CoinDesk Report:
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 efficiently and inexpensively facilitates the expression, replication, and transmission of information. For instance, chatting and sharing images on WeChat, uploading and posting videos on YouTube, and remote work on Feishu all exemplify this capability.
The emergence of blockchain has fundamentally transformed the internet from the underlying protocol architecture. Taking the three-layer protocol stack of the Bitcoin blockchain as an example, illustrated in Figure 1-1.
Figure 1-1 BTC’s Three-Layer Technology Stack
$BTC enables expression and transmission through the execution of Bitcoin’s scripting software, which builds upon the underlying Bitcoin blockchain. Generally, a blockchain extends continuously through the linkage of different blocks via hash pointers. Each block records transactions and related data, including block versions, hash values, Merkle roots, user addresses, transaction amounts, and times. Each individual block can be seen as a page of transaction records, while all blocks together form a complete ledger.
Moreover, due to its construction on a P2P network and proof-of-work (POW) consensus mechanism, blockchain possesses characteristics such as decentralization, transparency, permissionless operation, verifiability, traceability, anti-loss, and tamper resistance. Hence, the BTC blockchain is essentially a distributed ledger concerning $BTC, with globally consistent consensus.
Importantly, the three-layer protocol stack built on the distributed ledger of $BTC achieves protocol tokenization, pioneering the first programmable cryptocurrency in human history. This eliminates the reliance on centralized third parties for issuing, trading, paying, and transferring currency on the internet, marking the beginning of the Value Internet.
Bitcoin’s innovation led to the discovery of blockchain (distributed ledger), which reshaped the internet through software protocols at various levels, driving the formation and prosperity 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 all come with native tokens and have built a token economy system (Tokenomics) around them, achieving protocol assetization. Thus, the entire blockchain protocol framework realizes currency protocolization, protocol assetization, integrating currency, assets, and software protocols into a unified Value Internet.
In conclusion, compared to the traditional Information Internet, blockchain-based distributed ledgers have driven the concept of the Value Internet and conducted in-depth exploration and innovation around “value” in practice.
2. Token-Oriented Distributed Ledger — Building a Financial Value System
Since Bitcoin’s inception, blockchain has developed over 15 years and undergone several cycles. Why then do its main applications still focus on issuing encrypted digital assets and decentralized finance (DeFi), NFTFi, GameFi, SocialFi, etc.? Let’s delve into the logic behind the current largest market value public chains, Bitcoin and Ethereum.
Public chains are the core infrastructure for ecological development, upon which other protocols, smart contracts, or DApps are built.
Different public chains are essentially different distributed ledgers, and to a large extent, it is the underlying architecture of distributed ledgers that determines and restricts the construction of upper layers.
Bitcoin, initially created by Satoshi Nakamoto, was designed as a peer-to-peer electronic cash system, focusing on the transfer, payment, and simple transaction functions of $BTC. Bitcoin’s design is very conservative, deliberately limiting its scalability. Therefore, before Ethereum emerged, Bitcoin had almost no ecosystem; it was just a distributed ledger for $BTC.
Compared to Bitcoin, Ethereum does have significantly greater scalability, mainly reflected in its ability to support various smart contracts and the construction of decentralized applications (DApps). This has sparked a series of crazes in the blockchain field, such as ICOs, DeFi, NFTs, etc. These technologies and applications not only have flourished the Ethereum ecosystem but also attracted widespread attention and participation globally.
However, it is evident that despite high expectations for “going beyond,” the entire ecosystem remains almost entirely focused on issuing encrypted digital assets and closely related decentralized finance, so much so that Ethereum’s public chain is generally seen as the settlement layer for financial applications.
Returning to Ethereum’s public chain as a distributed ledger, perhaps this inherent nature can better understand its current development status. If we view this distributed ledger as a production system, the core element it processes is Tokens. However, compared to Bitcoin’s distributed ledger, Ethereum supports tens of thousands of Tokens of various types like FT, SFT, NFT. These Tokens exist in the form of smart contracts on Ethereum, allowing them to participate in various complex processing, trading, and circulation processes, thereby establishing a closely related, combinable, and prosperous financial system.
Looking at other public ledger accounts outside Bitcoin and Ethereum, they have basically not broken out of this framework paradigm: Tokens are the core elements of the ledger, but they focus on computing performance, privacy, cross-chain assets, protocol interoperability, etc., to meet different application scenarios and user needs.
