2024-07-04

Published on Thursday, July 4, 2024

By PermaDAO

In AR

Tags Ao

The AR+AO Framework Based on SCP: Creating a Value Internet with Integrated Financial and Economic Incentives

Summary

From Token-Centric to Data-Centric: How will AR/AO impart new meaning to the Internet of Value?

Author: DanceChange

Translator: Kyle

Reviewer: Xiaosong HU

Source: Content Guild Translation

1. Building the Value Internet Based on Distributed Ledger

The traditional internet, built on the TCP/IP protocol suite, is known as the Information Internet because it enables the efficient and low-cost expression, replication, and transmission of information. Examples include chatting and sharing pictures on WeChat, uploading and publishing videos on YouTube, and working remotely on Feishu.

Blockchain brings a fundamental change to the internet at the protocol level. This can be illustrated by the three-layer protocol stack of the Bitcoin blockchain, as shown in Figure 1-1.

Figure 1-1 BTC's Three-Layer Technology Stack

$BTC can be expressed and transmitted through Bitcoin’s script software, which is built on the underlying Bitcoin blockchain. Generally, a blockchain extends through a chain of blocks connected by hash pointers. Each block records transactions and related data, including block version, hash value, Merkle root, user addresses, transaction amounts, and timestamps. A single block can be viewed as a page of a ledger, and the connected blocks form a complete ledger.

Additionally, because the blockchain is constructed on a P2P network and a POW consensus mechanism, it possesses characteristics such as decentralization, transparency, permissionless access, verifiability, traceability, and immutability. Therefore, the BTC blockchain is essentially a distributed ledger for $BTC, achieving global consensus.

Importantly, the three-layer protocol stack built on the $BTC distributed ledger has achieved the protocolization of currency, creating the first programmable cryptocurrency in human history. This allows currency to be issued, traded, paid, and transmitted on the Internet without relying on a centralized third party. This marks the beginning of the value internet.

Bitcoin's innovation led to the discovery of blockchain (distributed ledger) and reconstructed the internet through software protocols at various levels, promoting the formation and development of the value internet, as shown in Figure 1-2.

Figure 1-2 Distributed Ledger Drives the Formation and Development of the Value Internet

These software protocols come with native tokens and build Tokenomics around them, realizing the assetization of protocols. Thus, the entire blockchain protocol framework has achieved the protocolization of currency and the assetization of protocols, integrating currency, assets, and software protocols into a value internet.

In summary, compared to the traditional information internet, the distributed ledger based on blockchain has led to the concept of the value internet, fostering exploration and innovation around "value."

2. Distributed Ledger for Tokens—Building a Financial Value System

Since the birth of Bitcoin, blockchain has developed over 15 years, experiencing several cycles. Yet, its primary application still focuses on issuing crypto assets and decentralized finance (DeFi, NFTFi, GameFi, SocialFi, etc.) related to these assets. To understand this, we can examine the two largest public blockchains by market value, Bitcoin and Ethereum.

Public blockchains are the core infrastructure for ecosystem development, with other protocols, smart contracts, or DApps built upon them. Different public blockchains are essentially different distributed ledgers, largely determined and limited by their underlying architecture.

Bitcoin, created by Satoshi Nakamoto, was initially designed as a peer-to-peer electronic cash system focused on the transmission, payment, and simple transaction functions of $BTC. Its design is conservative, deliberately limiting its scalability, resulting in an ecosystem almost exclusively around $BTC as a distributed ledger.

Compared to Bitcoin, Ethereum offers more robust scalability, supporting various smart contracts and decentralized applications (DApps). This has led to several trends in the blockchain space, such as ICOs, DeFi, and NFTs. These technologies and applications have not only thrived within the Ethereum ecosystem but also garnered global attention and participation.

However, despite high expectations for broader adoption, the ecosystem still largely revolves around crypto-asset issuance and decentralized finance, making Ethereum's public chain a financial application settlement layer.

Understanding Ethereum's nature as a distributed ledger clarifies its development. If viewed as a production system, the core element processed is tokens. Unlike Bitcoin, Ethereum supports various token types (FT, SFT, NFT), allowing complex processing, transactions, and flows, creating a connected and thriving financial system.

Other public ledgers follow similar frameworks: tokens are the core elements, each with different focuses like computational performance, privacy, cross-chain asset transfer, and protocol interoperability, catering to different application scenarios and user needs.

Thus, the crypto industry has evolved from cryptocurrencies to decentralized finance but has not yet developed a scaled crypto economy with significant real-world economic and social impact. The relationship between currency, assets, finance, economy, and social development is complex, as depicted in Figure 2-1.

Figure 2-1 Relationship Between Financial Assets, Contracts, and Economic Activities

If tokens remain the core element, as has been the case, the industry's capability will mainly be in constructing today's financial value internet. However, the value Internet should include both financial and economic value. If data, not tokens, becomes the core element, what could the landscape look like?

This is precisely what Arweave is working on and warrants further exploration.

