What is Arweave (AR)?

Arweave is a software designed to store files permanently across a decentralised network of computers, with the vision of creating a lasting digital archive, much like a modern-day Library of Alexandria.

Similar to decentralised storage platforms like Filecoin and Sia, Arweave uses cryptocurrency to power a marketplace where users can buy and sell data storage. Its goal is to challenge industry leaders such as Google, Amazon, and Microsoft.

What sets Arweave apart is its unique approach to permanent data storage, supported by its AR cryptocurrency. This model allows data storage providers to potentially earn ongoing revenue, even after the initial payment for storage has been made.

Files stored on Arweave can be accessed through standard web browsers, eliminating the need for special wallets or blockchain services. The platform is also developing a voting system to help users moderate illicit content.

As of 2020, Arweave has partnered with the Internet Archive to store its data, aiming to protect this valuable information from tampering.

How Does Arweave (AR) Work?

Arweave isn’t a traditional blockchain. Unlike the typical design where data and transactions are stored in a linear chain of blocks, Arweave uses a graph structure called a “blockweave.” In this system, each block is connected to two previous blocks, forming a more complex web of data compared to Bitcoin, which links blocks sequentially in a chain.

Proof of Access Consensus

Arweave’s method for verifying transactions differs from the typical proof-of-work used by Bitcoin. Instead, Arweave employs a mechanism called "proof-of-access."

In this system, each participating computer must verify that a new set of transactions includes a randomly selected marker from a previous bundle. If the marker is present, the transactions are added to the network, and the computer responsible for adding the new data is rewarded with AR cryptocurrency.

This proof-of-access system ensures that new transactions are accurate and that past data remains unaltered.

Content Moderation

Arweave also allows anyone running the software to choose the type of data they wish to store. This process is known as content moderation. Put simply, computers on the network can decide what types of content they want to host. Network participants can choose to host specific types of content, such as audio files but not images, for instance.

There are incentives for storing more demanding types of data, as computers that do so can earn a larger share of transaction fees.

The History of Arweave (AR)

Arweave was initially launched as Archain in 2017 but rebranded in 2018 after being accepted into the Techstars startup accelerator program.

In 2019, Arweave secured $5 million in funding from prominent venture capital firms, including Andreessen Horowitz and Union Square Ventures.

By March 2020, Arweave raised an additional $8.3 million, with plans to use the funding to expand its community of users and developers building on the platform.

What Gives Arweave (AR) Value?

As AR is the currency of the Arweave network, users who wish to store data must buy AR to pay for distributed data storage, and computers on the network that provide storage services must accept payment in AR tokens. 

A key factor for investors is the limited supply of AR tokens, capped at 66 million. When Arweave launched in June 2018, 55 million AR tokens were created, with an additional 11 million scheduled for gradual release to storage providers over time.

Token Economy

Arweave’s payment model assumes that storage costs will decrease over time, allowing users to pay a one-time fee for permanent data storage. AR payments are collected from users and distributed to the computers providing storage services, but not immediately. Instead, these payments are pooled in a system called the Storage Endowment.

The Storage Endowment functions like a traditional endowment, aiming to generate returns from the capital invested in it. Over time, the pool of funds grows, similar to a bank account earning interest, allowing it to make ongoing payments to storage providers over many years.