Today, we are excited to announce the tokenomics of AO, the decentralized supercomputer.

The AO token in 8 key facts and dates:

1. AO is a 100% fair launch token following Bitcoin's economic model.

2. AO tokens will be used to secure message passing in its network. You can learn more in the new AO paper.

3. The minting mechanism runs retrospectively from 13:00 EST February 27, 2024 (block 1372724). 100% of the AO tokens minted during this period have been granted to Arweave token holders, based on their respective balances held every 5 minutes. If you held AR on exchanges or with a custodian, you should ask them how to receive your tokens.

4. Going forward, a full third (33.3%) of AO tokens will be minted to AR token holders according to their ownership, every 5 minutes. Two thirds (66.6%) of AO will be minted in the future for bridging assets into AO, in order to powerful incentivize economic growth.

5. The first phase of the bridging contracts is live today. During this pre-bridge phase your tokens will remain securely on their native network, while you earn AO tokens. Once phase 2 bridges are live, you will be able to deposit your assets in the new bridge contracts and make use of them on AO – while accruing rewards. You can deposit staked Ethereum (stETH) tokens into the audited pre-bridge contract here.

6. Bridging rewards start at 11:00 AM EDT June 18, 2024.

7. You can withdraw tokens from the pre-bridge at any time, but you will only start earning AO after rewards begin on June 18. Rewards are distributed once every 24 hours.

8. AO tokens will remain locked until ~15% of the supply has been minted. This will occur on approximately February 8th, 2025.

Overview:

AO is a 100% fair launch token modeled after Bitcoin.

Like Bitcoin, AO has a total supply of 21 million tokens and a similar halving cycle of 4 years, with AO being distributed every 5 minutes, at a monthly rate of 1.425% of the remaining supply. As of June 13, there are 1.0387 million AO in existence. This makes them ultra scarce. For comparison, there are 120 million Ether, 461 million Solana, and 55 billion Ripple tokens.

AO’s minting mechanism means that although the amount of newly minted tokens halves every 4 years, there is no abrupt “halving event”. Rather, the number of new tokens decreases slightly every month producing a smooth release schedule.

While most token allocations models favor insiders over the community, AO’s model adheres to the principles of fairness and equal access, which are at the core of what the crypto revolution is supposed to be. There are no presales or pre allocations. Instead, the AO token reward mechanism incentivizes two crucial aspects of successful ecosystems: economic growth and the security of its base layer.

It works like this:

~36% (100% of the first 4 months + 33.3% going forward) of AO tokens are minted over time by Arweave token holders, whose tokens incentivize the security of AO’s base layer – Arweave.

~64% of AO tokens are minted over time for providing external yield and bridging assets into AO to incentivize its economic growth. This creates an extremely strong incentive to grow the liquidity of the ecosystem, leading to 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 Funding

After bridging is live, developers that attract users who deposit eligible assets in their apps will gain the corresponding AO token rewards. This gives the developers a permissionless, long-term revenue stream without having to apply for grants, external investment -- or even necessarily tokenize their projects. These developers can also choose to share part of their AO rewards with their users, if they prefer -- allowing users to continue earning AO tokens while using the apps in the ecosystem.

Permaweb Ecosystem Development Guild

Additionally, a number of dedicated ecosystem growth organizations and builders will also split the native yield of assets stored in the bridges. These organizations and builders work on the core protocol of AO, marketing operations, as well as critical infrastructure developments. This funding phases out over time, inline with the decaying rate of the network's mint -- allowing the network to bootstrap, but leaving it as a neutral, shared protocol.

How to Check your AO Balance

The AO token mint for Arweave token holders has been applied retroactively from the launch of the AO testnet on February 27th 2024 at 12:00AM UTC. Minting AO tokens since the start of the testnet will ensure a sufficient float of tokens before they circulate, targeted to be ~15% of the total supply (3.15 million) on approximately February 8th 2025.

If you have been holding $AR over the months since testnet launch, you have accrued approximately 0.016 AO tokens per AR as of June 13, 2024. Keep in mind that the current supply of AO is 1/65th of that of AR.

Major exchanges are currently looking into if and how to pass through $AO to their users. Please contact your exchange or custodian to determine how they are administering 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-custodial wallet (like ArConnect).

