part of Ethereum 2.0. The research team at Ethereum is said to be considering stateless clients and polynomial commitments, both of which can act as lightweight digital receipts for transactions.

Already some Ethereum platforms have incorporated “Rollups”, which is a similar Layer 2 technology that scales transactions by moving them off-chain.

SmartWeave “Lazy” Smart Contracts

Traditional smart contract blockchains like Ethereum and EOS are designed so that every node executes each transaction and rejects those that contain any invalid operations. Arweave’s SmartWeave smart contracts approach this from a different angle.

In SmartWeave smart contracts a system of lazy evaluation is used where the process of validation is pushed to the smart contract users rather than to the nodes. Any time a user interacts with a smart contract in Arweave they are required to evaluate the prior transactions that were executed on the dApp until reaching the end of the chain of valid state transitions. Once they reach the end of the contract the user then evaluates their own call to the contract and writes the resulting state transition to the network.

This is an ongoing process that repeats continually, with each new user validating the past transactions and then adding their own state transitions.

With a model such as this the network is utilized as a generic data consensus and sharing layer, and the network users take care of verifying all the transactions on any of the contracts they wish to interact with.

“Smart contract interactions are placed inside Arweave blocks, then evaluated and verified by users during interaction.”

One of the positives to come out of this decision to use “lazy” smart contracts is that it frees up validators from the network, and thus rids the network for the need to pay gas or transaction fees for every smart contract interaction. Instead developers are free to create their vision without worrying about the quantity of computations in the smart contract, and who will pay for those computations.

In addition to providing a solid base for scalable smart contract execution, these “lazy” smart contract executions also provides a framework for an entirely new subset of smart contracts to be constructed. Because developers no longer need to worry over the computational load of their smart contracts they can explore areas that otherwise would have been passed over. These include such things as GPU rendering, complex financial modeling, and even evolutional neural network execution.

Arweave Use Cases

The primary purpose of Arweave is to provide permanent storage as a service. Rather than using a model whereby contracts are created between users and the service provider, it does this through crypto-economic incentives whereby miners are compensated for replicating as much data as possible. The permanent data storage being offered by Arweave is a completely new market that cannot be offered by the traditional cloud-computing firms such as Amazon, Google, and Microsoft.

To store a file on Arweave a developer creates the transaction that will pay a small network fee to grant permissions to store that file forever. The current cost is $5/GB, which might look expensive initially when you compare it to Amazon’s cost of $0.276/GB on their lowest tier of pricing. However you must also take into account that Amazon’s price is a yearly charge. Arweave isn’t directly competing with Amazon on price because they are offering something that Amazon doesn’t offer and cannot offer, and that’s permanent storage.

The Permaweb

The Permaweb is a collection of linked applications and documents, just like the world-wide web you’re used to, but unlike the traditional WWW all of the contents of the permaweb are permanent. This layer of permanently collected data sits just on top of the core Arweave data storage layer.

The Arweave network is itself built on top of the same HTTP protocol used in the traditional web, which means any modern web browser has complete access to all the data stored on the Arweave network. That network is agnostic to contents, which means the permaweb can be used to store all types of data and information – from basic web pages to wikis to web applications or videos to pdfs.

Once any of these data types are stored in the permaweb they are permanently accessible from anywhere in the world, at any time, so long as the user has an internet connection. And once this data is added to the permaweb it can never be altered in any way, not even by the person who submitted it in the first place. This ensures that documents remain verifiable forever, while also enforcing consumer integrity for applications.

While there are many different markets that can likely benefit from Arweave’s permanent storage solution, there are currently two market segments already adopting the Arweave technology. These two sectors are early adopters because they need the permanent storage offered by Arweave, and they tend to be less price sensitive than other segments.

Blockchains for data availability – A blockchain is designed to store all its transaction data forever. The technology offered by Arweave allows a blockchain to store a copy of its ledger permanently forever. This provides both redundancy for the blockchain and solid auditability. There are several projects that are already using the Arweave permanent storage technology, including Solana, Polkadot, and a number of NFT projects.

Internet Archiving – Making use of Arweave to archive the internet makes perfect sense, and that’s exactly what the Internet Archive, the non-profit that hosts the Wayback Machine project, has announced they will be doing. This is a necessary project because nearly half of all the links cited by Supreme Court decisions in the U.S. are broken. Websites and pages within websites are forever being changed and taken down, making it crucial to create an archive that preserves the data existing on the internet.

These are just two examples of market sectors taking advantage of permanent storage. It’s impossible to say at this time how large the potential market for permanent storage might be, but we do know that blockchains will need to store massive amounts of data as their ledgers continue growing. We also know that the amount of data on the world-wide-web continues growing at an exponential rate, and archiving all that data is a goal of several organizations.

