Author: Spike @ Contributor of PermaDAO

Review: Xiaosong HU @ Contributor of PermaDAO

Since its establishment, Arweave SCP Ventures has aimed to promote the widespread adoption of Arweave. Since the upgrade to Arweave 2.6, the ecosystem of Arweave has entered a small period of prosperity. In order to fully demonstrate this progress, SCP Ventures, in collaboration with Forward Research and everVision, jointly wrote this report for readers to enjoy.

Key Insight

1. Arweave enters the era of data explosion. The Arweave network size has exceeded 100 PB, with over 1 billion mainnet transactions, over 100 million Bundlr transactions, over 10 million everPay transactions, and a 933% increase in the number of developers over 3 years.

2. The Arweave 2.6 upgrade marks a fundamental innovation. Mechanical hard drives can participate in mainnet mining, and the value weight of rare data will increase.

3. The foundational components of the creator economy are complete. UDL (Universal Data License), UCM (Universal Content Marketplace), and the combination of $U will change the face of the creator economy in the next era.

4. Arweave's ecosystem development is steadily advancing in a bear market. The number of projects within the ecosystem has exceeded 130, expanding from development tools to DeFi, NFT, DDB, storage, RWA, content, and DePIN, preparing the Arweave ecosystem for the next bull market.

5. Developers will have more development tools. Currently, Arweave has a total of 62 developers active in the open-source field, with Forward Research, everVision, and Community Labs being the most significant forces. EverID and Permaswap have already prepared for mass adoption, with the next goal for Arweave being to reach a user base of 1 billion.

6. Leveraging SCP theory, Arweave has transitioned from cold storage to hot computation, and from static to dynamic. The significant performance improvement brought about by separating storage and computation will allow developers to fully meet the needs of users, eliminating the performance limitations of public chains and the barriers to user adoption.

Part I: Introduction to Arweave

Different from the storage public chains we are familiar with, Arweave has unlimited scalability and the ability to access any public chain, DeFi, NFT, and other applications. Generally speaking, Arweave is currently a mainstream Layer 1 public chain that still adheres to the PoW mechanism and operates in a decentralized manner.

Image Description: Blockweave Structure

Image Source: The Block Research

SCP Ventures will briefly review the uniqueness of Arweave. The following mechanisms constitute the main technical components of Arweave:

• SPoRA (Succinct Proof of Random Access): Miners participating in the Arweave mining process need to access not only common predecessor and successor blocks but also random recall blocks to ensure multiple backups of network data. Under the current mechanism design, any data is stored in at least nearly 1,000 copies.
• SmartWeave: This is Arweave's version of smart contracts. Unlike Ethereum's "off-chain storage + on-chain computation" mechanism, Arweave adopts the design concept of Lazy Evaluation, which can be understood as the reverse of Ethereum - "on-chain computation + off-chain storage." Therefore, Arweave has the strongest data availability and unlimited scalability among current public chains.
• Permanent storage: Arweave does not have an issuance mechanism. When users pay storage fees with $AR, a portion of the funds enters the Endowment, which adopts a linear release mechanism to subsidize miners. Therefore, data on Arweave can be stored for at least 200 years.
• Permaweb: Arweave's use case is not just static storage, but it can support the construction of dynamic applications. From top to bottom, Permaweb has a three-layer architecture of application layer, service layer, and storage layer, with backend permanent storage and tamper resistance, while allowing users to overwrite at the front end to support complex business needs.

Overall, Arweave's architecture is oriented towards permanent storage, but it is by no means just a personal cloud or static database. Instead, it can support network infrastructure for large-scale use by the public, and this fundamental difference will take a long time to be recognized by users.

However, regardless, the ecosystem development of Arweave has already begun, and SCP Ventures will also detail its components and ecosystem progress in the subsequent sections of this report.

Image Description: Arweave Structure

Image Source: Arweave SCP Ventures

PART II: New Developments Since Arweave 2.6

Since the activation of Arweave 2.6 in March, it has changed the operating principles of Arweave from multiple perspectives, but has always revolved around the initial goal of "pay once, store permanently," with three important innovations.