Earn AO by Holding AR

New AO tokens are minted every 5 minutes. Before the launch of the pre-bridge on June 18th, 100% of all AO tokens were minted by AR token holders. After the launch of the pre-bridge, 33% of AO tokens are allocated and divided proportionately to AR holders, averaging to ~36% of total AO supply minted by AR token holders over time This process happens automatically.

The list below shows approximately how many AO you can expect to accrue for a given balance of AR 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 decreases over time, until all AO tokens are minted. AO tokens will become transferable on approximately February 8th, 2025.

Pre-bridge your stETH To Swap Yield for AO

Note: AO bridging rewards not available to persons in the US

During this initial period, stETH (ETH staked with Lido) can be deposited to accrue token rewards in AO. Other proof of stake assets will be eligible as we start opening up AO to more ecosystems.

Pre-bridged assets will not be usable in applications on the AO network during this initial period. Once the phase 2 bridge is live, you will be able to use your stETH in AO applications while still accruing AO token rewards.

When pre-bridging your stETH to AO, your original stETH deposit stays in an audited contract on the Ethereum network, while the native yield is split amongst dedicated ecosystem development organizations and builders in the AO ecosystem, in order to fuel growth. Upon launch these organizations are Open Access Supercomputing Foundation, Forward Research, Autonomous Finance, Warp Contracts, Longview Labs, and ao/acc. More organizations will be added as the ecosystem grows.

You can withdraw your initial stETH deposit at any time.

New AO tokens are minted every 5 minutes after 11 AM EDT June 18, 2024, precisely 16 weeks after the launch of AO’s testnet. After rewards begin, 66% of newly minted $AO are allocated and divided proportionately amongst wallets that pre-bridged to AO. This process happens automatically.

The exact number of AO tokens a yield provider receives is determined by the proportion of assets they deposited in the contract relative to the total assets deposited. As AO opens up to more ecosystems and more than one proof of stake asset can be provided, the number of AO tokens received will not only depend on the proportion of assets provided but also on the yield generated by each asset.

The list below shows how many AO tokens you can expect to accrue for holding a given percentage of of the total yield bearing asset pool over the next 12 months, 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 tokens will become transferable on approximately February 8th, 2025.

How To Deposit stETH to Accrue AO

Note: AO bridging rewards not available to persons in the US

You can begin depositing stETH into the pre bridge today. Rewards start accruing on June 18, 2024 at 11am EDT. Rewards are distributed once per day, so it may take up to 24 hours before you earn your first rewards.

Follow these simple instructions to swap your stETH yield for AO tokens:

1. Go to the mint page on the AO website.

2. Click on the Ethereum tab and connect your Ethereum wallet (Metamask or Rabby).

3. Enter the Arweave wallet address on which you want to receive your AO tokens.

4. Deposit stETH into the audited contract by inputting the amount you want to provide. These tokens will stay in the trustless contract on Ethereum and can be withdrawn at any time. If you don’t have stETH in your wallet, you will need to swap other tokens to get some stETH before depositing.

5. Sign the transaction in your ETH wallet to deposit the stETH in the contract.

6. You will earn AO tokens directly to the Arweave wallet you specified.

Smart contract security

The pre-bridge contract has been extensively audited and is trustless: Nobody has access to your tokens apart from you. The only privileged right of any kind is that Open Access Supercomputing Foundation (the organization that has launched AO’s token, in coordination with Arweave ecosystem organizations) is able to eject tokens from the contract – sending them back to their original owners – in the event of a security incident. This functionality offers an additional layer of safety, without putting the pre-bridged assets under the control of any centralized entity.

The contracts themselves are a minor modification of the MorpheusAI deposit contracts. These contracts were used in order to provide a battle-tested base, lessening any security risks.

Conclusion

The AO token minting process introduces a radically different model that rewards both users and developers, grounded in principles of fairness and equal access. The diverse teams behind this initiative have drawn inspiration from the groundbreaking innovation of Bitcoin and the foundational principles established by Satoshi Nakamoto.

Over the past fifteen years, the crypto industry has experienced tremendous growth. However, this expansion has not always aligned with broader societal benefits. To truly advance the mission of creating a permissionless and decentralized web that guarantees users’ rights, it became essential to rethink how value and incentives are integrated to achieve these goals. We hope that the principles we advocate resonate with you and may inspire you to join this movement too.