Recently, the rise of $AR token has attracted widespread attention in the industry. Many friends have asked about the current situation of Arweave, especially the question of whether $AR has begun to deflate. As a blockchain project focused on permanent storage of data, Arweave’s design mechanism makes this issue particularly important. This article will take an in-depth look at the supply mechanism of the $AR token and its deflationary potential.
Arweave’s supply mechanism
Before discussing whether $AR is deflationary, we need to understand Arweave’s supply mechanism. Arweave’s maximum supply is 66 million $AR tokens, of which 55 million have been minted and have entered circulation, while the remaining 11 million are used as mining rewards. According to current data, 10,708,000 $AR have been mined, which means 99.56% of $AR tokens are already in circulation.
This supply structure makes the inflationary pressure on $AR relatively small, because there are currently only 292,000 $AR left in the market (about 0.44% of the total supply) that have not yet been circulated.
Mining rewards and supply reduction
Currently, Arweave’s mining reward is 0.75 $AR per block and will be halved every year. This means that the rate at which $AR enters circulation will further slow down in the future. According to the current mining speed, the number of blocks mined by Arweave every day is about 660, so the number of new $ARs added every day is about 500. This number will gradually decrease over the next few years as mining rewards are halved.
Storage insurance fund mechanism: Arweave’s storage insurance fund (Endowment) mechanism is its unique feature. When users store data on Arweave, they need to pay a one-time storage fee. All of this fee will not be distributed to miners, but part of it will go into the storage insurance fund. This design not only ensures the profits of miners, but also ensures the security of data.
It has been observed that storage costs have declined at a rate of approximately 38.5% per year over the past 50 years, and Arweave's white paper conservatively predicts storage cost declines of 0.5% per year. Even in this scenario, a storage insurance fund can support long-term data storage needs.
Future use of storage insurance funds
So when will the $AR tokens in the Storage Insurance Fund be used? It currently appears that these funds will not be used in the short term until Arweave’s network scales significantly. Since the birth of Arweave, the tokens in the storage insurance fund have never been withdrawn, which means that most of the tokens may be locked in the fund forever and cannot enter circulation.
This allows us to think of the Storage Insurance Fund as a quasi-token burning mechanism for Arweave, as it limits the supply of $AR on the market.
Deflationary Outlook for $AR
So, is $AR really going into deflation? If Arweave gains widespread recognition and application, more $AR will be locked in the storage insurance fund. With the annual halving of mining rewards, $AR will enter a deflationary state when the number of tokens locked in the storage insurance fund exceeds the number of tokens introduced into circulation from mining.
Based on current trends, we expect $AR may transition to a sustained deflationary state by late 2025 or early 2026. While there is also the argument that the storage insurance fund may not be able to fully push $AR into deflation, given the amount of tokens that have not been spent since creation, this certainly strengthens our confidence in this judgment.
in conclusion
In summary, Arweave’s $AR token is designed to have deflationary potential, thanks to its unique supply mechanism and storage insurance fund design. As market recognition of Arweave increases, the deflationary process of $AR will become more apparent. In the future, we have reason to expect $AR tokens to play an increasingly important role in the blockchain ecosystem.
If you are interested in Arweave, it is recommended to pay attention to the latest trends in its ecosystem, especially information related to @AkordTeam. Their contribution in this field cannot be underestimated.