AO Token Economics Principles
Today, we are excited to announce the tokenomics of the AO decentralized superparallel computer.
8 Important Facts and Dates About AO Token
- AO is a 100% fairly distributed token that follows the economic model of Bitcoin.
- AO tokens will be used to secure messaging within its network. For details, please refer to the latest AO whitepaper.
- The minting mechanism will be retroactively executed starting from February 27, 2024, at 1:00 PM EST (block 1372724). 100% of AO tokens minted during this period will be allocated to Arweave token holders based on their balance held every 5 minutes. If you hold AR on an exchange or with a custodian, please consult them on how to claim your tokens.
- In the future, one-third (33.3%) of AO tokens will be distributed to AR token holders every 5 minutes based on their holdings. Two-thirds (66.6%) of AO will be used to bridge assets into AO to strongly incentivize economic growth.
- The first phase of the cross-chain contract goes live today (June 13, 2024). During this pre-cross-chain phase, your tokens will be securely held in their native network while you will receive AO tokens. Once the second phase of the cross-chain bridge is live, you will be able to deposit assets into the new cross-chain bridge contract and use them on AO while accumulating rewards. You can deposit staked Ethereum (stETH) tokens in the audited pre-cross-chain bridge contract by clicking here.
- Cross-chain rewards will begin on June 18, 2024, at 11:00 AM EDT.
- You can withdraw tokens from the pre-cross-chain bridge at any time, but AO incentives will only start accruing after June 18. Rewards are distributed every 24 hours.
- AO tokens will remain locked until approximately 15% of the supply is minted. This is expected to occur around February 8, 2025.
Overview
AO is a 100% fairly distributed token, modeled after Bitcoin.
Similar to Bitcoin, AO has a total supply of 21 million tokens and features a similar four-year halving cycle, with AO distributed every 5 minutes, amounting to 1.425% of the remaining supply each month. As of June 13, 103.87 million AO have been minted. This makes it extremely scarce. In comparison, there are 120 million Ethereum, 461 million Solana, and 55 billion Ripple in circulation.
The minting mechanism of AO means that while the number of newly minted tokens is halved every 4 years, the "halving event" does not occur suddenly. Instead, the number of new tokens minted each month decreases slightly, releasing them smoothly.
Despite most token distribution models favoring insiders, AO's model adheres to the principles of fairness and equal access, which are core tenets of the crypto revolution. There are no pre-sales or pre-allocations. Instead, the AO token reward mechanism incentivizes two key aspects of a successful ecosystem: economic growth and the security of the underlying layer.
Here's how it works:
Approximately 36% (100% of the first 4 months + the future 33.3%) of AO tokens will be minted and distributed over time to Arweave token holders, whose tokens incentivize the security of AO's underlying layer—Arweave.
About 64% of AO tokens will be used over time to provide external yields and bridge assets into AO to incentivize its economic growth. This creates a strong incentive mechanism to increase the liquidity of the ecosystem, forming an economic flywheel.
At the same time, without any token sales, the network funds its ecosystem development in two ways:
Permissionless Ecosystem Funding
Once the cross-chain bridge is live, developers can attract users to deposit qualifying assets in their applications to earn corresponding AO token rewards. This allows developers to obtain permissionless long-term revenue streams without applying for grants, external investments, or even tokenizing their projects. These developers can also choose to share a portion of the AO rewards with their users, allowing users to continue earning AO tokens while using applications within the ecosystem.
Permaweb Ecosystem Development Guild
Additionally, some organizations and builders dedicated to ecosystem growth will share the native yields of assets stored in the cross-chain bridge. These organizations and builders are committed to the core protocol of AO, market operations, and key infrastructure development. This funding gradually decreases as the network's minting rate declines, allowing the network to self-start while still maintaining its neutral and shared protocol characteristics.
How to Check Your AO Balance
AO token minting has been retroactively executed since 12:00 UTC on February 27, 2024, when the AO testnet launched. Minting AO tokens since the testnet launch will ensure there is enough supply before circulation, aiming to reach approximately 15% of the total supply (3.15 million) by February 8, 2025.
If you held $AR in the months following the testnet launch, as of June 13, 2024, you have accumulated approximately 0.016 AO tokens for every AR you hold. Please note that the current supply of AO is 1/65 of AR.
Major exchanges are currently exploring whether and how to distribute $AO to their users. Please contact your exchange or custodian to determine how they will manage this process.
If you have been self-custodying your $AR tokens, you can easily check your balance by visiting ao.arweave.dev. Click on the Arweave tab and connect your self-custody wallet (such as ArConnect).
