Cutting Costs, Not Corners: Arweave's Economic Edge Over Bitcoin and Ethereum
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Author: AZ @ Contributor of PermaDAO
Reviewer: Xiaosong HU @ Contributor of PermaDAO
Okay, let's get one thing straight, Arweave is built for on-chain storage, whereas other networks like Ethereum and Bitcoin barely come close to even challenging what it can do.
Do I have your attention?
Ok, let’s dive in!
Arweave: Pioneering a New Era of Onchain Data Storage
Arweave was developed under the vision of Sam Williams to do exactly that. And the truth is that it is currently achieving that goal with ease. Week-on-week, it continues to grow at a level that could be considered exponential.
Just look at these transactions.
Arweave is purpose-built for storing data at a scale and affordability that Ethereum and Bitcoin cannot match. Despite the surge above, Arweave remains as fast as ever.
Cost-Effectiveness: A Core Advantage
Arweave is cheap. Especially compared to Ethereum and Bitcoin!
Sam Williams, in his interaction with Philip Mataras, the founder of ArDrive, brings to light a compelling cost comparison.
Storing a 13 GB file on Arweave incurs a fee of only $87, while the same storage would demand approximately
$35,620,000 on Bitcoin and an astonishing
$780,000,000 on Ethereum.
Long story short, someone would be crazy to want to store on any of those two blockchains. They work in their own way, but they're not built for this, and even if they were who's gonna pay up?
Purpose-Built Design: The Foundation of Arweave
Okay, so then there's the question of how it can scale in a world where data is everywhere.
Look left and right when you're in the street and chances are you'll see people on their phones on social media, posting videos and photos, sending messages to one another. Once you start adding up all this data, it's crazily incomprehensible in size.
So, the question is, can Arweave actually handle such amounts of data?
And the answer is a resounding yes!
Arweave’s architecture is fundamentally different from that of Ethereum and Bitcoin.
Though Ethereum and Bitcoin are constrained by their inherent upload throughput limitations, Arweave has been meticulously designed for data storage. It can accommodate up to 2^256 bytes in a single transaction, distributed among countless users and items.
By the way, 2^256 bytes is a large number, so large in fact that I'm gonna type it out:
1,078,397,866,686,025,600,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000 gigabytes.
You don't even wanna know how many selfies or cat photos that is!
Resilience and Sustainability: Arweave's Unique Approach
Arweave's method of storing data offers greater resilience and longevity compared to Ethereum and Bitcoin. As Williams says himself, “validating the data is mining” in the Arweave network.
At the core of it all is the network's endowment system. Arweave actually incentivizes miners/nodes to store data for the long run.
The philosophy ensures that miners have a consistent incentive to store data over time, a feature notably absent in Bitcoin and Ethereum, where incentives may discourage long-term data storage.
Essentially, Arweave's innovative storage endowment incentivizes miners to store ALL the data rather than select pieces. If a miner can prove that they are storing a certain piece of data when the network asks for it, the miner receives rewards. As this random process takes place, the more data the miner ia storing, the more chances it has of receiving the reward.
Hence, no-brainer, they're gonna store everything. Wouldn’t you if you were running a miner/node?
When it comes to comparing blockchains, this is definitely Arweave’s power move.
The endowment model sidesteps the complexities and inefficiencies of handling millions of individual data storage contracts, a challenge prevalent in contract-based systems like Ethereum. In Arweave, a single Merkle root and a common reward pool serve all data, preventing increased computational burden or system bloat.
Let’s elaborate on that last bit further.
Recursive Bundling: The Gateway to Massive Scalability
So here's the thing, Arweave as we've seen can handle large data sizes. However, what happens when it comes to the number of uploads a.k.a. transactions that are being thrown at the network from these millions of people around the world using their phones, or what have you?
(Remember… selfies and cat photos!)
If you didn't already know this, Arweave has a mempool of 1000 transactions.
That might sound technical, but what it means is that it has a queue of 1000 transactions that can await approval and upload. If one transaction over the 1000 limit is posted to the network, then that one file will have to wait its turn to enter the mempool. Furthermore, there is a timeout period for this mempool. So, if the 1000 transactions take too long to upload, that 1001st file risks getting dropped altogether and never being uploaded to the network at all!
Yikes!
So how do we solve this?
