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<h2 id="header-0">Introduction</h2>The AO protocol originates from the Arweave network, a decentralized storage network, and refers to the underlying rules and mechanisms that govern the Actor-Oriented machine or AO computer.This novel protocol operates atop the Arweave network, ensuring that the network nodes adhere to a core data protocol. By doing so, it enables the AO computer to function as a super parallel computing environment. The AO protocol is responsible for the storage and recovery of holographic data for every process within the AO system, thereby creating a robust and decentralized computing platform.<img src="https://academy-public.coinmarketcap.com/optimized-uploads/1e64bb70b0824d10b61b07eb416ee259.png" />Source: <a href="https://medium.com/&#64;permadao" rel="noopener noreferrer nofollow">https://medium.com/&#64;permadao</a>The AO protocol represents Arweave’s most ambitious endeavor to date, where AO serves as the compute layer and Arweave serves as the underlying storage layer. The birth of AO empowers the whole Arweave ecosystem and brings more flexibility and functionalities. So, how does the AO protocol work and what can it do?<h2 id="header-1">What is AO?</h2>To put simply, the AO protocol is a super parallel computer that constitutes a decentralized computing environment, allowing an arbitrary number of processes (smart contracts in the AO system) to run in parallel simultaneously.The core of AO lies in the execution of verifiable computations of any magnitude, resulting in its high parallel processing capabilities and scalability, compared with other blockchains. In essence, the AO protocol consists of three sub components: the Messenger Unit (MU), Scheduler Unit (SU), and Compute Unit (CU). MU is responsible for receiving and processing information; SU is used for scheduling and sorting information; CU is used for processing computations.<img src="https://academy-public.coinmarketcap.com/optimized-uploads/075a325994fd4c8f81c71b5ee2631741.png" />Source: <a href="https://x.com/MessariCrypto/status/1805728390923567335" rel="noopener noreferrer nofollow">https://x.com/MessariCrypto/status/1805728390923567335</a>As a decentralized computing environment, the AO protocol does not directly store the data on it, but utilizes Arweave’s on-chain storage as its permanent host to store data during the running process. AO allows any number of parallel processes to run simultaneously and coordinates with each other through message passing. In AO&#39;s architecture of a parallel computer, AOS is a specific operating system based on this parallel computing scheme. Developers can build applications in AOS using the Lua language, the smart contract supporting language also used in Roblox and Minecraft. In the future, processes on AO will be compatible with any code that compiles to the EVM (Ethereum Virtual Machine), SVM (Solana Virtual Machine), or WASM (WebAssembly) ecosystem, which will reduce the entry barrier for existing blockchain developers.Currently, the AO protocol is still on the test network. But the community has demonstrated their enthusiasm for the nascent computing platform. Till now, AO test network has sent over 211M messages with $AOCRED (the test network token) surging nearly 50x at its peak price.<img src="https://academy-public.coinmarketcap.com/optimized-uploads/677cdadcd49f4a56b5898524828e85d1.png" />Source: <a href="https://www.ao.link/" rel="noopener noreferrer nofollow">https://www.ao.link/</a><h2 id="header-2">$AO Tokenomics</h2>The $AO token, the native token on the AO protocol, was launched on 13th, June 2024. The $AO token is a key part of a decentralized computing system designed to transform the landscape of decentralized computing.Notably, the AO protocol emphasizes a fair launch and incentivized tokenomics, aiming to create a trustless, scalable, and intelligent market for computation. In detail, $AO will be a fair launch and have no pre-mine. $AO&#39;s supply mirrors Bitcoin’s distribution model with 21M total tokens and a 4-year halving. In general, $AO tokens will be split between: Arweave token holders (36%) &#43; Bridge staked assets like stETH, SOL (64%). Both $AR holders and stETH stakers will be streamed $AO tokens every 5 minutes. The distribution of $AO tokens took place in February 2024, during which $AR holders began receiving a continuous stream of $AO tokens at five-minute intervals. Importantly, $AO token will remain non-transferable until their supply reaches 15% of the total, either in January or February 2025.