Arweave's endowment mechanism is a unique feature of Arweave's token economy that serves as a pool of AR tokens designed to ensure permanent data storage. The endowment is a sustainable funding mechanism that acts as a storage battery for the network. Instead of transaction fees going directly to miners, Arweave takes a different approach. When users pay transaction fees, most of that payment goes into this endowment pool rather than to the miners immediately.
- The endowment only releases tokens to miners when the regular block rewards aren't enough to cover the cost of storing the network's data.
- Creates a sustainable long-term storage system where one-time payments from users can fund perpetual storage.
Understanding Arweave’s token economy
Arweave’s token economy is built around AR, the native token of the network, with a maximum supply of 66 million tokens. Of this, 55 million were created at genesis, and 11 million are being gradually released as mining rewards. The system is designed to achieve multiple key objectives in its economic model. It collects transaction fees into the endowment pool, while distributing mining rewards through both block rewards and strategic endowment releases. This structure helps maintain sustainable economics as storage costs naturally decrease over time.
Typically, blockchain networks send transaction fees directly to miners as immediate rewards for their work and have very little to no built-in mechanism for long-term storage incentives. Arweave takes a different approach with its endowment mechanism, where most fees go into an endowment pool that releases tokens to miners only when block rewards aren't enough to cover storage costs.
How is endowment calculated?
It looks at the total size of stored data, current storage costs per gigabyte, and existing reward mechanisms to determine if and how much should be released from the endowment. This calculation happens with each new block, and the size of the endowment pool is tracked and updated accordingly.
Why is endowment important?
The endowment is part of Arweave's broader economic model that accounts for the historical trend of declining storage costs. The endowment pool serves as both a reserve and a stabilizing force, ensuring miners remain incentivized while maintaining sustainable economics for the network's long-term operation. It aims to make permanent data storage financially sustainable through a one-time payment system.