• Arweave 2.6 will introduce a dynamic pricing mechanism, where the protocol will specify the maximum hard drive speed, making the calculation of hard drive prices more predictable. Under this mechanism, miners using hard drives that exceed the specified speed will not receive additional rewards.

Image Description: Dynamic Pricing Mechanism

Image Source: Arweave SCP Ventures

• Therefore, it will become more profitable for miners to use lower-cost mechanical hard drives (HDD). According to calculations, based on the current average hard drive mean time between failures (MTBF), if the Arweave mainnet is to guarantee storage effectiveness for at least 200 years, each piece of data will need at least 15 copies.
• Ultimately, Arweave hopes to incentivize miners to store more data, especially rare data backups and data types with heavy space requirements such as audio and video. Specifically, after the update, Arweave will add a new data partition, organized in a 3.6 TB scale, to increase the scale effect of data utilization.

In the six months since the upgrade, Arweave's network size has smoothly exceeded 100 PB, and the total number of transactions has exceeded 1 billion, with an average of around 1,000 copies of each file.

All of this is not only due to the Arweave 2.6 update, but the Bundle standard based on ANS-104 has also contributed a large amount of data. In simple terms, Bundle is a Layer 2 standard on Arweave that will package more data together and submit it to the mainnet, thereby improving the efficiency of single data uploads. The main tools currently are Arseeding and Bundlr, open-sourced by Web3Infra.

Image Description: Arweave Eco Stats

Image Source: Arweave SCP Ventures

DeFi and basic development tools are the main driving forces behind the growth of Arweave's data.

Bundlr and Lens Protocol have deep cooperation, with Bundlr serving as its on-chain data storage solution, offering a transaction fee of only $0.0003, and has achieved 679,000 on-chain transactions with a total data usage of over 214 million. This is another milestone for the entire Arweave ecosystem.

Similarly, Arseeding also exceeded 10 million transactions at the end of August, mainly driven by DeFi transaction volume led by everPay, and has expanded to more service hosting services, such as the large-scale adoption by 4everLand.

In addition, more underlying infrastructure is being rolled out, with the most important being the adoption of UDL and UCM designed by Forward Research and the $U protocol. These three will change the current status of simple data uploads at the basic protocol level and can further stimulate their economic value.

• UDL (Universal Data License) aims to give creators more autonomy. Creators can set the length of the license period, the type of currency used for payment, and the fees, and can directly use Bundlr to synchronize settings during upload. Assets are then available on Permaweb.
• UCM (Universal Content Marketplace) categorizes content uploaded with UDL on Permaweb as atomic assets, using smart contracts to bring divisibility and tradability, giving any format of content transactional value, including text, images, streaming media, and even tokens and NFTs. This will fundamentally revolutionize the existing content creator economy.
• $U, created at a 1:1 ratio with AR entering the Endowment when users pay storage fees, can be directly traded on Permaswap and obtained when using Arseeding or Bundlr for uploads, to support more creators in monetizing their content.

In addition, important foundational protocols have also made progress, such as the UCP (Universal Commenting Protocol), which allows users to interact with content on Arweave and sign with a wallet to verify their authorship. UCP allows for permanent storage of comments, preventing arbitrary censorship or deletion, thus giving users the freedom to express thoughts, communicate, and build strong communities.

To illustrate the specific uses of these innovations, Forward Research has created a super demo product - BazAR NFT Marketplace, which supports the use of UDL and UCM, enabling the circulation and trading of NFTs within the atomic asset category, and can be purchased using $U.

Image Description: BazAR NFT Marketplace Tech Structure

Image Source: Arweave SCP Ventures

Arweave's underlying infrastructure is already quite rich, and what is needed next is more application development and data usage. To provide a detailed explanation of the current data growth status, SCP Ventures will interpret the network data since the Arweave 2.6 update.