This is where bundling comes in. A simple process, which improves the network unlimitedly!
Think of bundling transactions like zipping together loads of files and sending them all as one package to the network. If you bundle together, the 1000 files as one transaction, that means that the 1001st file becomes the 2nd file.
And it gets better than that.
Arweave employs a strategy of recursive bundling. So if your next question was what happens when we have 1000 bundled file packages filling up the mempool, the answer is that we can bundle the bundles.
By this point, you've probably realized that there is no limit whatsoever to how many files Arweave can upload in one go. In theory, Arweave could allow the storage of the entire current web's data in a single transaction. Insane!
Arweave has the ability to do all this thanks to a simple build design it has: All data on Arweave is permanently stored.
Given this, the combination of different users' data into a single transaction becomes a possibility. This approach is already efficiently handling millions of data pieces daily.
When it comes to the actual bundling process Arweave did not start out like this. It had the bottleneck, but protocols have been built on top of the network to help improve it in many ways. Two of the leading bundling protocols on the network, right now are:
Bundlr
EverVision
Arweave vs. Ethereum and Bitcoin: A Comparative Analysis
Ok so while Ethereum and Bitcoin have made significant progress, and have their own use cases, their designs are not optimized for on-chain data storage.
Ethereum, with its focus on smart contracts and decentralized applications, and Bitcoin, as a digital currency (or gold), face inherent limitations in handling large-scale data storage. These limitations stem from their respective block size constraints, transaction costs, and network throughput capacities, which are not conducive to storing large volumes of data.
That's not to say that these blockchains don't have their own unique use cases.
No one can deny that - currently at least - Ethereum is the go-to chain for decentralized finance (DeFi). on the other hand, no one can deny that Bitcoin is the leader when it comes to digital gold and head against inflation - some even believe that it is the future world currency.
(I won't state my opinion on that at this point, but I think the chances are high.)
Then you have other Blockchains like Solana. They were created to be Ethereum killers and are also focusing on fast throughput and transaction speed, but again they lack on-chain storage functionality.
In contrast, Arweave’s blockchain structure with features like blockweave technology, allow for greater scalability and efficient data retrieval.
Speaking of use cases, digital property assets and artwork in the form of NFTs exist on both Bitcoin and Ethereum. Ethereum is flooded with them, and recently Bitcoin saw the rise and success of Ordinals. If you haven't heard of Ordinals, they are essentially NFTs on Bitcoin. The process of creating them is a little bit more complicated than on Ethereum, but that's a whole other story.
However, once again, NFTs are where Arweave can shine…
Arweave NFTs
There are many resources on the Internet, where you can find information about how NFTs are better on Arweave, so I'll keep this one short.
For this example, we'll think of NFTs in the context of digital artwork - a.k.a. JPEGs which people think they can simply right click and save.
NFTs ave a few components to them.
One is the smart contract which needs to be stored on chain.
Then you have the tokens that are created from the smart contract, these are the actual NFTs themselves which you will find in your wallet.
Then you have the metadata, which describes that token.
And lastly, you have the actual image.
A lot of NFT projects to save money and time store the images on external sources like private servers or Dropbox. This is a way for them to get around the cost we mentioned further up in the 13 GB file section. Some NFT projects consist of 10,000 files. Imagine having to upload all those files directly to Ethereum. The cost is huge… so only the smart contract and the tokens are usually stored on-chain, and everything else is stored off-chain.
So, based on what we said about the cost of storing data on Arweave, you can start to see how it is more cost-efficient to create NFTs here.
But wait! There’s more!
Not only that, but if you use Arweave to create your NFTs, you can have all of the above components in one place, instead of scattered around different blockchains and external sources.
If you were wondering about the smart contract - because it is a great concern for many - yes, Arweave can most definitely facilitate smart contracts.
This is a great time to remind you that Meta actually chose Arweave as the blockchain where it wanted to store its Instagram NFTs. The NFT hype died down (as far as mainstream is concerned) and that chapter ended…
But it was probably just a taster of what will come.
To conclude
Once you start to see the potential of what Arweave can do and handle, you start to see how important it will be in the future of blockchain, and not only.
Low-cost on chain storage is needed for blockchain and web3 to succeed. It's only a matter of time before Arweave stops hiding in the shadows and comes to the forefront.
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