Earn AO by Holding AR
New AO tokens are minted every 5 minutes. Before the pre-cross-chain launch on June 18, 100% of AO tokens are minted by AR token holders. After the pre-cross-chain launch, 33% of AO tokens will be proportionally distributed to AR holders, on average, AR token holders will mint approximately 36% of the total supply of AO tokens over time. This process is automatic.
The following list shows how much AO you can approximately accumulate based on the amount of AR you hold over the next 12 months:
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 number of newly minted $AO will gradually decrease over time until all AO tokens are fully minted. AO tokens are expected to be transferable around February 8, 2025.
Pre-Cross-Chain Your stETH for AO Rewards
Note: AO cross-chain rewards are not available for U.S. users
In the initial phase, stETH (ETH staked through Lido) can be deposited to earn AO token rewards. Other proof-of-stake assets will become eligible as AO opens up to more ecosystems.
During this pre-cross-chain phase, pre-cross-chain assets will not be usable in applications on the AO network. Once the second phase of the cross-chain is live, you will be able to use your stETH in AO applications while still accumulating AO token rewards.
When you pre-cross-chain stETH to AO, your original stETH deposit will be held in an audited contract on the Ethereum network, while native yields will be distributed among dedicated ecosystem development organizations and builders within the AO ecosystem to promote 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.
You Can Withdraw Your Initial stETH Deposit at Any Time
New AO tokens are minted every 5 minutes, starting from June 18, 2024, at 11:00 AM EDT, exactly 16 weeks after the AO testnet launch. After rewards begin, 66% of newly minted $AO will be proportionally distributed to wallets that pre-cross-chain to AO. This process is automatic.
The number of AO tokens earned by yield providers is determined by the proportion of their assets deposited in the contract relative to the total deposited assets. As AO opens up to more ecosystems and allows for multiple proof-of-stake assets, the number of AO tokens earned will depend not only on the proportion of assets provided but also on the yields generated by each asset.
The following list shows how much AO tokens you can approximately accumulate over the next 12 months, assuming the only asset provided is stETH, based on the percentage of the total yield asset pool you hold:
0.01%: 210 AO
0.1%: 2,105 AO
0.5%: 10,524 AO
1%: 21,049 AO
5%: 105,243 AO
AO tokens are expected to be transferable around February 8, 2025.
How to Deposit stETH to Accumulate AO
Note: AO cross-chain rewards are not available for U.S. users
You can start depositing stETH into the pre-cross-chain bridge today. Rewards will begin accumulating on June 18, 2024, at 11:00 AM EDT. Rewards are distributed daily, so it may take up to 24 hours to receive your first reward.
Follow these simple steps to exchange your stETH yields for AO tokens:
- Visit the minting page on the AO website.
- Click on the Ethereum tab and connect your Ethereum wallet (Metamask or Rabby).
- Enter the Arweave wallet address where you wish to receive AO tokens.
- Deposit stETH into the audited contract, entering the amount you wish to provide. These tokens will be held in a trustless contract on Ethereum and can be withdrawn at any time. If you do not have stETH in your wallet, you will need to exchange other tokens for stETH before depositing.
- Sign the transaction in your ETH wallet to deposit stETH into the contract.
- You will directly earn AO tokens in the specified Arweave wallet.
Smart Contract Security
The pre-cross-chain bridge contract has undergone comprehensive audits and does not require trust: no one can access your tokens except you. The only privilege is that the Open Access Supercomputing Foundation (the organization coordinating the launch of the AO token with the Arweave ecosystem) can withdraw tokens from the contract in the event of a security incident and send those tokens back to the original owner. This feature provides an additional layer of security without placing pre-cross-chain assets under the control of any centralized entity.
These contracts are slight modifications of the MorpheusAI deposit contracts. The use of these contracts is intended to provide a battle-tested foundation, reducing any security risks.
Conclusion
The AO token minting process introduces a new model that rewards users and developers based on principles of fairness and equal access. The multiple teams behind this project draw inspiration from Bitcoin's pioneering innovations and the fundamental principles established by Satoshi Nakamoto.
Over the past fifteen years, the cryptocurrency industry has experienced tremendous growth. However, this expansion has not always aligned with broader societal interests. To truly advance the mission of creating a permissionless and decentralized network that ensures user rights, it has become crucial to rethink how to integrate value and incentives to achieve these goals. We hope the principles we advocate resonate with you and may inspire you to join this movement.