Part III: Data Interpretation

Note: Due to research method limitations, the data source is viewblock.io, and the statistics cover the period from March 2023 to August 2023, which is sufficient to illustrate the current state of the Arweave network over a six-month period.

Starting with the most basic storage fees, Arweave's storage prices are in a state of dynamic change. However, this is not the whole truth. Based on the fluctuation of AR's price, as of September 2023, the cost of storing 1 TB on Arweave is approximately $3500, but it is important to note that this is the cost for permanent storage.

In fact, according to calculations by CoinGecko in May, based on the price of storing 1 TB per month, Arweave only requires around $2.13, which is only 10% of Amazon S3's cost, and can store data for over 200 years.

In terms of storage scale, Arweave's data scale has entered a steady growth phase. SCP Ventures has compiled detailed data from March to August to explain the data explosion of Arweave.

Since March, the Arweave mainnet has maintained a high-frequency growth phase of around 100 million transactions per month, with monthly transactions exceeding 100 million in both July and August. As a result, the transaction volume for Q2 of 2023 (April/May/June) exceeded 260 million, and with the current growth trend, Q3 is expected to exceed 300 million transactions.

Although the price of AR has decreased compared to the peak of the bull market, the trading and usage of AR are still growing rapidly. For example, stimulated by the upgrade in March, the monthly transaction volume reached 17 million AR, with an average monthly transaction volume of about 10 million (9,158,368). The transaction volume exceeded 10 million in March, June, and August, and showed an upward trend in July and August, indicating further growth ahead.

With the continuous boost from data, Arweave's network size has remained above 125 TB since March, steadily increasing by 2 TB per month over the past 6 months. In the bear market environment, this data is undoubtedly more realistic and valuable, and by the end of this year, Arweave's weave size may approach 150 TB.

Image Description: Arweave tx/trade volume/Weave Size Stats

Image Source: Arweave SCP Ventures

After reviewing the data growth situation, the on-chain address data of Arweave is also worth noting. Since March, the growth of contract addresses on Arweave has been explosive, especially in April of Q2, with nearly 2 million (1,919,789) new contract addresses, and a total growth of over 4 million for the quarter.

Influenced by this data, the number of active addresses on Arweave has also started to grow rapidly, from 479 in March to 1042 in June, marking the first time Arweave has surpassed 1000 active addresses.

Image Description: Arweave Address Stats

Image Source: Arweave SCP Ventures

Overall, Arweave's data growth has not only continued but increased in the bear market, thanks to Arweave's reform measures and the prosperity of its ecosystem. From a macro perspective, Arweave's data growth mainly depends on storage dApp applications, but there are also new trends worth noting, such as decentralized databases (DDB) and network hosting services, which will together constitute the main engine for Arweave's future data growth.

In the broader fields of DeFi and NFTs, Arweave has not stopped exploring. One of the most notable developments is in the creator economy, abstract accounts, and DeFi practices guided by SCP theory.

Part IV: Key Developments in the Arweave Eco

According to statistics from Community Labs, at the end of 2022, most projects within the Arweave ecosystem were development tools, but by 2023, most applications had transitioned to application types.

The construction of the foundational infrastructure of the Arweave ecosystem has been largely completed, gradually transitioning to ecosystem development and market expansion.

Image Description: Arweave Eco

Image Source: Community Labs

Taking decentralized databases (DDB) as an example, this is an area with untapped growth potential. Currently, various database services have been built on Arweave, including SQL and NoSQL types. In terms of operation, they generally follow a dual architecture with Arweave as the data storage layer and the incentive network responsible for operation. For example, Mind Network aims to build a data encryption layer using ZK + FHE, while Kwil and WeaveDB are typical representatives of SQL and NoSQL, with Kwil providing high-performance services similar to MySQL, and WeaveDB aiming to provide a multi-file database similar to MongoDB to support the use of non-numeric data such as files, audio, and video.

Overall, the current use cases of Arweave are still focused on storage services, and DDB represents a new direction for application development, with these stacks greatly improving developer efficiency on Arweave.

