SUBMIT A PRSUBMIT AN ISSUElast edit: Jan 17, 2025

Core Dynamic TAO Concepts

Dynamic TAO is a planned evolution of the integrated tokenomic and governance model that underlies the Bittensor network. It represents a significant step in Bittensor's trajectory toward more thorough decentralization, by eliminating the centralized role of the root network in judging the value of subnetworks. Instead, in the Dynamic TAO model, the relative value of subnets is determined in a wholly distributed fashion: by the amount of TAO that users have staked into their currency reserves.

Subnet liquidity reserves

A key mechanism introduced with Dynamic TAO mechanism is that each subnet has two liquidity reserves, one containing TAO($\tau$)—the currency of the Bittensor network, and one containing a subnet specific "dynamic" currency, referred to as that subnet's alpha ($\alpha$) token. The alpha token is purchased by staking TAO into the subnet's reserve, which is initially empty.

A subnet's economy therefore consists of three pools of currency:

• Tao reserves: the amount of tao ($\tau$) that has been staked into the subnet
• Alpha reserves: the amount of alpha ($\alpha$) available for purchase
• Alpha outstanding: the amount of alpha ($\alpha$) held in the hotkeys of a subnet's participants, also referred to as the total stake in the subnet

Terminology: alpha tokens

Each subnet has its own currency with its own name, but in the abstract a given subnet's token is referred to as its $\alpha$ token. With a set of subnets in mind, we refer to $\alpha$ as the token for subnet $\alpha$, $\beta$ as the token for subnet $\beta$, $\gamma$ as the token for subnet $\gamma$, and so on.

These subnet tokens contrast with TAO ($\tau$), the token of the Bittensor network as a whole. A subnet pool's reserve ratio (tao/alpha) determines the price of its alpha token.

The price of a subnet's alpha token is determined by the ratio of TAO in that subnet's reserve to its alpha in reserve. Alpha currency that is not held in reserve but is which is held in the hotkeys of subnet participants is referred to as alpha outstanding.

Run btcli subnet list with the Dynamic TAO-enabled btcli to view information about the subnets and their currency reserves on Bittensor testnet.

        ┃               ┃ Price       ┃ Market Cap  ┃              ┃                         ┃               ┃              ┃
 Netuid ┃ Name          ┃ (τ_in/α_in) ┃ (α * Price) ┃ Emission (τ) ┃ P (τ_in, α_in)          ┃ Stake (α_out) ┃ Supply (α)   ┃ Tempo (k/n)
━━━━━━━━╇━━━━━━━━━━━━━━━╇━━━━━━━━━━━━━╇━━━━━━━━━━━━━╇━━━━━━━━━━━━━━╇━━━━━━━━━━━━━━━━━━━━━━━━━╇━━━━━━━━━━━━━━━╇━━━━━━━━━━━━━━╇━━━━━━━━━━━━━
   0    │ τ root        │ 1.00 τ/Τ    │ τ 5.93m     │ τ 0.0000     │ -, -                    │ Τ 5.93m       │ 5.93m Τ /21M │ -/-
   3    │ γ templar     │ 0.02 τ/γ    │ τ 57.32     │ τ 0.0197     │ τ 31.44, 1.43k γ        │ 1.18k γ       │ 2.61k γ /21M │ 67/99
   9    │ ι pretrain    │ 0.02 τ/ι    │ τ 55.38     │ τ 0.0194     │ τ 30.91, 1.46k ι        │ 1.16k ι       │ 2.61k ι /21M │ 73/99
   1    │ α apex        │ 0.02 τ/α    │ τ 54.45     │ τ 0.0192     │ τ 30.65, 1.47k α        │ 1.14k α       │ 2.61k α /21M │ 65/99
   2    │ β omron       │ 0.02 τ/β    │ τ 54.45     │ τ 0.0192     │ τ 30.65, 1.47k β        │ 1.14k β       │ 2.61k β /21M │ 66/99
   4    │ δ targon      │ 0.02 τ/δ    │ τ 54.45     │ τ 0.0192     │ τ 30.65, 1.47k δ        │ 1.14k δ       │ 2.61k δ /21M │ 68/99
   ...

