What Is Bittensor and Is TAO a Good Investment (2024)?

Published: February 28, 2024 | Last Updated: February 27, 2024

Markos Koemtzopoulos

Markos Koemtzopoulos is the founder and main writer of ElementalCrypto. He has been a lecturer at the University of Nicosia on cryptocurrencies and DeFi and has taught two courses on crypto and blockchain technology.

In this post, I explain what Bittensor is in simple language. I then score it across 4 dimensions (team, product, tokenomics, momentum)  to decide if it is a good investment or not. 

What is Bittensor TAO Network?

Bittensor is a decentralized marketplace for AI services.

And it uses a blockchain to facilitate the process. 

Now many people are not going to like this definition.

But these are the type of people who would describe an onion as a multilayered biennial herbaceous plant belonging to the Amaryllidaceae family, with unique morphological attributes, intricate anatomical structures, and dynamic physiological processes instead of just saying it’s a vegetable that makes food tasty. 

Bittensor founders
Bittensor team: Ala Shaabana who has a background in AI development and neural networks and Jacob Robert Steeves an ex-Google software engineer. They both run the Opentensor Foundation.

Let’s take a look at why Bittensor uses a blockchain.

Bittensor’s blockchain

One of the reasons that AI is scary is that it’s in the hands of a few corporate giants. 

Microsoft and Open AI run models on their data; Google runs models on its own data; Elon Musk and a few others are doing their own thing. 

These large actors are expending vast amounts of resources but they are siloed off from each other. 

Each is trying to dominate the market. 

And, because we are still early, so far all they have managed to do is make some impressive videos of lifelike puppies.

Meanwhile, shareholders are wondering how this massive capital expenditure translates into revenue. 

Bittensor wants to decentralize the process which is something blockchains are very good at.

This way anyone can crunch numbers and data on this open-source protocol and make their valuable contributions available on the blockchain in return for a reward. 

How does Bittensork work?

Bittensor uses a consensus mechanism that is inspired by both Proof of work and Proof of stake blockchains.

Say you are a data geek who’s running a machine learning model to predict the price of Bitcoin.

You use historical data, social media mentions, and a bunch of other parameters to do this.

You can now offer this prediction on Bittensor.

Others will be running their own models as well. 

If your prediction is the best then you will be rewarded in the native token of the Bittensor blockchain called TAO.

In this sense, you are the equivalent of a Bitcoin miner.

You are performing a task and offering computation power to solve a problem and if you are right you get rewarded in newly minted coins (check out What is a Bitcoin and how does it work for more). Only difference is that instead of proof of work you are offering proof of intelligence.

For this reason, Bittensor calls such providers miners. 

Who decides if you are any good?

Anyone can participate as a referee to decide if your answer was any good.

These referees are known as validators and play a crucial role. 

They are called validators because they

  • check transactions 
  • add new blocks to the blockchain
  • and need to stake TAO to do so.

So it’s kind of similar to validators on other PoS blockchains except that in addition, they need to rate the quality of the answer.

In our example, it’s pretty easy for a validator to rate your prediction because all they need to do is wait a day and see how close your prediction was to the actual price.

Each validator feeds its score back to the blockchain and then the blockchain distributes newly minted TAO tokens to validators and miners.

Miners receive TAO according to the weighted average that validators have scored them on. 

Validators on the other hand are rewarded in direct proportion to the amount that they have staked.

They too are rewarded in the form of TAO tokens.

So now we have a system in place that consists of:

  • Miners who have the incentive to offer computational power to crunch data, run AI models, and perform complex tasks.
  • Subnet validators who stake TAO, validate transactions, and rate miners
  • An incentive system or marketplace for this specific type of data (the bitcoin price prediction in this instance). 

But there’s more than one marketplace.

​Because crypto developers like to complicate things they call each marketplace a subnet. 

There are 32 subnets on the Bittensor network at the time of writing and the vision is for there to be hundreds. 

Who decides how much each subnet gets? 

Currently, validators vote on this according to their staking power. So they can decide to pay Subnet 1 30% of TAO emissions, Subnet 2 4%, etc. In the future, this process will be automated. 

You can find a comprehensive list of all 32 subnets here.

But I was curious so I have delved into some of them here:

Let’s take a look.

Bittensor subnet examples 

  • Subnet 1: Text prompting. Validators send text prompts that miners need to complete. E.g. “the cow jumped over the …”
  • Subnet 2: Machine translation: Validators evaluate how good the miners’ translations of text inputs are
  • Subnet 3: Data scraping: harvest and aggregate data from social media
  • Subnet 4: Fine-tuning Large Language Models (LLMs) using data from subnet 18
  • Subnet 5: Subnet miners offer storage space similar to Filecoin or Akash
  • Subnet 6: Prediction markets start with Bitcoin which is the example I gave
  • Subnet 7: Miners transcribe spoken language into accurate written text 
  • Subnet 8: Provides compute resources
  • Subnet 9: Collect and store data
  • Subnet 10: Decentralize the computing required to prevent LLM from being hacked
  • Subnet 11: For text-to-audio applications 
  • Subnet 12: Democratizes access to advanced model inference capabilities
  • Subnet 13: Deliver reliable, high-quality text and image generation responses through API usage. This is the subnet with the largest number of end users. It’s kind of similar to ChatGPT. Check out Corcel.io

Is Bittensor a good investment?