3. The Data Trilogy—Building a Data-Oriented Distributed Ledger

Although Arweave is often categorized under decentralized storage, it doesn't compete directly with projects like Filecoin, Sia, or Storj. Arweave offers "decentralized permanent storage" and can build applications based on the "storage consensus paradigm (SCP)," promoting data storage on the blockchain and transforming "data resources" into "consensus data," which then becomes "data elements." This "data trilogy" positions Arweave as a data-oriented distributed ledger, providing unique resources and scalability for innovation and development in the crypto economy, as shown in Figure 3-1.

Figure 3-1 The Data Trilogy Constructs a Data-Oriented Distributed Ledger and Drives Innovation and Development

3.1 Data Resources: Decentralized Permanent Storage

Arweave can permanently store any type and size of data, including cryptocurrencies or assets (Token, FT/SFT/NFT), documents, images, audio, video, web pages, games, legal contracts, program code, and holographic states.

Is this feasible? Arweave’s yellow paper analyzes this from two perspectives: economic feasibility and the realization of the permanence mechanism.

Economically, storage costs have decreased by about 30% annually over the past few decades, offering a finite cost opportunity for permanent storage. Arweave uses a storage fund mechanism to incentivize miners to store unlimited data permanently. The cost of storing 1GB of data permanently is approximately $2, making it cost-effective.

For permanence, Arweave employs a PoW + PoA (Proof of Access) mining mechanism, incentivizing miners to mine valid data. The more data stored, the higher the reward, with higher rewards for rare data, ensuring data replication rates exceed 90%. This ensures data persistence and reliability despite node failures or server outages.

By permanently storing various data types, Arweave accumulates vast on-chain data resources, building a public knowledge base for human development and enabling the SCP paradigm for applications.

3.2 Consensus Data: Storage Consensus Paradigm (SCP)

Arweave introduces the Storage-based Consensus Paradigm (SCP), an abstraction and paradigm refinement of the SmartWeave concept. SmartWeave is Arweave's smart contract, characterized by the separation of storage and computation, with storage on-chain and computation off-chain.

In terms of computation, SCP uses off-chain smart contracts that can run on any device with computational power. This removes the constraints of on-chain consensus rules, offering unlimited computational performance and enabling applications like machine learning, graphics rendering, online gaming, and social interactions. Hyper-parallel computing AO (Alloy-Orchestrator) stems from this concept.

For storage, storage is consensus, forming consensus data. Here’s how:

The computation's input comes from data stored in Arweave's blockchain, and the resulting state is also stored on-chain. The blockchain acts like a hard drive, storing various data types, ensuring data is tamper-proof, traceable, and a trusted source.
Smart contract source code and all parameters are sequentially stored on the blockchain, ensuring deterministic state generation. Clients can locally generate and verify states, becoming trusted endpoints, and submit trusted data on-chain.

These two aspects constitute on-chain consensus data, meaning data on the Arweave network isn’t just stored content but carries consensus value, serving higher functions and supporting various blockchain applications and smart contracts.

Thus, Arweave is more than a storage platform; it’s a distributed ledger with Data consensus, offering new paradigms and solutions for on-chain data storage, sharing, and utilization. SCP brings two key contributions: it transforms data resources into consensus data, laying the foundation for data as a production material; and it allows limitless computational performance, accelerating productivity.

3.3 Data Elements: Data Flow and Production Collaboration

As described, decentralized permanent storage creates data resources, forming the data source. The storage consensus paradigm (SCP) establishes consensus data as trusted data. But how will these data be utilized? Through data flow and production collaboration.

However, foundational issues need addressing first: how to identify data, determine data ownership, set data pricing, and distribute benefits. This involves discussing the existence of data on Arweave.

In summary, all data uploaded to Arweave, regardless of type or size, is considered atomic assets (Atomic Assets), the NFT paradigm for data on Arweave. Viewing data as atomic assets offers multiple advantages and solutions, especially for data flow, production collaboration, and asset management:

Data Identification and Ownership Confirmation
Every uploaded data item is viewed as an atomic asset with a unique transaction ID, making it easy to identify and track. Asset data, metadata, and contracts are bound to the same transaction ID, confirming ownership and facilitating identification.
Data Monetization and Pricing
Data as atomic assets can be monetized and traded in the market, discovering prices.
Benefit Distribution and Collaboration Innovation
The characteristics of atomic assets—easy identification, ownership, monetization, and pricing—enable clear benefit distribution models, automated and transparent through smart contracts. This makes data easier for other applications or services to use, promoting collaboration and innovation.

Arweave, as a decentralized permanent storage platform, assigns new forms and functions to data through the atomic asset concept. This method addresses fundamental issues like data identification, ownership, pricing, and benefit distribution, unlocking data's liquidity and application potential, and advancing the assetization of data in the digital economy.

