Reducing costs to break monopolies Arweave’s economic advantages on Bitcoin and Ethereum

Unlocking Economic Advantages How Arweave's Cost-Effective Approach Can Disrupt Monopoly in Bitcoin and Ethereum

Arweave, born for data storage, Ethereum and Bitcoin can’t compete with it!

Did this sentence catch your attention? Let’s explore together.

Arweave: Pioneering the new era of on-chain data storage

Arweave was developed under the vision of Sam Williams, and it has been growing exponentially every week.

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Take a look at the transactions in the chart below.

Arweave is built specifically for data storage on a scale and economic model that Ethereum and Bitcoin cannot match. Even in the face of the aforementioned surge in transactions, Arweave maintains its high speed as always.

Cost-effectiveness: Core Advantage

Arweave’s data storage is extremely cheap, especially compared to Ethereum and Bitcoin!

Sam Williams revealed an astonishing cost comparison in a conversation with Philip Mataras, the founder of ArDrive:

Storing a 13 GB file on Arweave costs only $87, while storing the same data:

• On Bitcoin, it would cost around $35,620,000

• On Ethereum, it would cost $780,000,000.

In short, it’s insane for someone to store data on these two blockchains. They were not built for data storage, and even if they were, who would pay exorbitant storage fees?

Born for Data: The Foundation of Arweave

Now, the question arises: how does it scale in a world where data is ubiquitous?

When you’re walking on the street, look around, and you’re likely to see people using their phones to post videos and photos on social media and exchanging messages. Once all this data is accumulated, the scale of it becomes unimaginable.

So, can Arweave really handle such a massive amount of data?

The answer is yes!

Arweave’s architecture is fundamentally different from that of Ethereum and Bitcoin.

While Ethereum and Bitcoin are limited by their inherent throughput restrictions, Arweave is specifically designed for data storage. It can accommodate up to 2^256 bytes in a single transaction and distribute them among countless users and projects.

By the way, 2^256 bytes is a large number, let me write it out for you:

1,078,397,866,686,025,600,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000 GB.

You can’t even imagine how many selfies or cat photos that is!

Fault Tolerance and Sustainability: Arweave’s Unique Solution

Compared to Ethereum and Bitcoin, Arweave’s data storage method offers stronger fault tolerance and sustainability. As Sam Williams himself says, “mining verified data” on the Arweave network.

At the core of all this is the network’s donation mechanism. Arweave actually incentivizes miners/nodes to store data for the long term.

This concept ensures that miners are always motivated to store data for the long term, whereas Bitcoin and Ethereum clearly lack this feature, which could hinder long-term data storage.

Essentially, Arweave’s innovative storage donation mechanism incentivizes miners to store all data rather than selectively storing certain data. If miners can prove that they’ve stored a particular data fragment when the network demands it, they will be rewarded. The more data a miner stores, the higher their chances of receiving a reward when this random process occurs.

Therefore, without a doubt, they will store all data. If you were running a miner node, wouldn’t you do the same?

Compared to other blockchains, this is definitely Arweave’s secret weapon.

The donation mechanism bypasses the complexity and inefficiency of dealing with millions of individual data storage contracts, which is a common challenge in Ethereum and other smart contract-based systems. In Arweave, a Merkle root and a public reward pool serve all data, preventing increased computational load or system bloat.

Let’s further elaborate on the last point.

Recursive Bundling: Achieving Massive Scalability

As we’ve seen, Arweave is capable of handling large amounts of data. However, what happens when it comes to the number of transactions uploaded to the network by millions of people worldwide using their phones simultaneously?

(Remember… selfies and cat photos!)

In case you didn’t know, Arweave has a memory pool of 1000 transactions.

This may sound technical, but it means that it has a queue of 1000 transactions waiting for approval and upload. If a transaction exceeds the limit of 1000, the file will have to wait in line to enter the memory pool. Additionally, this memory pool has a timeout period. If the upload time for 1000 transactions is too long, the 1001st file may be completely discarded and never uploaded to the network!

So, how do we solve this problem?

This is where Bundle (transaction bundling technology) comes into play. A simple process that can vastly improve network efficiency!