Thus, the cryptocurrency industry has evolved from encrypted currencies (assets) to decentralized finance (various blockchain-based intelligent digital contracts), but has not yet developed a scaled encrypted digital economy, let alone the real significance for the real economy and the continued development of society. The author has previously elaborated on the relationship between currency, assets, finance, economy, and social development in past articles (see Appendix 1), and while not detailed here, their interrelationships can be abstractly represented in Figure 2-1.
Figure 2-1 Interrelationships of Financial Assets, Contracts, and Economic Activities
In this figure, if the core element remains only Tokens, its ability, as developed in practice, primarily lies in constructing today’s financial value internet. However, the author believes that the value internet should encompass not only financial value but also economic value. Based on a distributed ledger oriented towards Tokens, its ability circle is difficult to extend to an encrypted economy. But if the core element is no longer just Tokens but Data, what kind of scenario would it bring about?
I believe this is precisely what Arweave is doing and deserves further exploration.
3. Data Trilogy — Building a Data-Oriented Distributed Ledger
Although Arweave has always been categorized under decentralized storage tracks, it does not compete at this level with storage projects such as Filecoin, Sia, or Storj. This is because Arweave has the ability of “decentralized permanent storage,” which can build applications based on the “Storage Consensus Paradigm (SCP),” promote data storage on-chain, support the transformation of “data resources” into “consensus data,” and further become “data elements.” Thus, the “Data Trilogy” makes Arweave a distributed ledger oriented towards Data, providing innovative resources and scalability different from other decentralized storage projects, fostering possibilities for innovation and development in the encrypted digital economy, as shown in Figure 3-1.
Figure 3-1 Data Trilogy Builds a Data-Oriented Distributed Ledger, Bringing Innovative Development
3.1 Data Resources: Decentralized Permanent Storage
In Arweave, any type and size of data can be permanently stored, including not only encrypted digital currencies or assets (Tokens, FT/SFT/NFT), but also documents, images, audio/video, web pages, games, legal contracts, program code, and holographic states.
These data are stored on-chain with a one-time payment, permanently available for open access. Is this feasible? The Arweave Whitepaper analyzes this from two perspectives: economic feasibility and the feasibility of eternal storage mechanisms.
Regarding economic feasibility, the Whitepaper mentions that storage costs have decreased by around 30% annually over the past few decades, and after an infinite number of years, costs will stabilize, providing a limited-cost opportunity for permanent storage, thus opening up the market for permanent storage. In terms of storage pricing, the protocol employs a storage endowment mechanism to incentivize miners to store any amount of data permanently. In terms of actual costs, storing 1GB of data permanently costs approximately $2, offering good cost-effectiveness.
In terms of implementing the eternal storage mechanism, Arweave adopts a PoW + PoA (Proof of Access) mining mechanism to incentivize miners to mine valid data. The more data stored, the higher the earnings, with rarer data storage yielding higher returns. These measures ensure a data replication rate exceeding 90%, preventing data loss due to single node failure or server malfunction, thereby ensuring durability and reliability.
In summary, combining any data with permanent on-chain storage, Arweave accumulates a vast amount of on-chain data resources, building a public knowledge base for human development, laying the foundation for forming common understanding, and providing possibilities for introducing SCP paradigms to build applications.
3.2 Consensus Data: Storage Consensus Paradigm SCP
Arweave introduces the Storage Consensus Paradigm (SCP), an abstraction and paradigm refinement of the SmartWeave concept. SmartWeave is the smart contract on Arweave, characterized by the separation of storage and computation, with storage on-chain and computation off-chain.
In terms of computation, SCP utilizes off-chain smart contracts, which can run on any device with computing power. This frees computational performance from the constraints of on-chain consensus rules, enabling unlimited scalability and achieving performance similar to traditional applications. This opens up possibilities for running large-scale data processing, intensive computation, real-time interactive blockchain applications such as machine learning, graphics rendering, online games, and social interaction. Super parallel computing AO is a product of this, which will be discussed further.
