作者：Kevin, Caiya researcher from BlockBooster
Recently, Grayscale Research, the research arm of Grayscale, released a new list of the 20 tokens with the most potential in the fourth quarter of this year. The list takes into account various factors, such as potential catalysts, network adoption, and risk factors. A total of six new digital assets have been added to the list: Sui (SUI), Optimism (OP), Helium (HNT), Bittensor (TAO), UMA Protocol (UMA), and Celo (CELO). Among them, Bittensor is considered to be an outstanding AI project that aims to combine AI with blockchain to enhance the decentralization of artificial intelligence.
(Source: Grayscale)
On September 28, the TAO Foundation announced that a new subnet will be launched soon, providing scalable computing resources for GPU rental platform Fish to validators and users, who can pay with TAO tokens. As of press time, the price of $TAO is stable at around $500.
(Source: Twitter)
(Source: CoinMarketCap)
In addition to Grayscale Research's potential list of tokens and the TAO Foundation's announcement and market performance, what other developments are worth looking forward to in the future for Bittensor? Next, we will take a deep dive into the working mechanism of the upcoming subnet token dTAO and analyze its potential impact on the price of $TAO.
dTAO refers to subnet tokens. Each subnet has its own dTAO, and the token release is consistent with Bitcoin and TAO. After dTAO goes online, the token will be paired with TAO to form a liquidity pool in the Bittensor network. With the implementation of dTAO, Bittensor will gradually remove the subnet cap and give the network greater flexibility.
TAO holders can now obtain dTAO tokens by staking TAO in different pools. Although this process is called "staking", it is actually more like a swap. The consensus mechanism, token economics, and release rate of dTAO are similar to those of TAO. Each subnet has its own dTAO release, and subnet validators need to purchase/stake dTAO to participate in consensus and receive rewards.
As a subnet gains more market attention, more TAOs may be staked in the subnet's pool, increasing the weight of its daily TAO release in the pool. This dynamic release mechanism affects the liquidity and dTAO price of each subnet. The weight is determined by the ratio of TAO to dTAO, reflecting the user's demand for the subnet. Bittensor dynamically adjusts the daily TAO release weight based on the price of dTAO.
Why introduce dTAO?
The current TAO subnets face several challenges, especially in the design of the root validator architecture. The performance of the root validator has not met the expectations of the Bittensor Foundation. Despite the 32 subnets, the competition among them has not intensified as expected. The subnets were supposed to provide high-quality output, guide miners, and develop AI models with practical use cases, but many subnets have not met the expected goals.
The main problems with the current subnet include:
Resource Overlap and Redundancy: Multiple subnetworks focus on similar tasks, such as text-to-image generation, text prompts, and price prediction, resulting in resource redundancy.
Subnets that lack real-world use cases: Some subnets (such as price prediction, sports win-loss prediction subnets) have not yet proven their practicality in real life.
"Bad money drives out good money": If a high-quality subnet lacks sufficient financial support, it may be difficult to gain development space. Since there is only a seven-day protection period, subnets that fail to accumulate enough root validator support may be eliminated prematurely.
Other issues include the subjectivity of root validator evaluations, favoritism in staking decisions, and the power imbalance caused by a small number of root validators controlling the majority of TAO’s daily release weight.
dTAO’s impact on Bittensor
The introduction of dTAO aims to solve these systemic problems by decentralizing subnet evaluation and incentivizing competition. By shifting power from root validators to the broader community of TAO holders, Bittensor introduces a market-driven pricing system where TAO holders can "vote" for their favorite subnets by staking their tokens.
Key benefits of the dTAO system include:
Decentralized subnet evaluation: No longer relying on a few validators, the dynamic pricing of the dTAO pool will determine the distribution of TAO issuance. TAO holders can support the subnets they believe in by staking TAO.
Increased subnet capacity: Removing the subnet cap makes it possible for the network to scale to over 1,000 subnets, promoting competition and innovation in the ecosystem.
Encourage early participation: It can motivate users to pay attention to the new subnet and motivate the entire ecosystem to evaluate the new subnet. Because validators who migrate to the new subnet earlier may receive higher rewards. Early migration to the new subnet means buying the dynamic TAO of the subnet at a lower price, increasing the possibility of obtaining more TAO in the future.
Promoting miners and validators to focus on high-quality subnets: further stimulating miners and validators to find high-quality new subnets. The miner's model is placed off-chain, and the validator's verification is also off-chain. The Bittensor network rewards miners only based on the verifier's evaluation. Therefore, for different types or all types of AI applications, as long as the application conforms to the miner-validator architecture, Bittensor can correctly evaluate it. Bittensor has a high tolerance for AI applications, allowing participants at each stage to obtain incentives and feed back the value of Bittensor.
