The next phase of the AR.IO Network testnet is here as we march towards main net for the first permanent cloud network!

We open sourced our gateway node software, introduced the Gateway Address Registry, developed the ArNS app, and now we’re testing the Observation and Incentive Protocol — a protocol designed to incentivize gateway operators to join and sustain the network.

Over 230+ ar.io nodes are online, providing resilient access to the data stored on Arweave — how are these gateways incentivized? The Observation and Incentive protocol follows the introduction of the Observer service and uses the AR.IO Smart Contract and Protocol Balance to reward gateways and observers that fulfill their network duties.

This phase of the testnet integrates the incentive portion of the protocol and is the first instance of decentralized distribution of TestIO rewards for gateway operators and observers.

The Observation and Incentive Protocol (OIP) and How It Works

The observer service built into ar.io nodes evaluates other gateways’ ability to resolve ArNS names accurately and in a timely manner. The service creates a JSON report based on the findings and uploads that report to Arweave.

When the report is uploaded, the observer service interacts with AR.IO Smart Contract and sends it the transaction ID of the uploaded report and a list of gateways that failed it’s observation checks.

At the end of the observation period, called an epoch, the AR.IO Smart Contract tallies up the interactions from all observers in order to determine the reward distribution for both gateways and observers.

Observer Selection

Random pools of observers determined by the AR.IO smart contract are selected each epoch (1 day) to perform observation duties. There is a maximum of 50 observers selected per epoch.

If there are less than 50 gateways in the network, every gateway serves as an observer. If there are more than 50 gateways in the Network, observers are selected based on four criteria chosen to balance a gateway’s commitment to the network and its performance:

• the gateway’s stake

• the gateway’s time (tenure) that it was joined to the network

• the gateway’s prior performance as a node

• the gateway’s prior performance as an observer

View weights and stats of gateways with the ArNS Cache here: ar://gateways.

The more participation from a gateway in the network, the greater its chance to be selected as an observer, the greater its chance for more rewards. Read more about the selection process in our docs portal.

Protocol Testnet Reward Distributions

During this testnet phase, gateway operators and observers will start receiving TestARIO protocol reward distributions. The rewards for gateways and observers are paid from the Protocol Balance that accumulates TestARIO tokens through Arweave Name System purchases, leases, renewals, and under_name additions.

Our White Paper includes the AR.IO Network tokenomic information with more details.

How are Rewards Determined?

Test token distributions received during this phase indicate a valued member of what we’re building with the AR.IO Network.

Operational gateways and observers are rewarded from the protocol at the end of each epoch. Gateways that pass >=50% of interactions are eligible for gateway reward distributions and observers that submit reports and interactions with the AR.IO Smart Contract are eligible for observer reward distributions.

If a gateway is signaled as ‘failed’ in more than 50% of reports/interacations, it is not eligible for gateway reward distributions. Similarly, if an observer fails to produce a report or AR.IO Smart Contract interaction, it will not receive observer rewards and their gateway rewards, if eligible, will be reduced.

If a gateway fails observation checks for 30 consecutive epochs, that gateway will be removed from the address registry and its staked TestARIO tokens will be slashed and returned to protocol balance.

What to do with Rewards?

The TestIO tokens earned can be used for buying ArNS names or extending leases on ArNS name already owned (some of those may carry over to mainnet). TestIO tokens can also be used for increasing a gateway’s stake, improving the chances to be chosen as an observer to earn even more rewards during the testnet.

NOTE: Protocol reward distributions during this phase are a proxy for your gateway’s participation — they are NOT indicative of any rewards that will be received when mainnet is launched.

Conclusion

The AR.IO testnet’s progress to date is a testament to its commitment to decentralization and active community. The protocol’s innovative approach evaluates gateway performance and distributes rewards without reliance on a central actor.

Join us as we march towards mainnet and see experience the power of the permanent cloud network for the world.

Connect with Us

Join our Discord to learn more about this part of the Testnet and join our Newsletter to stay on top of the latest news and updates about the AR.IO Network, including the release of the White Paper.