In terms of storage, storage is consensus, forming consensus data. We can understand it like this:
Firstly, the input of the calculation comes from the stored data on the Arweave blockchain, and the generated status in the calculation is also stored on the blockchain, where the blockchain is like the hard disk of a computer. But its function is not only to store all kinds of data but also toAs a professional translator, I will translate this news article into English using descriptive language. The sentences will be accurate and coherent, and I will retain proper nouns and all 
references. I will ensure that the meaning remains the same and there are no grammatical errors. The translation will not include a period at the end. Please find the translation below:
“Both the local generation status and the verification status of the client have become feasible, making it a trusted terminal. The data submitted by the client on the blockchain is also trusted data. Together, they constitute the consensus data on the chain. This indicates that the data on the Arweave network is not just stored content, but also carries a consensus value. It is not just a static information storage, but has higher-level functions and significance. It can be an object for verification and participation in consensus, and can support various applications and smart contracts on the blockchain.
Therefore, Arweave is not just a storage platform, but also a distributed ledger with consensus on data consistency, providing new paradigms and solutions for the storage, sharing, and utilization of data on the blockchain.
Based on this, SCP has brought two very important contributions: firstly, it has promoted the transformation of data resources into consensus data, laying the foundation for data to become productive assets; secondly, it allows unlimited scalability of computational performance, accelerating the release of productivity.
3.3 Data Elements: Circulation and Collaborative Production of Data
As mentioned above, decentralized permanent storage builds data resources and becomes the source of data. Based on the storage-based consensus paradigm, it is a mechanism that forms consensus data, which is trusted data. So how will these data be effective? This is based on the circulation and collaborative production of data.
However, before that, there are some basic questions to consider: How to identify data? Who does the data belong to? How to price the data? How to distribute the benefits? This requires discussing the form of data existence on Arweave.
In summary, regardless of the type or size of data uploaded to Arweave, it is considered as an atomic asset, which is the NFT paradigm of data on the Arweave network. On Arweave, considering data as atomic assets brings multiple advantages and solutions, especially in data circulation, collaborative production, and asset management:
Data identification and ownership confirmation: Every data uploaded to Arweave is considered as an atomic asset with a unique transaction ID. This design makes data easy to identify and trace, as all asset data, metadata, and contracts are tied to the same transaction ID. Each data item can be clearly attributed to its creator or uploader, facilitating ownership confirmation.
Data monetization and pricing: As atomic assets, data can be monetized as a new form of digital asset and achieve price discovery through circulation and trading in the market.
Benefit distribution and collaborative innovation: Atomic assets, with characteristics such as easy identification, ownership attribution, monetization, and pricing, provide a clearer model for benefit distribution and can be automated and transparently executed by smart contracts. This makes it easier for other applications or services to use the data, promoting collaboration and innovation.
As seen, Arweave, as a platform providing decentralized permanent storage, has given data new forms and functionalities through the concept of atomic assets. This approach not only solves basic issues such as data identification, ownership, pricing, and benefit distribution but also unleashes the liquidity and potential of data, promoting the process of data assetization in the digital economy.
These examples demonstrate how to innovate and utilize various data assets using Arweave’s atomic asset concept:
Purchasing big data for specific scenarios can serve machine learning and artificial intelligence.
Audio and video data can be used as atomic assets to build copyright consumption markets and allow for permissionless secondary development.
Gamer identity and experience data can be used to establish trusted decentralized player reputation systems.
Even Web 2 applications, combined with Arweave’s consensus data, can drive the Web2 to Web3 transformation and promote integrated development.
At the same time, we can see that public chains or applications such as Lens, Opensea, Mirror, Solana, Cosmos, and Avalanche have stored data on Arweave, demonstrating their trust and recognition of Arweave’s decentralized storage and consensus data model. This practice not only provides data persistence and verifiability for their users but also promotes the possibility of cross-chain interoperability and collaboration based on consensus data between different public chains and applications.
In conclusion, Arweave has moved beyond the development framework based solely on tokens and has evolved from data resources to consensus data and then to data elements. With the support of SCP, Arweave has broken free from traditional constraints and created new data production resources, bringing productivity with large-scale high-performance computing power, and reconstructing production relationships among entities in the process of data circulation, exchange, production, consumption, and value distribution.
Arweave is expected to bring new momentum to the innovative development of the cryptocurrency industry and build a true encrypted digital economic system.
4. Building an Economic Value System Based on SCP’s AR+AO Framework
In general, blockchain faces the challenge of the imbalance between strong verification and weak computation, known as the blockchain’s impossible triangle problem. However, SCP eliminates this constraint by separating consensus (storage) from computation on Arweave, allowing for unlimited scalability of computation. AO, based on the core theory of SCP, aims to achieve the interconnection and collaboration of large-scale parallel computers on the Arweave network, providing feasibility for the implementation of large-scale computational applications and contributing to the construction of an economic value system based on data.
