Fairness and equal access are fundamental principles of the crypto revolution, and these guide the recently announced AO Token’s distribution.
Let’s dive into the intricacies of the AO Token.
How many AO tokens are there?
AO Tokens are designed to be ultra-scarce, with a maximum supply of 21 million tokens. They follow a four-year halving cycle, similar to Bitcoin, but with a smoother distribution curve. AO tokens are distributed every five minutes at a constant monthly rate of 1.425% of the remaining token supply, meaning the number of tokens distributed gradually decreases every five minutes.
Currently, 1.03 million tokens have been distributed as retroactive rewards since the AO testnet launch on February 27, 2024.
The smallest unit of AO is 1 Armstrong, named after Joe Armstrong, one of the inventors of Erlang (from which AO has drawn inspiration for network architecture). One Giga Armstrong (10^9 Armstrongs) equals one AO token.
How is the AO token launch different from others?
Smart contract networks are digital economies. And without sufficient initial liquidity and user activity, these digital economies struggle to grow, regardless of the quality of their applications and services. This is known as the “cold start” problem.
AO aims to address this problem by rewarding the addition of value from networks where liquidity has already accrued and to implement economic security on the AO network while also securing the underlying network, Arweave.
How will AO tokens be distributed?
In a radically different approach from other token launches, there will be 0 pre-allocations, 0 pre-sales, or sales of any kind, 0 preferential access whatsoever. 100% of the tokens will be given to the community in one of two ways.
Holding AR Tokens
36% of the total supply will be distributed to AR token holders over time, securing AO’s base layer, Arweave. The distribution per user will be determined by the aggregation of AR token balances held every five minutes. This distribution is retroactively calculated from February 27, 2024, the AO testnet launch date.
Users who have held AR since that date should have accrued approximately 0.016 AO tokens per AR token as of 13 June 2024.
Users holding AR tokens in non-custodial wallets like ArConnect.io and Arweave.app will directly receive their AO token balances. However, those holding AR tokens on centralized exchanges (CEXs) must contact their respective exchanges, as their AO token mints will be received by the CEXs. Currently, AO tokens are non-transferable until at least 15% of the total supply has been minted, estimated to occur in approximately 6-7 months. CEXs may start showing users their accrued AO token balances during this period and distributing the tokens to them, thereafter.
Holding CRED Tokens
As a special provision for rewarding initial testers of the AO testnet, FWD Research will reserve a part of their minted AO tokens as grants for holders of the CRED tokens in a 1000:1 ratio.
Bridging Assets to AO
The remaining 64% of the total supply will be distributed as rewards for driving economic growth in the ecosystem. This involves bridging assets from other networks and using these assets within the AO network.
On June 18, 2024, pre-bridges will facilitate the transfer of staked assets from Ethereum (stETH) and soon from Solana to AO. The staked tokens will remain on their native networks until AO reaches mainnet, ensuring they are not exposed to AO’s security features prematurely.
In Phase 2, AO will extend its message-passing layers to communicate with other networks, enhancing security of the bridges. Users will receive derivative tokens representing their bridged assets, which can be used throughout the AO ecosystem, while passively minting AO tokens. The bridging process will be managed by smart contract pairs, with one on the native network and one on the AO network. The latter will be responsible for issuing the derivative tokens like aoETH in exchange for bridged stETH.
Users can withdraw their staked assets at any time, but once withdrawn, their AO token minting will halt.
To learn more about bridging assets, visit ao.arweave.dev.
How can apps and services leverage AO token mints?
Developers can build apps and services that require deposits of assets like AR tokens or bridged assets. As the holders of these assets earn AO token mints, it provides a unique opportunity for app developers to earn revenue streams from assets deposited in their apps. Users can deposit assets into their favorite projects, supporting their development and earning rewards.
Potential ideas for applications include perpetual swap exchanges, derivative markets, autonomous agents, and AI-based applications.
What value does the AO token add to the AO network?
