Retweeted original title: TAO, with a market value of US$4 billion, is it Ethereum for AI or a new meme factory?

Since the beginning of the year, the AI ​​sector has been very popular, and the return on investment is more impressive than other tracks. Old projects with AI concepts are being launched one after another, and new projects that can quickly bring high returns are also appearing in droves. Among them, the Bittensor token TAO tripled from US$230 in January to around US$700, while Bittensor ecological projects that emerged during the same period such as TaoPad (TPAD), AIT Protocol (AIT), OpSec (OPSEC) And the growth multiples of many small projects that followed immediately exceeded TAO.

Bittensor has its own special features. Its subnet mechanism depicts the blueprint of “decentralized AI model incentive market”. The token price has increased 15 times in the past six months, and Bittensor has also become a frequent visitor in VC research reports. But in the eyes of the community, TAO does not seem to be a worthy investment target. The reason is simple: it is too expensive. Therefore, the recent emergence of Bittensor ecological projects has given investors more choices. Projects with the name “Bittensor” have achieved very good returns at the beginning of their development.

BlockBeats has discovered that recently emerging projects in the Bittensor ecosystem are becoming more ‘watered down’. This development is not unexpected, but these projects are often the first step for many users to invest in and understand Bittensor. This change inevitably raises concerns. From the value investment perspective, Bittensor’s innovative subnet mechanism makes it seen as the ‘Ethereum of AI’ by the community. However, for most investors, Bittensor seems to have become a new factory for AI memes.

From one every three days to three a day: A flood of ‘TAO Ecosystem’ low quality projects

Starting with recent projects, the price trend of their tokens is the most direct signal. Corresponding to the Twitter content, we can see the transformation process of these projects.

BlockBeats mentioned in the article “With a 20-fold increase in one weekend, the AI Summer of the crypto market is coming” that two weeks ago, among the new AI projects that appeared on the Ethereum hot list, most of the projects were either engaged in decentralized infrastructure business such as GPU/CPU leasing, or had several project names containing “TAO” in the Bittensot ecosystem. The latter all use the Bittensor ecosystem as a selling point, and can quickly attract the attention of the community as soon as they are launched. Some tokens have increased more than ten times a week, and most projects have quickly completed the jump from zero to tens of millions of dollars in market value within two weeks.

Some Bittensor ecological projects that appeared before March 10

First up are Taτsu ($TATSU), Tao Bank ($TBANK), and Tao Accounting System ($TAS). None of these projects has released team information, nor has it been officially recognized by Bittensor, nor is it an official subnet of Bittensor. However, with the name of “Bittensor” and the release of a few code pages or product front-end pages, the token price climbed rapidly.

Taτsu’s token $TATSU climbed 50x in two weeks from $0.2 when it was launched, $0.3 when the first tweet was posted, to $10 when the product page was released. In early March, after the launch of the product “AI conversation assistant TaτsuASK”, riding on the popularity of AI at the time, $TATSU exceeded $70 on March 8, completing a 35-fold turnaround from $3 to $70 in 15 days.

Another project, Tao Bank, comes from the Bittensor ecosystem LaunchPad platform TaoPad, and its token $TBANK has an initial allocation price of $0.05 or $0.06. After the team created a liquidity pool for the TBANK/ETH trading pair, TBANK quickly reached $0.3 after being launched, and it also appeared on the Dexscreener hot list that day. On March 8, TBANK reached a high of $2.4 and increased 8 times on the 12th. During this period, what Tao Bank did was: release the product front-end interface and announced that tokens would be deployed on Arbitrum.

Two days after TBANK went online, the Tao Accounting System token TAS, which was positioned as the “Experimental Token Standard on Bittensor”, was also launched. Compared with the first two projects, the “Experimental Token Standard” had no product pictures to publish. Just two days after it went online, TAS experienced sharp rises and falls. During this period, someone in the project team’s comment area questioned “the team did not cancel the transaction tax as promised.” The team only tweeted that “it will come back after participating in ETH Denver and launch the test network.” In this Twitter comment area, KOLs who lead orders account for more than half of the cooperation invitations. It took TAS less than 4 days to achieve an increase of more than 8 times.