<img src="https://academy-public.coinmarketcap.com/optimized-uploads/cf0562e4c64c463e82e56dbb334287da.png" />Source: <a href="https://x.com/aoTheComputer/status/1796174737598738724" rel="noopener noreferrer nofollow">https://x.com/aoTheComputer/status/1796174737598738724</a>At present, the AO prebridge attracts over 120K stETH ($422M) in deposits from over 1600 depositors. Onchain whales seem to be interested in $AO emission. Among all the depositors, there are 11 whale depositors who contribute over 2000 stETH each. Cumulatively, they are farming over 40% of the total $AO emission.<img src="https://academy-public.coinmarketcap.com/optimized-uploads/4b9364412415440993da4969ca8b03f0.png" />Source: <a href="https://dune.com/zkayape/ao-tokenomics-steth-deposit-breakdown" rel="noopener noreferrer nofollow">https://dune.com/zkayape/ao-tokenomics-steth-deposit-breakdown</a><h2 id="header-3">The AO’s Narrative in AI</h2>The AO protocol is designed to enable trustless and cooperating compute services without practical bounds on scale, which opens up a new design space for various applications. In less than half a year after the testnet launch, AO has developed a vibrant ecosystem with dozens of projects so far, including notables like ArNS, Autonomous Finance and PermaDAO etc.<img src="https://academy-public.coinmarketcap.com/optimized-uploads/2c79de36078c4676a457e212fc80fbe8.png" />Source: <a href="https://x.com/everpay_io/status/1783907666491851253" rel="noopener noreferrer nofollow">https://x.com/everpay_io/status/1783907666491851253</a>Notably, the AO protocol is designed to have a number of key breakthrough features to accelerate AI on its network. According to <a href="https://x.com/samecwilliams/status/1797708520105582804" rel="noopener noreferrer nofollow">Sam&#39;s post</a>, AO is capable of:<ul><li><a href="https://x.com/aoTheComputer/status/1803821165783154898" rel="noopener noreferrer nofollow">Full LLMs</a> (Llama 3 and many others) running inside AO smart contracts -- capable of making financial decisions.</li><li>WASM64 support allows up to ~18 exabytes of memory at the protocol level.</li><li>WeaveDrive: Access to data on Arweave as a local harddrive in AO processes.</li></ul>In practical terms, the AO protocol can find applications in various AI scenarios, including machine learning tasks, resource-intensive autonomous agents, complex financial transactions, and data-heavy applications. The distinctive features position the AO protocols as a strong contender in the intersection of crypto x AI narrative.Considering Render network, the well known AI and computing platform, sits a $3B marketcap with $4.2B fully diluted valuation and IO, the newly emerged AI and DePIN platform, has a $373M marketcap with $3.1B fully diluted valuation, $AO seems to be an early and underestimated bet in this segment, giving its parent project Arweave ($AR) only has a fully diluted valuation of $1.8B. This discrepancy suggests that the AO protocol might be a next $1B opportunity for those who recognize its potential in decentralized compute and crypto x AI integration.<h2 id="header-4">Conclusion and Summary</h2>In summary, the AO protocol represents a leap forward in the realm of blockchain technology, introducing three major concepts: parallel processing, application sovereignty and asynchronous messaging.What makes the AO protocol even more remarkable is its ability to enable the execution of large-scale, multi-billion parameter AI models—such as LLama-3—directly on blockchains. This achievement opens a gateway for integrating human-like decision-making within a decentralized and trustless network.<img src="https://academy-public.coinmarketcap.com/optimized-uploads/7a44c0ba5a6244caa7ecf75318195106.png" />Source: <a href="https://x.com/apus_network/status/1806939660868071662" rel="noopener noreferrer nofollow">https://x.com/apus_network/status/1806939660868071662</a>Looking ahead, the convergence of blockchain and AI is poised to be one of the most transformative paradigm shifts in the next decade. The AO protocol sits precisely at the intersection of these two narratives, pioneering the integration of crypto and AI ahead of its competitors. While we can’t predict what the AO protocol will become in the next ten years, it undoubtedly holds the potential to play a pivotal role in the upcoming crypto x AI revolution.

Bitrue Research: AO - The Nascent AI Blockchain

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