Examples of utilizing Arweave's atomic asset concept for data asset innovation include:

Purchasing large datasets for machine learning and AI
Using audio/video data as atomic assets for copyright consumption markets and unlicensed secondary development
Establishing decentralized reputation systems for gamers based on player identity and experience data

Even Web2 applications can achieve Web3 integration with Arweave's consensus data, promoting fusion development.

We also observe that public chains and applications like Lens, Opensea, Mirror, Solana, Cosmos, and Avalanche store data on Arweave, demonstrating trust and recognition of Arweave's decentralized storage and consensus data model. This approach not only provides data persistence and verifiability for their users but also enables cross-chain interoperability and collaboration based on consensus data.

In conclusion, Arweave has transcended the token-based development framework, evolving from data resources to consensus data and then to data elements. Supported by SCP, Arweave breaks traditional constraints, creating new data production materials, unlocking large-scale high-performance computational productivity, and reconstructing production relationships during data flow, exchange, production, consumption, and value distribution. Arweave is poised to drive innovation and build a genuine crypto digital economy.

4. Building an Economic Value System Based on SCP with AR+AO Framework

Blockchain typically faces the challenge of imbalanced strong verification and weak computation, known as the blockchain trilemma. However, SCP eliminates this constraint by decoupling consensus (storage) from computation on Arweave, enabling unlimited computational performance. AO, based on SCP, aims to connect and collaborate on a large-scale distributed computer network on Arweave, providing feasibility for large-scale computational applications and aiding the construction of a data-based economic value system.

4.1 AO’s Modular Architecture and Advantages

AO is a "verifiable distributed computing system" built on Arweave, an implementation of the storage consensus paradigm (SCP). The architecture diagram shows it consists of MU, SU, and CU modules.

Figure 4-1 AO’s Modular Computing Architecture (Image from AO White Paper)

This modular architecture separates computation from storage, with MU, SU, CU, and Arweave as independent yet interconnected modules.

MU (Messenger Unit): Sends information to the appropriate SU for processing, then delivers it to CU for computation. The computation result returns to SU, and the process repeats.
SU (Scheduler Unit): Handles scheduling and message sorting, uploading messages to Arweave.
CU (Compute Unit): Receives messages, performs computations, realizes state transitions, and uploads to Arweave.

This architecture offers advantages in computational performance, consensus data, and application innovation:

Computational Performance: Launching an application on AO is akin to starting a process, with the system allocating resources like MU, SU, and CU. These units can scale horizontally, providing unlimited computational and storage resources for high-performance, large-scale parallel computing.
Consensus Data: A process can be viewed as a series of ordered logs, recording the process's state at any time, forming holographic data. This data is uploaded to Arweave, which handles independent process settlement and storage. This ensures data persistence, immutability, and verifiability, making AO a verifiable distributed computing system.
Application Innovation: The real value of data lies in its analytical significance and the value it creates post-computation. Arweave, hosting vast amounts of trusted data, provides an ideal foundation. AO’s hyper-parallel computing promotes data collaboration and application innovation, enabling high-computation tasks like running AI language models, performing machine learning, and realizing autonomous intelligent applications.

4.2 Incentive-Integrated Value Internet

This architecture decouples computation from storage (consensus), highlighting their respective advantages and offering modular flexibility and scalability. Simultaneously, AO and Arweave can interdependently and mutually promote each other, a relationship of technical complementarity with significant implications for building a valuable internet:

Constructing an Economic Value System
We are transitioning from a token-based financial value system to a data-based economic value system. Tokens have typical financial attributes, focusing on liquidity, and building a decentralized finance (DeFi) value internet, including asset issuance, trading, market making, and lending.
Data, as an asset, has financial attributes, but as a production material, it has economic attributes. It can enable data-based flow and production collaboration, such as AI, intelligent agents, computing power markets, copyright management, game development, and social networks. This can build a more diverse and innovative economic value internet, encompassing various economic activities and value creation possibilities beyond finance.
Financial-Economic Incentive Integration
The financial value system is relatively mature in the crypto field, while the economic value system needs construction. When the value internet includes both financial and economic value, it creates a complete loop of currency, assets, finance, and economy. Finance will power the economy, which in turn promotes financial development, achieving "financial-economic incentive integration" in the value Internet.

Conclusion

Finally, we modify Figure 3-1 to summarize the entire view (Figure 4-2) and provide a concluding summary.

Figure 4-2 SCP-Based AR+AO Framework, Building a “Financial-Economic Incentive Integration” Value Internet

We start by presenting a perspective: the essence of blockchain is a distributed ledger, initiating the construction of a value internet system. However, token-based and data-based distributed ledgers are two different foundations. The former, starting with BTC and represented by Ethereum, builds a financial value system centered on decentralized finance. The latter, represented by Arweave, achieves the "data trilogy," then, under the SCP-based AR+AO framework, decouples storage (consensus) from computation, promoting innovations in production materials, production relations, and productivity. This could achieve "financial-economic incentive integration" in the value internet, driving innovation and development in the crypto digital economy.

Appendix

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