Arweave’s core function is to provide permanent storage for data. To make this possible, the network uses an innovative pricing mechanism that ensures data can be stored indefinitely while maintaining economic sustainability.
How is the Cost of Storage Calculated?
Data storage costs have been consistently decreasing over the past 50 years. This trend, known as the declining GBh cost (cost to store 1 GB of data for an hour), has dropped at an average annual rate of 30.57%.
Using this trend, Arweave calculates the cost of perpetual data storage by summing the declining costs over time. This makes it possible to charge users a one-time upfront fee for permanent storage, with the expectation that the declining costs of storage will cover data preservation forever.
The Storage Endowment
To ensure that the data remains permanently stored, Arweave uses a storage endowment system. This system distributes tokens to miners over time, incentivizing them to continue storing data sustainably.
How Does Transaction Pricing Work?
Every transaction on Arweave includes two components:
- Perpetual Storage Cost: A conservative estimate of the storage cost for the data being uploaded.
- Transaction Reward: An instant reward given to miners for including the transaction in a block.
This dual system ensures both immediate and long-term incentives for miners to keep the network running smoothly.
Ensuring Miner Sustainability
Miners are rewarded through three main mechanisms:
- Transaction Fees: Paid directly by users when uploading data.
- Inflation Rewards: A pre-defined number of tokens released at each block.
- Endowment Rewards: Tokens drawn from the storage endowment if transaction fees and inflation rewards don’t cover the costs of maintaining the network.
The storage endowment acts as a financial buffer, ensuring that miners remain profitable even during periods of fluctuating token prices or network activity.
Future Data Density and Storage Reliability
Arweave’s model relies on the assumption that data storage costs will continue to decline. There are several reasons to believe this trend will persist:
- Data Density Improvements: Storage technology still has immense room for growth, with theoretical limits far beyond current capabilities.
- Reliability Advancements: Storage mediums are becoming more reliable, reducing costs over time.
- Incentives for Innovation: As global demand for data grows, so does the push to develop cheaper and more efficient storage technologies.
These factors ensure that Arweave’s economic model remains viable for decades (if not centuries) into the future.
Data Permanence vs. Network Permanence
It’s important to note that Arweave’s goal is data permanence, not necessarily the indefinite operation of the network itself. Like all technologies, Arweave may eventually be replaced by a newer system better suited to the challenges of the time.
However, this doesn’t mean the data will be lost. The information stored on Arweave is cryptographically linked and widely replicated, making it highly resilient. If a future system emerges, it’s likely that Arweave’s data will be subsumed into that system, just as older archives have been integrated into modern digital systems.
For example:
- Early internet protocols like Gopherspace are now archived on the Arweave permaweb.
- Similarly, the Library of Congress and countless other archives have been digitized and preserved on the modern web.
Arweave anticipates that its data will follow this same pattern, ensuring long-term preservation through replication and the incentives it has created for permanent storage.