To answer this question I scored the Bittensor protocol and its digital token on the following dimensions. 

  1. Overall team score: 70%
  2. Overall product score: 85%
  3. Overall tokenomics score: 90%
  4. Overall momentum score: 60% 

Bittensor Team Evaluation

Team Weight Score
Are the founders legit with related experience? ✔️ I am going to say ok although, to be honest, there are some red flags here. The team refers to an anonymous contributor called Yuma Rao (perhaps as a marketing gimmick?). They say ex-Google employees but only one of them was there and that was just for one year. The way they have presented themselves on their site does not fill me with confidence. However, they come across well in interviews and podcasts. 65 45
Have they built Web 3 projects before? No 5 0
Did they do an exit? No 5 0
Can you find legit profiles on LinkedIn? ✔️ Yes 5 5
Did they raise funds? ✔️ yes from Digital Currency Group and others. But there was no premine so the question is how do these funds exit? 10 10
How long have they been around? ✔️ Launched as parachain on Polkadot in 2021 but launched its own blockchain called Finney in 2023 which is a fork of Polkadot substrate 5 5
Public appearances through Interviews/podcasts ✔️ Yes 5 5
Overall team score 70% 100 70

Bittensor Product Evaluation

Product Weight Score
Is it easy to understand what they do? Absolutely not 5 0
What is it? - A decentralized network where anyone can contribute computational resources (such as computing power and data) to train machine learning models or perform other AI-related tasks. -
Is there a demand for their product? ✔️ Yes. The largest subnet product, Corcel.io, has 200K visits/month according to Similarweb. 25 25
Is there a use case? ✔️ Yes, they make AI intelligence available to anyone 20 20
How big is the market? ✔️ Let's agree it's a big market people 5 5
Is it being used? ✔️ Yes 5 5
Github activity ✔️ Yes I see lots of commits across subnets 5 5
Has the product launched? ✔️ Yes 5 5
Does it have a strategic moat? ✔️ It's looking like they are gaining the first-mover advantage. 5 5
Is it focused? ✔️ Yes they are not distracted by other projects 10 10
Is the website easy to understand for non-crypto visitors? No you need a degree in computer science to understand what they are on about. 5 0
Do they have a proof of concept? ✔️ Yes, 32 subnets are proof enough 5 5
Is the UX good? Corcel is not great to look at but users don't care. I don't think developers care about UX as much as about access to the output or tool 5 0
Is it already being done? - Similar projects are Akash, Flower, Fetch.ai, OctaiPipe - -
At what stage is the product? - They are live - -
How does it create value? - Democratizes AI compute. - -
How does the project generate revenue? - It doesn't. Yet. - -

Bittensor Tokenomics Review

Tokenomics Weight Score
Why is the coin valuable? You need TAO to register as a miner. You also need TAO to become a validator. Only validators can access information from miners. If this information can be monetized in the form of a consumer-facing product or by being sold directly to ai companies more validators will emerge to get a piece of the action thus driving up the value of TAO. However, at the time of writing, none of the validators generate revenue so the 3Bn market cap is pure speculation. 45 45
Did they do a pre-mine? - No - -
Is supply fixed or inflationary? - The maximum supply of TAO tokens is fixed at 21 Million - -
Was it a fair launch - Yeah - -
Circulating / total supply 30% 5 0
Token release schedule ✔️ 4-year halvings like Bitcoin 10 10
Are there incentives to reduce or lock supply? Yes, staking. 90% of the circulating supply is currently staked 15 15
How many tokens Only TAO for now but it's about to get super complex with each subnet having its own token 5 0
How much upside is left: market cap vs industry size ✔️ $3Bn market capitalization vs trillions: we're still low 20 20
Is it listed on major exchanges - Yes - -
Overall tokenomics score 90% 100 90

Bittensor Momentum Assessment

Momentum Weight Score
Is it trending on social media? ✔️ Yes, Lunarcrush shows relatively high social dominance 30 30
Is the market cap low compared to similar projects? No it has the highest market cap of all AI crypto coins 40 0
What is the crypto market like? ✔️ Bullish 10 10
What is the sentiment for the sector this crypto focuses on ✔️ AI is hot everywhere including in crypto 20 20
Are they marketing heavily? - No evidence to suggest they are - -
Overall momentum score 60% 100 60

Disclaimer. While I have presented Bittensor in a positive light here please be aware that I am very good at losing money and that no one knows how the future of AI will evolve. Please make sure you do your own research and data analysis when deciding whether to invest in a coin. 

References and resources

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Markos Koemtzopoulos is the founder and main writer of ElementalCrypto. He has been a lecturer at the University of Nicosia on cryptocurrencies and DeFi and has taught two courses on crypto and blockchain technology.

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