Since March, BlockBeats found that projects related to the Bittensor ecosystem have appeared more and more frequently, but the project content and social media operations have become more and more random, and their lifespans have become shorter and shorter. From March 5th to March 10th, 10 project tokens with TAO in their names were listed on Ethereum in five days and appeared on the Dexscreener hot list.

On March 5, UNITAO, a Dapp platform positioned within the Bittensor ecosystem, launched its token and saw a 7-fold increase in value within 24 hours, only to plummet 80% the following week. The lifespan of TAOx was even shorter, increasing 3-fold in four days, then dropping 90% in the next two days. Following UNITAO and TAOx, eight more projects emerged within the Bittensor ecosystem in just four days. However, the trading volume of most of these projects did not exceed 10M. The tokens derived from “TAO” have transitioned from potential value projects to quick-profit schemes that ride the coattails of the hype. Jasmine, a contributor to the Bittensor community ecosystem, has stated that she has declined offers to promote projects related to Bittensor.

If they are all low quality projects, then for investors, can Bittensor, which has a grand positioning and unlimited potential, be bought only as a meme that is the leading project branch under the AI meme? But unlike memes, when the heat is too high, “Don’t touch Bittensor” is a safer choice. Many people realize this, “Be careful with tokenized subnets”.

Bittensor ecology, unlimited potential or is it out of reach?

As more similar projects emerge, the expectations for each project are dispersed, and the lifespan of newly launched projects is getting shorter. Moreover, regardless of price fluctuations, the team can receive transaction tax revenues once the project token is purchased, and how much profit the holders can ultimately obtain depends on the conscience of the dealer. In other words, the project teams and investors that have emerged in the past month are all dependent on “crowdfunding into Bittensor” to meet. Their purpose is all to participate in the Bittensor ecosystem, and share a piece of the pie from this AI sector’s leading project with a market cap of 4 billion dollars.

For investors participating in these projects, after experiencing ups and downs, Bittensor may have fallen from a ‘value halo’ to a ‘cutting people’s signboard’. However, as the project that firmly occupies the first place in the AI sector’s market value, the potential value of Bittensor cannot be ignored. The reason for such a contradiction is largely due to the difficulty of participating in the Bittensor ecosystem.

Liquidity blocked outside the door

When it comes to supporting a project, the options usually include buying its tokens or participating in various practices within the project’s ecosystem. However, Bittensor seems to not be welcoming to retail investors.

Currently, users can participate in the Bittensor ecosystem in the following ways: register as a subnet, become a validator, become a miner, or purchase TAO to participate in staking. The first three can get a daily market allocation of 7200 TAO from Bittensor as incentives, while only participating in staking can yield about 15% APY. Becoming any of the first three also requires staking TAO.

When it comes to the choice of ‘holding TAO’, TAO itself, a non-EVM token, is not easy to purchase. Bittensor is built on the Polkadot ecosystem, using its own independent L1 blockchain based on Substrate. Therefore, when conducting on-chain transactions, most mainstream wallets cannot buy and hold TAO, and can only store and manage TAO through wallets compatible with the Polkadot ecosystem.

Moreover, in recent months, the emergence of wTAO has largely solved the problem of circulation and holding of TAO on Ethereum. However, according to dlnews, the developer behind Tao Bridge, which provides cross-chain services, is only an anonymous individual named CreativeBuilds, who operates independently of Bittensor and the project itself is closed-source. Theoretically, holding wTAO carries the risk of rugpull.

Subnet Universe and “Bittensor War”

In October 2023, Bittensor underwent the Revolution upgrade, marking a significant milestone in its development. The Revolution upgrade introduced the concept of “Subnet”, allowing anyone to create a subnet specifically for certain types of applications and define their own independent incentive mechanism.

According to the tokenomics of TAO, 7200 TAO tokens (equivalent to approximately 504 million USD at 700 USD per token) are mined daily. These TAO tokens are allocated by the ROOT network to 32 subnets and their miners and validators.