4.1 Modular Architecture and Advantages of AO
AO is a “verifiable distributed computing system” built on top of Arweave and is an implementation of the storage consensus paradigm (SCP). It consists of three basic units: MU, SU, and CU, and their architecture is shown in Figure 4-1.
Figure 4-1 Modular AO computing architecture (image from AO whitepaper)
This is a modular architecture where computation is separated from storage, and MU, SU, CU, and Arweave are independent modules but interconnected and interact with each other.
MU (Messenger Unit): This is the messenger unit responsible for sending messages to the appropriate SU for processing, then delivering them to CU for computation, and returning the computation results to SU. The messenger unit repeats this process continuously.
SU (Scheduler Unit): This is the scheduler unit responsible for scheduling and message ordering, and uploading messages to Arweave.
CU (Compute Unit): This is the compute unit that receives messages, performs computations, implements state transitions, and uploads them to Arweave.
Such an architecture demonstrates advantages in computational performance, consensus data, and application innovation:
In terms of computational performance, launching an application on AO is equivalent to starting a process, and the system allocates and schedules resources such as MU, SU, CU, etc. These units can be horizontally scaled to obtain unlimited computing and storage resources, thus achieving high-performance and high-capacity parallel computing.
In terms of consensus data, a process can be seen as a series of ordered logs that record the state of the process at any given time, forming so-called holographic data. These holographic data will be uploaded to Arweave, which is responsible for settlement processing and data storage for independent processes. This not only provides data with characteristics such as loss prevention, tamper resistance, and verifiability but also makes AO a verifiable distributed computing system.
In terms of application innovation, the true value of data lies in the analytical meaning and value created after computation. Arweave, as a platform that carries a large amount of trusted data, provides an ideal foundation for this. AO’s super parallel computing capabilities promote collaboration and application innovation based on data, such as running AI language models, executing machine learning tasks, and implementing autonomous agent intelligent applications with high computational requirements.
4.2 Incentivizing a Converged Value Internet
As mentioned above, this architecture decouples computation and storage (consensus), highlighting their respective advantages and bringing modular flexibility and scalability. At the same time, in the overall architecture, AO and Arweave can rely on each other and promote each other. This relationship is not only a technical complementarity but also of great significance in building a value internet system:
Building an economic value system: Transforming from building a financial value system based on tokens to building an economic value system based on data. Tokens have typical financial attributes, with liquidity as their core, and they construct a decentralized finance (DeFi) value internet system, including asset issuance, trading, liquidity provision, collateralized borrowing and lending, etc. On the other hand, data as an asset has financial attributes but also has economic attributes as data production resources. It can be circulated and used for collaborative production based on data, such as artificial intelligence (AI), intelligent agents, computational markets, copyright management, game development, and social networks. This can build a more diverse and innovative economic value internet system that is not limited to the financial field but also covers a wide range of economic activities and value creation possibilities.
Convergence of finance and economic incentives: In the field of cryptocurrencies, the financial value system is relatively mature, while the economic value system is under construction. When the value internet possesses both financial value and economic value, currency, assets, finance, and economy will form a complete closed loop. Finance will provide impetus to the economy, and the economy, in turn, will promote the development of finance, thus achieving the convergence of “finance and economic incentives” in the value internet.
In summary, we have provided a perspective that the essence of blockchain is a distributed ledger, and based on this, the construction of a value internet system has been initiated. However, blockchain based on tokens and blockchain based on data are two different foundations, with the former starting with BTC and Ethereum as a typical representative, constructing a financial value system core to decentralized finance (DeFi). The latter, represented by Arweave, has achieved the “data trilogy” and, under the AR+AO framework based on SCP, separated storage (consensus) from computation, thus promoting innovation in production resources, production relationships, and productivity. It is expected to realize the convergence of “finance and economic incentives” in the value internet and promote the innovative development of the encrypted digital economy.
Note: This research report was first published on PermaDAO (@perma_daoCN), and you can also follow me on X: @web3thinking.
Appendix
1. From FT, NFT to SFT, DeFi may open a new chapter for Web3
2. Arweave: A Protocol for Economically Sustainable Permanent Information Storage
3. Storage-based Consensus Paradigm
4. AO Protocol: A Decentralized, Permissionless Supercomputer
5. Arweave, AO, AI – Modular framework and flexible security