Part V: Dev Tool & Developer Stats

According to statistical data, Arweave currently has 17 full-time developers, and with part-time developers, there are around 62 monthly active developers. In terms of trends, the activity of open-source code repositories has been increasing year by year, especially since 2023, with a significant increase in the number and activity of developers.

Image Description: Arweave Developer Data

Image Source: https://www.developerreport.com/ecosystems/arweave

From a developer's perspective, Arweave can be understood as a backend framework or a public database, and therefore requires two types of services: gateways and index building tools.

In terms of gateway design, as mentioned earlier, Arseeding and Bundlr can be understood as light nodes, providing their own communication with the Arweave mainnet. However, the Arweave mainnet still retains direct interaction gateways, such as Arweave.net and AR.IO.

Image Description: Arweave Gateway Types

Image Source: Arweave SCP Ventures

4EVERLAND is also an important development facility, providing one-stop web hosting services for applications and websites built on Arweave, including multiple domains such as Arscp.Ventures.

After setting up node services, efficient index building tools are also needed for developers to retrieve data in a timely manner. Here, two projects are mainly introduced, namely KNN3 and Adot.

• KNN3 and Arseeding have deep cooperation, supporting real-time indexing services uploaded via Arseeding, and can be developed through GraphQL.
• Adot has built a full-text search service tool for the Arweave mainnet, allowing developers to retrieve any data uploaded to Arweave through Adot.

After building complete storage, gateway (access), and indexing service tools, Arweave has become an always-on decentralized cloud service provider, capable of meeting all the construction and development service needs of developers.

The final piece of the puzzle is how to onboard Web2 users. Currently, the consensus is on abstract accounts, relying on traditional login methods such as email and phone number, to then build encrypted wallets and on-chain accounts, hoping to solve the high entry barriers for Web2 users in this way.

Two products are highlighted, namely EverID under everVision and the othent tool incubated by Community Labs, along with its open-source Arweave Wallet Kit.

• EverID uses WebAuthn to bridge the gap between Web2 login methods and Web3 services. EverID can generate identity keys locally using hardware devices (Windows, iOS, macOS, and Android) and supports sharding of private keys across multiple physical devices to enhance security. After generating local identity, it can activate accounts and identities within the everPay system, without the need for users to record private keys or account addresses on the frontend.
• Othent uses Google JWT (JSON Web Token) to register Google email addresses on Arweave and calls Warp's smart contract service to build an on-chain identity system.

Abstract accounts and wallet applications differ in their goal of lowering the barriers for Web2 users to use blockchain. However, widespread use of Arweave also requires high-performance products, such as basic DeFi infrastructure and cross-chain bridges to other public chains.

Unlike pure storage services, complex DeFi and cross-chain bridges are very difficult to build for non-EVM blockchains. However, once they can operate independently and stably, they will have a driving effect on the entire ecosystem.

Part VI: Conclusion

In 2023, Arweave celebrated its fifth anniversary, starting from the concept of permanent storage and gradually building a complete technical architecture, effectively storing data for over 200 years, standing out among many storage projects.

Arweave has grown into the most decentralized storage infrastructure in the Web3 field, aiming to build an eternal library for all of human civilization, storing all the achievements of human civilization to date.

Guided by this philosophy, Arweave has expanded from personal storage to enterprise-level storage, from static data to the DDB field, from a single storage service to data availability services. From the experimental cooperation of Meta NFT to the wise choice of Lens, all have proven the reliability of Arweave.

References:

• $U-Niverse
• Introducing BazAR!
• Arweave
• Introducing the Universal Data License
• Universal Content Marketplace
• Centralized vs Decentralized Storage Cost (2023)
• https://www.arweave.org
• http://fwd.arweave.dev
• Arweave (AR) Research Reports | Messari
• Crypto Fundamental Analysis — ‘The Arweave’ : Good Concept, Solid Tech ?
• twitter/MessariCrypto
• Decentralized Storage: A Primer

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