See: Using Dynamic TAO

Price/rate of alpha tokens

For each subnet, you'll see that Price (listed in the third column) is a function of TAO in reserve τ_in over alpha in reserve α_in

$$Price = \frac{\tau_{in}}{\alpha_{in}}$$

For example, if for subnet $\varepsilon$, its subnet pool contains TAO reserves of 1000 TAO units and its alpha reserves of 16000 $\varepsilon$ units, then the relative price of the $\varepsilon$ token is:

$$R = \frac{\tau_{in}}{\alpha_{in}} = \frac{1000}{16000} = 0.0625$$

Hence,

$$\text{1 } \varepsilon = 0.0625 \text{ TAO}$$

This exchange rate can change every block when staking or unstaking or emissions occur on this subnet.

Emission in Dynamic TAO

Liquidity is steadily injected into the Bittensor token economy according to a distribution algorithm intended to foster growth of while stabilizing prices and protecting them from manipulation.

Each block:

• the chain emits TAO and injects it into the TAO reserves of the subnets.

• the chain emits 2 each alpha currency, distributed between:
  • the subnet's alpha reserve (liquidity available for purchase)
  • alpha outstanding (rewards distributed to miners, validators and subnet owners)

See the main article: Emission in Dynamic TAO

Decentralized evaluation of subnets

The relative value or weight of subnets within Bittensor is critically important as it determines the rewards granted to different subnets and their participant miners and validators through the process of emission. Prior to Dynamic TAO, relative weight among subnets within the Bittensor network is determined by Yuma Consensus over the evaluations of the Root Network validators. This gives a fundamentally centralizing role to the holders of Root Network validator keys.

In Dynamic TAO, the relative weight is determined organically according to the emergent market value of the subnet, as represented by its stabilized token price. TAO-holders can stake TAO into subnets in exchange for the subnet-specific dynamic currency, referred to as the subnet's alpha ($\alpha$) token. In this way, stakers 'vote with their TAO' for the value of the subnet, determining the emission payout to the validators and miners working in it. In return, stakers receive a portion of the rewards emitted to the subnet.

Subnet Zero

In dynamic TAO, Subnet Zero—or Root Subnet—is a special subnet. It is the only subnet that does not have its own $\alpha$ currency. No miners can register on subnet zero, and no validation work is performed. However validators can register, and $\tau$-holders can stake to those validators, as with any other subnet. This offers a mechanism for $\tau$-holders to stake $\tau$ into validators in a subnet-agnostic way. This works because the weight of a validator in a subnet includes both their share of that subnet's $\alpha$ and their share of TAO staked into the root subnet. in Subnet Zero.

Over time, the dividends generated by TAO staked into Subnet Zero will decrease, relative to stake held in the alpha currency of active subnets. This is inevitable as the total alpha stake starts at zero, and therefore must increase. As TAO is staked into alpha in subnets across the Bittensor network, and through the emission that the inflation rate of alpha, the relative weight of TAO and total alpha stake is expected to stabilize:

Validator stake weight

A validator's stake weight in a subnet equals their alpha stake plus their TAO stake times the 'tao weight' parameter:

$$\text{Validator stake weight} = \text{Alpha stake} (\alpha) + \text{TAO stake} (\tau) \times \text{TAO weight}$$

tip

A validator's stake weight in Subnet Zero is simply their staked TAO.

A validator's relative stake weight (their stake weight over the total stake weight) in a subnet determines their voting power when evaluating miners, and determines their share of emissions.

$$\text{Validator x's relative stake weight} = \frac{\alpha_x + \tau_x \times w_{\tau}} {\displaystyle \sum_{v \in \text{validators}} \bigl(\alpha_v + \tau_v \times w_{\tau}\bigr)}$$