The security mechanisms in the AO network are based on a universal principle: Attestations on the outcomes of message interactions with processes should be cryptographically validated and economically secured. This system is a flexible version of the Proof of Stake (PoS) mechanism.
In this system the AO data protocol provides cryptographic validation while a special process, the ‘AO-Sec Origin’, ensures economic security.
To achieve this, the process allows any network participant to:
- Stake in the process itself, slashing of which subject to votes from other stakers
- Deposit in a substaking process, granting it authority over the funds and allowing it to slash or return as per self-administered rules
Additionally, AO introduces a novel approach where users can purchase specific levels of security for each message they send, tailoring security resources to their needs.
The network requires a native token to implement this economic security and underpin the AO-Sec Origin security process. Hence, the AO Token is introduced. A number of security mechanisms can be constructed from this economic framework where staked service operators and clients can find mutually agreeable means of interaction. As a result, a market for these varied security mechanisms is created. This versatility will allow the possibility to leverage new technologies like ZK Proofs to verify the integrity of messages without the need for the core protocol to undergo any changes.
The AO-Sec Origin process is the primary custodian and issuer of the network’s staking tokens keeping track of ownership and user defined properties of all stackable units. It also provides the back-stop security functions for the reliable operation of the network, including staking, slashing, and un-staking of tokens. Finally, the AO-Sec Origin process facilitates the reassignment of processes in response to failures or breaches of protocol by Scheduler Units (SUs), such as liveness issues or double-signing.
In cases of these failures the process may become unhosted, another SU can send a dry run with proposed terms to rehost the process. It is up to the discretion of the process to accept, request further information or reject the proposal.
To ensure that the AO-Sec Origin process itself is immune to these challenges and can extend its security to other processes, it uses Arweave’s Byzantine Fault Tolerant (BFT) consensus algorithm as its host.
In addition to this, SIV, an optional sub-protocol, can add an extra layer of Sybil resistance to the AO network. It integrates a lightweight, low-latency consensus mechanism using outcome attestations, tailored for specific deployment scenarios as requested by processes or users.
The framework of SIV involves a deterministic ordered set of attestors who audit the activities of other stakers. Clients needing staked operations can mandate SIV's inclusion, specifying the required number of attestors' signatures for result validation, ensuring enhanced security and integrity.
What is the difference between the AR and AO Tokens?
AO network vs Arweave network
The AO network leverages Arweave as its base layer for permanent data storage and integrity.
AO focuses on providing a secure, scalable, and interoperable compute environment for decentralized applications (dApps), using the AO token as its native currency for economic security and liquidity.
Arweave is a decentralized storage platform enabling permanent, immutable data storage. Its native token, AR, is used for data storage and incentivizing miners to maintain this data.
Economic security vs data permanence
AO achieves economic security through a flexible Proof of Stake (PoS) mechanism. Network participants stake AO tokens to become validators, earning rewards for securing the network and participating in governance.
Arweave ensures data permanence with its unique consensus mechanism, Succinct Proofs of Random Access (SPoRA). Miners are rewarded with AR tokens for providing storage services and maintaining data integrity.
Why having both tokens complement each other makes sense
The combination of Arweave’s storage and AO’s compute creates a comprehensive and robust ecosystem that offers both data permanence and efficient computation. Having separate tokens allows for targeted economic incentives and value accrual within each network. The distinct economic models of AR and AO tokens enable each to capture the value generated by its unique niche. Also, the two tokens can adapt independently while fueling the main and underlying network, Arweave.
How will the AO token be governed?
A new non-profit organization will oversee the launch and distribution of the AO token based on the mechanisms described in the previous sections.
Conclusion
The AO token aims to establish a fair and robust digital economy by addressing initial liquidity challenges and rewarding community participation.
Want to learn more aboutAO? Checkout this article.
If you're looking to deposit assets on the AO network, try out apps like Operation Liquidity and Astro.
Have an idea? Reach out to us via the form on CommunityLabs.com.
