A one-stop understanding of decentralized supercomputer AO token economics

Original Translation: PANews Editorial Department

On June 14th, the AO Foundation officially launched the tokenomics of the decentralized supercomputer AO.

8 Key Facts and Dates about AO Token

• AO is a 100% fair issuance token that follows the Bitcoin economic model.
• The AO token will be used to secure message transmission within its network.
• The minting mechanism will start retroactively from 13:00 Eastern Time on February 27, 2024 (Block 1372724). During this period, 100% of the minted AO tokens will be granted to Arweave token holders based on their respective balances held every 5 minutes. If you hold AR on an exchange or custodian, you should inquire about how to receive the tokens.
• In the future, one-third (33.3%) of AO tokens will be minted to AR token holders based on their ownership every 5 minutes. Two-thirds (66.6%) of AO tokens will be minted in the future to transfer assets into AO, to stimulate economic growth powerfully.
• The first phase of the bridges contract goes live today. In this pre-bridge phase, users’ Tokens will remain securely on their native network while earning AO Tokens. Once the second phase of the bridges goes live, users will be able to deposit assets into new bridges contracts and use them on AO – while earning rewards. Users can deposit stake Ethereum (stETH) Token into audited pre-bridge contracts here.
• Transitional rewards will begin at 11:00 AM Eastern Time on June 18, 2024.
• Users can withdraw tokens from the pre-bridge at any time, but can only start earning AO after the rewards start on June 18th. Rewards are distributed once every 24 hours.
• The AO token will remain locked until about 15% of the supply is minted, which will occur around February 8, 2025.

Overview: 21 million coins in total, 100% fair issuance

AO is a Token that mimics the 100% fair issuance of Bitcoin.

Like Bitcoin, AO has a total supply of 21 million tokens and a halving cycle of 4 years. AO is distributed every 5 minutes, with a monthly distribution of 1.425% of the remaining supply. As of June 13th, AO’s inventory is 1.0387 million tokens. This makes them extremely scarce. In comparison, Ethereum has 120 million, Solana has 461 million, and Ripple has 55 billion.

The minting mechanism of AO means that although the number of newly minted tokens is halved every 4 years, there will be no sudden ‘halving event’. Instead, the number of new tokens will decrease slightly every month, forming a smooth issuance schedule.

Although most token distribution models tend to favor internal personnel rather than the community, AO’s model adheres to the principles of fairness and equal access, which is the core of the encryption revolution. There is no pre-sale or pre-allocation. Instead, AO’s token reward mechanism incentivizes two key aspects of a successful ecosystem: economic growth and security at the underlying layer.

Its working principle is as follows:

~ 36% (100% of the first 4 months + 33.3% afterwards) of AO tokens are minted by Arweave token holders over time, incentivizing the security of the AO base layer - Arweave.

About 64% of the AO tokens are minted over time, used to provide external income and introduce assets into AO to incentivize its economic rise. This creates extremely powerful momentum to increase the liquidity of the ecosystem, forming an economic flywheel.

At the same time, without any token sales, the network provides funding for its own ecosystem development in two ways:

Permissionless Ecosystem Financing

After the launch of the bridge, developers who attract users to deposit eligible assets in their applications will receive corresponding AO token rewards. This provides developers with a permissionless long-term source of income without the need to apply for grants, seek external investment, or even tokenize their project tokens. If they wish, these developers can also choose to share part of the AO rewards with users, allowing them to continue earning AO tokens while using applications in the ecosystem.

Permaweb Ecosystem Development Association

In addition, some specialized ecosystem development organizations and builders will also share the native returns of the assets stored in the bridge. These organizations and builders are committed to the core protocol, marketing operations, and key infrastructure development of AO. These funds will gradually decrease over time, consistent with the decay rate of network minting, allowing the network to guide but keeping it as a neutral shared protocol.

AR Already has holder’s AO balance calculation method

Arweave Token holders’ AO token minting has been initiated from 12:00 UTC on February 27, 2024, to trace applications back to the AO testnet. Minting AO tokens since the start of the testnet will ensure sufficient circulating supply before circulation, with the goal of reaching approximately 15% of the total supply (3.15 million) around February 8, 2025.

If you have been holding $AR since the launch of the testnet for several months, as of June 13, 2024, you have accumulated approximately 0.016 AO tokens per AR. Please remember that the current supply of AO is 1/65 of AR.

Major exchanges are currently studying whether and how to transfer $AO to users. Please contact the exchange or custodian to understand how they manage this process.

If the user has been keeping the $AR token by themselves, they can check the balance by visiting ao.arweave.dev. Click on the Arweave tab and connect the self-managed wallet (such as ArConnect).