That said, there are several other potential markets for permanent storage who will value the utility and will also be willing to pay a premium for it:

• Journalists and news agencies who want to make sure their reporting is available forever to shine light on the truth;
• Political dissidents who want to ensure that governments can’t censor their thoughts;
• Lawyers working on personal estates or trusts;
• NGOs or foundations who want to store their records forever;
• People who want to store personal memories for distant future generations.

And of course the unexplored region is that Arweave will almost certainly lead to the creation of new applications that can take advantage of its permanent storage and inexpensive smart contract execution.

The Arweave Team

The Arweave team primarily remains behind the scenes and doesn’t actively promote itself due to the community-based nature of the project. The LinkedIn page for Arweave lists 20 employees currently, but it is safe to assume that there are more.

The CEO and co-founder, and also the face of Arweave, is Sam Williams. He is a serial entrepreneur, as well as a holding a PhD in Computer Science from the University of Kent. In addition to his numerous start-ups he is a self-avowed proponent of decentralization. He also has a deep experience in software and software design, having started coding at a young age.

The CTO of Arweave is Jesper Noehr, a man with over 2 decades of experience in the technology sector. Prior to coming on board with Arweave he was also the founder and CEO of Bitbucket, a Git code management tool that was later acquired by Atlassian. He was also the founder of Upvest.co, an API that ties together a fully integrated suite of investment products.

And then we have the COO of Arweave, Sebastian Campos Groth, who brings to Arweave a background in early stage venture capital, business development and project management. Prior to joining Arweave he kicked off the first Techstars Metro Accelerator before managing the Techstars Berlin program.

The AR Token

According to its yellow paper, Arweave has a maximum token supply of 66 million AR. 55 million AR was minted when the blockweave's genesis block was created in June 2018, and an additional 11 million will be gradually introduced as block rewards.

Arweave held a token pre-sale event in August 2017 in which 10.8% of the initially generated token supply was sold, and two public sales were completed in May 2018 and June 2018 in which 7.1% and 1.1% of the supply was sold, respectively.

The company allocated an additional 19.5% for a private sale, 2.9% for project advisors, 13% for the team (subject to a five-year lock-up with 20% released per year), 19.1% for ecosystem development, and 26.5% for future project use (subject to a five-year lock-up with 20% released per year).

While the tokens sold at just $0.73 each in the token sale, as of June 2021 the price of AR is $15.58 each.

As can be seen from the chart above, the AR token has actually seen a fairly steady increase in value over the past couple of years. There was a nice pop higher in the summer of 2020 after the team released the addition of the profit sharing tokens that allow developers to receive rewards when their dApps are used. Price settled back, but the token has participated quite well in the 2021 rally in the overall cryptocurrency market.

While the current price is off the all-time high of $45.03 struck on May 14, 2021it remains quite elevated in comparison with price heading into the 2021 rally. Overall we would say that the price action is bullish and bodes well for the future performance of AR.

Conclusion

We found Arweave interesting because it was created to serve an entirely new market sector, and because this is uniquely enabled by its foundations on blockchain technology and smart contracts. Not only will Arweave cater to the permanent storage market, it can also serve the needs of the current data storage market.

The network is growing, and in March 2021 it processed over 1 million transactions. It is being heavily adopted by new NFT projects, by DeFi projects such as yearn.finance, Uniswap v2, and SushiSwap, and by blockchains that will need to store massive amounts of ledger data.

Decentralized storage is an active space in blockchain and there’s little doubt that eventually the world will move to this method of storage. It is the next logical step after cloud storage. It’s too early to say if Arweave will become a major player in the field with so many other projects tackling the problem of decentralized storage, but with Arweave being the only one to tackle permanent storage it’s a good bet that they will become a major player in the sector.

Another positive is that Arweave is very good at communicating through its Medium blog, and is well connected with its community. They have a solid whitepaper, although it is a bit outdated and could do with an update.

The only potential stumbling blocks for Arweave are related to adoption, which it seems to be overcoming quite well currently, and with the speed and resilience of the network. Data storage and recovery will need to rival the speed of access users are already accustomed to, and the hybrid SPoRA consensus mechanism will need to be able to withstand any potential attack vectors without falling into the trap of becoming a centralized database.

Overall Arweave looks to be moving in the right direction, and if permanent storage is a need that must be satisfied, then they are also in a very good market niche. Considering the exponential growth of data and information it’s safe to believe that permanent storage will be very much in demand in the coming decades, making Arweave a solid long-term bet.