The competition among subnets on Bittensor is fierce. In January, the registration threshold for creating a subnet was less than 200 TAO. Over the past three months, the cost of registering a subnet has soared, reaching 10281 TAO on March 10th, exceeding 7 million USD. If the token’s own appreciation is taken into account, the cost of registering a subnet has increased by a hundredfold in just three months.

Successfully registering a subnet does not guarantee stable profits. The rising cost of subnet registration implies an increase in the number of projects registering subnets. Once they have sufficient registration fees, these projects launch testnets and set up their incentive mechanisms on the test chains. Among the 32 subnets, new ones have a “protection immunity period” of 7 days. After seven days, the subnet with the lowest token distribution faces cancellation and is replaced by the testnet when it meets the requirements.

To become a validator or miner requires not only staking TAO but also following the specific requirements and setup process described in the chosen subnet’s GitHub. Only the top 64 validators in all subnets by stake will be granted validator licenses and marked as active participants.

The daily TAO rewards for validators and miners are based on their respective contributions and are determined by a fixed formula: INCENTIVE (EMISSION 0.41) + DIVIDENDS (EMISSION 0.41). Here, EMISSION represents the share of TAO minted by the subnet, and DIVIDENDS represent the percentage weight of all validators’ stake in the subnet. Of the total daily distribution, 82% is evenly distributed among validators and miners, while the remaining 18% goes to the subnet owner.

Emission also has its calculation formula, which is related to the amount staked by the validator and the subnet’s score. According to research by the 0xai institution, which focuses on the Bittensor community, the top 5 validators hold over 65% of the staked TAO.

Image source 0xai, among the top five Validators, τaosτaτs & Corcel, Foundry, and TAO-Validator.com all have significant bias

According to the data from Taosat, as of the time of writing, out of the 7,200 TAOs emitted daily, the “18Cortex” subnet consistently holds around 10% of the share. Meanwhile, the share of “19 Vision” subnet has risen from 7.96% to 8.85% over the past week. Correspondingly, the incentives allocated to the “08 Time Series Prediction” subnet have dropped from 8.49% to 6.75%.

In the eyes of the Bittensor community, the high threshold and intense competition of the subnet can drive the continuous development of the Bittensor ecosystem. There are many widely circulated ‘subnet strategies’ on social platforms. In terms of liquidity issues, the community believes that those protocols offering nodes for deployment or staking will compete in terms of user profit sharing, staging a ‘Bittensor War’.

Subnet strategy in the Bittensor community. Upper left @0xai_devi; lower left: @xavi3rlu; right @Richmelon8

It’s worth affirming that Bittensor has attracted many participants who are focused on AI technology. Subnet 18Cortex comes from the open-source AI research organization Nous Research, and the performance of Subnet 9 is said to exceed that of OpenAI’s GPT2 large model. In utilizing Web3 to empower AI, Bittensor has received a lot of affirmation. Vitalik, when analyzing the combination of AI and Crypto, used Bittensor as an example to explain how to use encryption incentive mechanisms to create better artificial intelligence products without fully relying on encryption technology.

Vitalik writes about Bittensor

Vitalik at Bittensor Asia Community Meetup on March 5

However, at least for now and for a long time to come, the Web3 market is pursuing better utilization of funds. Tom Shaughnessy, author at Delphi Ventures, mentioned in his article when introducing Bittensor, “I believe the key to the Bittensor system is how the demand for subnets translates into demand for subnet tokens.”

Bittensor’s “success” comes from its sub-network mechanism. The closed ecology, fierce competition and high entry barriers can screen and gather enough outstanding participants, and it is expected to run better models. From a certain perspective, Bittensor has chosen the relatively realistic path of the combination of AIxCrypto.

Many AI sector projects are currently facing criticism for decentralization for the sake of decentralization. AI is a very advanced field with a high technical density. Traditional Web2 companies with strong resources are still struggling, so what results can Web3 produce?

The decentralized incentive market built by Bittensor can, ideally, allow teams interested in researching AI technology to obtain sufficient material incentives based on their abilities. Through the AI ​​Lego approach, Bittensor drew a product idea for the phrase “AI solves productivity, Web3 solves production relations”, and it is still operating normally.

