Release of AO Token Economics Model Reveals How to Maximize Efficiency in Obtaining AO Tokens

Source: PermaDAO
The acquisition of AO depends on the amount of funds and the type of token assets held. Our goal is to maximize the efficiency of acquiring AO tokens with limited funds.
Arweave officially released the AO token economics at 11:00 pm on June 13th Beijing time. The analysis is based on existing data to explore the most efficient ways to acquire AO tokens. This article is for cryptocurrency economic analysis purposes only and does not provide investment advice.
Interpreting the AO token economic model
According to the AO token economics, AO is a token that follows the 100% fair launch model of Bitcoin. Similar to Bitcoin, AO has a total supply of 21 million tokens, with a halving cycle every 4 years. AO is distributed every 5 minutes, with a monthly allocation of 1.425% of the remaining supply. Unlike Bitcoin, AO’s halving is a relatively stable process without sudden “halving events.” The distribution of tokens reduces the supply on a monthly basis. Although this may not significantly impact the efficiency of acquiring AO, early acquisition of AO should not be overlooked to maximize returns.


The official stance is that AO tokens are a 100% fair launch token. Currently, the understanding is that AO tokens can only be acquired by holding specific assets ($AR, $AOCRED, $stETH). This highlights the project’s broader vision compared to many other crypto projects in the market. Acquiring AO depends entirely on the amount of funds and the type of token assets held. The focus is on seeking the most efficient way to acquire AO tokens with limited funds.
The acquisition of AO tokens is divided into two phases. The first phase ended on June 18th and the second phase began. The first phase’s acquisition was made known to everyone on June 13th when the token economics were announced. From February 27, 2024 (launch of the AO public testnet) to June 18th, AO tokens were minted and distributed to $AR token holders. Based on the balance held in each wallet address every 5 minutes, as of June 13, 2024, each $AR holder could receive approximately 0.016 AO tokens. In total, over 1 million tokens were distributed in the first phase.
Maximizing AO token acquisition strategy
The circulation in the first phase accounted for only about 5%, with the second phase being the main focus. The key is to maximize the acquisition of AO tokens in the second phase. 33.3% of AO tokens will be distributed to $AR token holders, while 66.6% of AO will be used for assets staked in AO (currently only stETH). Additionally, AOCRED can be exchanged for AO at a ratio of 1000:1 (this portion of AO will be provided from AO tokens generated by AR held by Forward Research).
After the second phase starts, each $AR holder can receive 0.016 AO in the first year, while the number of AO tokens received from staking other eligible cross-chain assets (non-AR assets) in the AO network is determined by the trading volume of the cross-chain asset multiplied by its annual staking yield rate ratio to the total cross-chain asset value. Currently, stETH is the only eligible cross-chain asset. Therefore, 66.6% of AO distributed to other assets staked in AO will be allocated to the stETH pool. The exact amount of AO tokens received from staking stETH depends on the proportion of the stETH value staked relative to the total pool assets value.
If the asset you stake accounts for 0.01% of the total fund pool assets, staking for a year could yield 210 AO. Currently, the pool is over $20 million (which can be seen here). If the TVL of the pool reaches $1 billion after the second phase is opened and remains constant for a year, staking $1000 worth of stETH would yield 2.1 AO after a year. On the other hand, if the market value of AR is $2 billion and remains constant for a year, holding $1000 worth of AR in your wallet would yield 0.485 AO after a year. While staking stETH may seem more profitable currently, the stETH pool and the market value of AR are unlikely to remain unchanged for a year. Therefore, calculations should be based on the ratio of the TVL of other asset pools to the market value of AR (calculated in USD).
When the TVL of the fund pool / AR market value ≈ 2, staking other assets of the same value and holding AR of the same value will yield similar results.
When the TVL of the fund pool / AR market value > 2, holding AR of the same value will yield more AO than staking other assets of the same value.
When the TVL of the fund pool / AR market value < 2, staking other assets of the same value will yield more AO than holding AR of the same value. Note that the AO tokens minted after the second phase will be unlocked on February 8, 2025, with a circulation rate of 15%, totaling around 3 million tokens. In addition, calculating the risks and costs of acquiring AO is crucial, as they significantly impact the future price of AO. AR holders simply need to hold, while stETH needs to be staked to earn ETH through Lido. The current APR of stETH is 3.3%. Staking stETH in AO means sacrificing this part of the annual interest income to the AO project team, which was originally the vested interest of stETH holders. Therefore, the stETH APR can be considered the cost for stETH stakers to acquire AO. If the TVL of the pool reaches $1 billion, the cost for stETH stakers to acquire AO would be $15.7. However, this calculation is based on controlled variables and only considers the current situation where stETH is the only eligible cross-chain asset.

For short-term investors, both staking st