Driving sustainable use cases
One of the main goals of dTAO is to promote the development of subnetworks with real revenue potential and stimulate the emergence of real use case applications and allow such applications to be properly evaluated.
What are real use cases? Applications that do not generate income through Ponzi. On the other hand, if the subnet does not generate income, there will be fewer and fewer subnet validators, because they will not buy subnet tokens that do not generate income in the new subnet stage (subnet validators need to buy dtao, not stake tao, to verify subnet miners). Validators play a vital role in this process by driving the dTAO price of subnets with sustainable business models. Therefore, validators are the starting point for the positive spiral of subnet coin prices, and income is the cornerstone. If there are fewer and fewer validators, that is, no one buys subnet tokens, then the income obtained by miners will become a one-way selling pressure, causing the subnet to fall into a death loop. The less daily release the subnet gets, the fewer miners and validators there will be, until it returns to zero. The ponzi design is limited in its appeal to retail investors for new subnets during cold start, because the release mechanism of subnet tokens means that the subnet project party cannot complete asset mismatching or attract users by dividends, and can only use products with moats to attract users to pledge, validators and miners.
Token Economics and Issuance Changes Brought by dTAO
The introduction of dTAO reshapes the rules of Bittensor’s daily release:
Previous rules: Subnet rewards are distributed in a fixed ratio - 41% to validators, 41% to miners, and 18% to subnet owners.
Rules after dTAO: Now, 50% of newly issued dTAO tokens will be added to the liquidity pool, and the remaining 50% will be distributed among validators, miners, and subnet owners based on the decisions of subnet participants.
Through the decentralized TAO issuance mechanism, dTAO introduces more volatility to the system. The price of the dTAO pool will fluctuate according to market demand, which may bring higher returns, but also comes with greater risks.
Long-term outlook
dTAO represents the best practices of combining AI infrastructure and applications in the Web3 industry. In the past six months, market performance and discussion have shown that infrastructure has reached saturation. Currently, almost all of the AI platforms ranked at the top of the market value are infrastructure-based, with serious homogeneity, and may find it difficult to continue to attract market attention in the next six months.
On the other hand, AI applications face a contradiction between revenue and market value. If an application issues tokens independently, long-term stable growth is difficult to achieve. Due to the inherent characteristics of blockchain, AI applications in Web3 cannot reach the performance level of mature applications in Web2. As a result, most of these applications lack differentiation, have no defensive competitive advantages, have low user conversion and retention rates, and find it difficult to achieve sustainable high returns. This also makes it difficult for their token prices to reach the valuation level of similar infrastructure platforms, forming a vicious cycle.
dTAO provides a solution to this problem. The Bittensor platform has established a proven and mature system, and miners, validators, and consensus mechanisms are all developing in the right direction. It is the most decentralized and mature AI infrastructure in Web3, with the potential to support the emergence of large-scale applications. When applications choose to run as a subnet on Bittensor, they can use the support of this mature network to get through the early stages and focus on product innovation. The issuance mechanism of dTAO ensures that subnets must be constantly updated and attract users to gain more weight, while avoiding the risk of "RUG" and excessive concentration of chips in the hands of the team.
The early stages of dTAO are expected to be relatively stable, with less risk for early investors due to the daily issuance mechanism. The long-term success of dTAO will depend on the ability of the subnet to generate real value and revenue in the Bittensor ecosystem.
After the introduction of dTAO, the subnet can generate revenue in two ways: 1) attract users to pay for the product; 2) increase the market value and thus push up the token price. Either way, it will have a positive impact on the overall market value of Bittensor. The issuance mechanism also ensures that if the team wants to make a profit by selling coins, they must buy tokens from the pool like ordinary users, which is the fairest launch mechanism in the current environment.
This design eliminates many of the risks faced by most Web3 application projects, such as market-driven price fluctuations and systemic instability, as well as the possibility of large holders or "whales" significantly affecting prices through sudden actions, thereby disrupting the ecosystem. sex.
In addition, this issuance model reduces the risk of short-term selling because liquidity injection is gradual. The subnet must accumulate liquidity and maintain stable prices over a period of time, and this process inherently relies on the quality of the products provided by the subnet.
Recently, the price of TAO has risen significantly due to the upcoming launch of dTAO and the resurgence of AI narratives. On the one hand, the market makers have fully absorbed the chips in the past few months, and now it is time to start the price of the currency. On the other hand, it can be seen that subnets or potential subnets are scrambling for chips, and most of these chips will not be put into the market in the short term. The treasury of the subnet is used to increase the value of TAO. Therefore, when dTAO is launched, there may be chip distribution by the team or VC, resulting in price fluctuations.
But as long as the objective barriers to the combination of AI and web3 are not broken, dTAO is the best implementation of the combination of AI infrastructure and applications.
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