Transactions can be bundled together, such as compressing a large number of files and sending them all as one package to the network. If 1000 files are bundled together as one transaction, it means that the 1001st file becomes the second file.

And things are going to get even better.

Arweave employs a recursive bundle strategy. If your next question is, what happens when we have 1000 bundled files filling the memory pool, the answer is that we can bundle those bundles again.

By now, you might have realized that Arweave can upload an unlimited number of files at once. In theory, Arweave could store all the data of the current network in one transaction, which is pretty crazy.

The reason Arweave is able to do all of this is due to its simple architectural design: all data on Arweave is stored permanently.

Given this, it becomes possible to combine data from different users into one transaction. This approach has been effectively processing millions of data entries every day.

When it comes to the actual Bundle process, Arweave wasn’t always like this. It used to have bottlenecks, but now it has built many protocols on the network to improve it in various ways. Currently, the two leading Bundle protocols on the network are:

• Irys (formerly Bundlr)

• EverVision

An analytical comparison of Arweave with Ethereum and Bitcoin

Although Ethereum and Bitcoin have made significant progress and have their own use cases, their designs are not optimized for on-chain data storage.

Ethereum focuses on smart contracts and decentralized applications, while Bitcoin, serving as digital gold, faces inherent limitations in dealing with large-scale data storage. These limitations come from their respective block size limits, transaction costs, and network throughput, which are not conducive to storing large amounts of data.

This is not to say that these blockchains don’t have their own unique use cases.

Without a doubt, at least for now, Ethereum is the preferred chain for decentralized finance (DeFi). On the other hand, no one can deny that Bitcoin holds the leading position as digital gold and a hedge against inflation, with some even considering Bitcoin as the future global currency.

(I won’t express my opinion on this for now, but I think it’s quite possible.)

In comparison, Arweave’s blockchain architecture features functionalities like blockweave technology, enabling greater scalability and efficient data retrieval.

Speaking of use cases, both Bitcoin and Ethereum have digital assets and artwork in the form of NFTs. Ethereum has seen a proliferation of NFTs, while the market has recently witnessed the rise and success of Bitcoin Ordinals. If you haven’t heard of Ordinals, they are essentially NFTs on Bitcoin. The process of creating them is a bit more complex than on Ethereum, but that’s another story.

However, NFTs are also an area where Arweave can truly shine.

Arweave NFT

There are many resources on the internet where you can find information about NFTs on Arweave, so I won’t go into detail here. In this example, let’s consider NFTs as part of digital artwork —— although many people simply see them as JPEG images that can be saved with a simple right-click.

NFT has several components:

• One is the smart contract, which needs to be stored on the blockchain.

• Then there are the tokens created from the smart contract, which are the actual NFTs themselves, and you will find them in your wallet.

• Next, there is metadata that describes the token.

• Finally, you have the image you see now.

To save time and money, many NFT projects store images on private servers or external resources such as Dropbox. This is a way for them to avoid the cost of storing 13GB files mentioned earlier. Some NFT projects consist of 10,000 files. Imagine the cost if you had to directly upload all these files to Ethereum… it would be huge. So usually, only the smart contract and tokens are stored on the chain, while everything else is stored off-chain.

Therefore, based on our understanding of the cost of storing data on Arweave, you can start to see the cost advantage of creating NFTs here.

But wait, there’s more!

Not only that, if you use Arweave to create your NFT, you can have all the above data in one place instead of being scattered across different blockchains and external resources.

If you’re concerned about the smart contract on Arweave – a concern shared by many – yes, Arweave absolutely supports smart contracts.

Meta actually chose Arweave as the blockchain to store its Instagram NFTs.The hype around NFTs is gradually subsiding (in terms of the mainstream), but this might be a dress rehearsal for the upcoming bull market.

Summary

Once you start to understand what Arweave can do and its potential in handling data, you’ll realize how important it is for the future of blockchain, and more.

Low-cost on-chain storage is crucial for the success of blockchain and Web3. It’s only a matter of time before Arweave steps into the limelight.

We will continue to update Blocking; if you have any questions or suggestions, please contact us!