However, the output and application of AI models require a long time to produce results, which is also the reason why the crypto field did not look favorably on AI x crypto in the past years. For the crypto market pursuing capital efficiency, how to attract liquidity is a more important point. The Bittensor ecosystem often makes Web3 natives feel “difficult to understand”. The setting of miners and validators, staking mechanism, and TAO tokens is all to attract more AI developers and ideally run better AI models and products. There are many different subnets on the Bittensor ecosystem, but subnet progress is usually only related to validators and miners. Investors who hold TAO but are not familiar with AI products seem to only be able to envision the future of Bittensor in the perception of “do not understand but feel great”.

The “low quality project” mentioned earlier was supported by retail investors who were optimistic about Bittensor but had no idea how to start. After the popularity of these projects fades away, is Bittensor closer to the crypto community?

Where are the opportunities for TAO?

First of all, Bittensor “believers” and community observers have completely different understandings of TAO’s future growth space. On the one hand, observers believe that its price has increased 15 times in the past six months, and its market value has reached the US$4 billion mark, so there is limited room for high-fold increases. However, the Bittensor community believes that 87% of the circulating TAO tokens are being staked, which means that the actual token circulation only accounts for a small part of the current market value, and TAO still has a lot of room for growth.

In addition, it’s undeniable that the name Bittensor still carries allure. If you’re still seeking for a quick and high return in the Bittensor ecosystem, looking for Bittensor-related projects that can issue tokens directly is still a viable option. Although “making a profit from naming” is no longer possible, new gameplay and marketing strategies will still attract buyers.

For instance, the Tao Ceτi (ceti) project launched on March 11th, was publicly endorsed by its founder on its launch day. The founder, Dennis Jarvis, is also the former CEO of Bitcoin.com. Even though there was no project introduction or token economics on its official website after the project’s launch, ceti still achieved a surprising performance of a 15-fold increase within three days of its launch.

On the other hand, Bittensor has also made some efforts to improve its ecosystem. In January, the Bittensor Foundation Opentensor Foundation submitted a network upgrade proposal, Dynamic TAO (BIT001), which made improvements to the staking mechanism of the Bittensor network and the distribution rules of TAO block rewards, enhancing the power of TAO holders to participate in the distribution of Bittensor block rewards. Most importantly, this proposal proposed a “dual-token” mechanism .

Related Reading:”Analyzing the network upgrade proposal Dynamic TAO: What impact will it have on Bittensor?》

According to Taonews, the dual token mechanism means that after the proposal is approved, the tokens in the Bittensor ecosystem will include TAO and new subnet tokens, and TAO and subnet tokens can be traded. The value of the subnet will no longer be solely related to validators and miners. Embracing the impact of market factors means lowering the threshold for “speculative” behavior, making the Bittensor ecosystem more vibrant, but also more complex.

As of the time of writing, the B1T1 proposal is still under discussion. This weekend, the threshold for registering a subnet on Bittensor has dropped from 10281 TAO to a minimum of 2016 TAO. Every time a project registers a subnet, the registration cost doubles. If no one registers, the price will halve linearly within four days. This means that the competition for subnets in the Bittensor ecosystem seems to have eased.

Earlier，the Opentensor Foundation stated on social media that it will announce the Bittensor roadmap this Thursday. The Nvidia conference is underway, and it is foreseeable that a new wave of AI craze is coming. Multiple projects are ready to go, and what role Bittensor will play in it can only be answered over time.

Reference reading:

·《Wrapped TAO on Ethereum soars to $82m—but it‘s all controlled by one person》，Authors：Tim Craig, Ryan Celaj

·《Maximizing Your Impact in Bittensor: What You Should Know Before Running a Node》，Author：Xavier Lyu

·《Bittensor’s New Tokenecon Empowers Subnet AI Competition》Author：Tom Shaughnessy，Guest Author (Delphi Ventures)

·《BIT1 Unveiled: Steering Bittensor Towards a Revolutionary Dual-Token Ecosystem》Author：tao.news

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