Hold AR for future earnings of AO

A new AO token is minted every 5 minutes. Before the pre-bridge launch on June 18, all AO tokens were minted 100% by AR token holders. After the pre-bridge launch, 33% of AO tokens will be distributed to AR holders in proportion, accounting for approximately 36% of the total supply of AO minted by AR token holders. This process occurs automatically.

The following list shows approximately how much AO you can expect to accumulate in the next 12 months for a given AR balance:

1 AR: 0.016 AO

10 AR: 0.16 AO

50 AR: 0.8 AO

100 AR: 1.6 AO

500 AR: 8.0 AO

1000 AR: 16.0 AO

The newly minted $AO quantity will decrease over time until all AO tokens are minted. AO tokens will be transferable starting around February 8, 2025.

Pre-bridge stETH to convert earnings into AO

Please note: The AO transition reward does not apply to US citizens.

At this initial stage, you can deposit stETH (ETH staked using Lido) to accumulate token rewards in AO. As AO opens up to more ecosystems, other Proof of Stake assets will also be eligible.

At this initial stage, the pre-bridge assets will not be usable in the AO network applications. After the second stage of bridging goes live, you will be able to use stETH in the AO application and still receive AO token rewards.

When bridging a user’s stETH to AO, their original stETH deposit will be held in an audit contract on the Ethereum network, while the native yield will be distributed between the dedicated ecosystem development organizations and builders of the AO ecosystem to facilitate growth. At launch, these organizations include Open Access Supercomputing Foundation, Forward Research, Autonomous Finance, Warp Contracts, Longview Labs, and ao/acc. More organizations will be added as the ecosystem develops.

Users can withdraw their initial stETH deposits at any time.

New AO tokens will be minted every 5 minutes after 11 AM Eastern Time on June 18, 2024, which is exactly 16 weeks after the AO testnet launch. Once the rewards start, 66% of the newly minted $AO will be distributed proportionally to the wallets that have been pre-bridged to AO. This process will happen automatically.

The exact amount of AO tokens received by the income provider depends on the proportion of assets they deposit in the contract to the total deposited assets. As AO opens up to more ecosystems and can provide multiple proof of stake assets, the number of AO tokens received not only depends on the proportion of assets provided, but also on the income generated by each asset.

The following list shows how many AO tokens you can expect to accumulate in the next 12 months by holding a certain percentage of the total income asset pool (assuming the only asset provided is stETH):

0.01%: 210 AO

0.1% ： 2, 105 AO

0.5% ： 10, 524 AO

1% ： 21, 049 AO

5%: 105,243 AO

AO Token will be transferable starting around February 8, 2025.

How to deposit stETH to receive AO

Please note: The AO transition reward does not apply to US citizens.

Users can start depositing stETH into the pre-bridge today. Rewards will start accumulating on June 18, 2024, at 11 a.m. (Eastern Time). Rewards are distributed once a day, so users may need to wait for up to 24 hours to receive the first reward.

Convert the user’s stETH earnings into AO tokens according to the simple instructions below:

• Go to the minting page on the AO website.
• Click on the Ethereum tab and connect your Ethereum wallet (Metamask or Rabby).
• Enter your Arweave wallet address to receive AO tokens.
• Deposit stETH into the audit contract by entering the amount you want to provide. These tokens will be held in a trustless contract on Ethereum and can be withdrawn at any time. If you don’t have stETH in your wallet, you will need to exchange other tokens for some stETH before depositing.
• Sign the transaction in your ETH wallet to deposit stETH into the contract.
• You will receive AO Token, directly deposited into your specified Arweave Wallet.

Smart Contract Security

The Pre-Bridge contract has undergone extensive audits and requires no trust: no one except you can access your tokens. The only privilege is that the Open Access Super Computing Foundation (the organization coordinating the launch of the AO token with the Arweave ecosystem organization) can withdraw tokens from the contract in the event of a security incident - and return them to the original owner. This feature provides an additional layer of security without placing the Pre-Bridge assets under the control of any centralized entity.

These contracts themselves are minor modifications to the MorpheusAI deposit contract. These contracts are used to provide a battle-tested foundation, thereby reducing any security risks.

Conclusion

The AO token minting process introduces a completely different model, based on the principles of fairness and equal access, rewarding users and developers. The diverse teams behind this initiative draw inspiration from the groundbreaking innovation of Bitcoin and the fundamental principles established by Satoshi Nakamoto.

In the past fifteen years, the encryption industry has experienced tremendous growth. However, this expansion is not always consistent with broader social interests. To truly advance the mission of creating a permissionless, decentralized, and user rights-protected network, it is crucial to rethink how to integrate values and incentive mechanisms to achieve these goals.

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