Bittensor ($TAO) Is a Big Artificial Intelligence or AI Sector

input: Artificial Intelligence or AI is a big sector. In crypto, we find many decentralized AI protocols. These are a good alternative to the centralized AI markets like ChatGPT.

Artificial Intelligence (AI) is a booming sector, and in the realm of cryptocurrency, we're seeing the rise of decentralized AI protocols. These protocols offer a compelling alternative to the centralized AI services. In this article, we'll delve into Bittensor ($TAO), a leading decentralized AI protocol.

Bittensor is essentially a Peer-to-Peer (P2P) network that serves as an ecosystem for AI. It's also a decentralized protocol, which contrasts with the centralized control of AI and siloed data. Centralized control poses difficulties in sharing or accessing data. On the other hand, Bittensor's open-source protocol, which anyone can access, promotes transparency and collaboration.

Bittensor features subnets, each performing different AI-related machine learning models, such as compute power, storage space, or even applications in medical research. These subnets are interlinked, and the aim is for all subnet projects to share their knowledge, forming a neural network, or as Bittensor calls it, a ‘digital hive mind’. The network should grow and improve as participants contribute, with machine learning models interacting and learning from each other.

On their part, Bittensor incentivizes the subnet with its $TAO token. This is where the P2P marketplace comes into play. Devs build their data models, train them, and trade them in the marketplace. Protocols providing more valuable and accurate output are selected for the validation process, rewarding them with $TAO tokens.

Like Bitcoin, the $TAO token has a max supply of 21 million tokens, and Bittensor also has a 4-year halving cycle, reducing the issuance rate of new tokens. Nodes and validators ‘mine’ the $TAO token. You can find out more about the $TAO tokenomics in #2 of this deep dive.

Currently, the team has around 40 members. The team opted for a fair distribution approach, rather than traditional ways of fundraising, setting up with much more community participation and fewer VCs.

How Does Bittensor Work?

So, as already mentioned, Bittensor is a decentralized network that interconnects machine learning (ML) models. It uses a different consensus mechanism, called Proof of Intelligence (PoI), also known as the Yuma Consensus (YC). With traditional blockchains, you mine or stake to receive rewards. However, with POI or YC, it depends on how valuable your ML contribution is.

Its main network is the Subtensor, which is the coordination layer. The subnets all have different, specific tasks. They are interconnected, but also independent and have three different players:

* ML miners: These are the ones who train, deploy and maintain their own unique ML models on the network.

* Validators: They aggregate and validate the contributions of the miners.

* Stakers: They stake their $TAO to secure the network and vote on proposals.

Its main network is the Subtensor, which is the coordination layer. The subnets all have different, specific tasks. They are interconnected, but also independent and have three different players.

ML models that provide more accurate and valuable output also receive more rewards, which are in $TAO tokens. Validators that evaluate miners close to consensus also receive higher rewards.

However, this also caused governance issues. Until February 2024, Bittensor had centralized governance, with 64 validators of the Root Subnet, and 50% of the voting power was with the top 5 validators, who also showed bias and favoritism. Hence, a new governance model was in order.

Introduction of Dynamic $TAO or $dTAO

By introducing $dTAO there’s now a decentralized governance mechanism. For instance, this also removed the roles of the 64 Root Subnet validators. It took a year to get to this governance model, but on 13th February 2025 it launched. It’s possible to stake on a subnet or stake on the Root Subnet. Here, you stake $TAO and receive $TAO as a reward. Subnet staking is explained below.

You can read the $dTAO whitepaper for a better understanding of it. However, that’s rather technical. For an easier explanation, check this OAK Research article or the Bittensor docs. The picture below shows the ecosystem before the $dTAO upgrade. Or check the video below.

After this upgrade, each subnet has its own alpha token. However, you can’t trade them on a secondary market or exchange. You can only find them in dedicated liquidity pools for each subnet. In these liquidity pools, there are two tokens: $TAO and a subnet’s alpha token. You can see these tokens as a liquid staking token.

To get access to such a liquidity pool, you need to buy