TAO Bittensor Token (TAO)

Most recent update: [Oct 22, 2024] 

What is TAO Bittensor? 

TAO is the native cryptocurrency of the Bittensor network, a decentralized platform designed to connect machine learning models and create a peer-to-peer(P2P) market for machine intelligence. Leveraging blockchain technology, Bittensor creates a marketplace where the collective intelligence of AI models comes together and forms a digital hive mind. Contributors can share their models and data, and with the TAO token established by the Bittensor protocol, innovation is driven, pushing the boundaries of machine learning through this tradable commodity.

The unique advantage of TAO lies in its promotion of a decentralized approach to AI development. Traditionally, creating and training machine learning models requires substantial resources and expertise, often limited to large organizations. TAO democratizes this process by enabling a diverse range of participants—from researchers to developers—to contribute their models and computational power. In exchange for their contributions, users receive TAO tokens, which can be used for governance, staking, and accessing AI services within the network.

TAO not only enhances the overall intelligence of the network but also allows participants to benefit financially from their efforts. Miners and validators are rewarded with tokens for their computational resources, accurate predictions, and other valuable contributions to the network. This incentive structure encourages active participation and helps maintain the network’s stability and efficiency.

Who is behind TAO? 

The Bittensor network was co-founded by Ala Shaabana and Jacob Robert Steeves in December 2019 and is supported by the Opentensor Foundation, a collaborative group of experts dedicated to revolutionizing machine learning and decentralizing artificial intelligence. The Bittensor is a mining network, similar to Bitcoin, that offers censorship-resistant access to a decentralized network of machine learning models. Its innovative protocol positions itself as a leader in the AI landscape.

Ala Shaabana has a strong background in computer science and software engineering, with experience in both industry and academia, including roles at Instacart and the University of Toronto. Jacob Robert Steeves complements this expertise with his experience in machine learning and software engineering from renowned companies like Google. Together, they work to bridge the gap between complex AI technologies and user-friendly applications within the Bittensor ecosystem. The broader Bittensor community includes contributors from diverse backgrounds, fostering collaboration and knowledge-sharing. This team works together to create a decentralized network that empowers participants to contribute, and ultimately pushes the boundaries of machine learning innovation. 

How does it work? 

Bittensor functions as a decentralized intelligence market structured on a P2P network. It supports various data modalities, including text, images, and speech, which facilitates efficient knowledge-sharing. Bittensor decentralizes AI applications through its "subtensor," connecting 32 competition-based platforms called "subnets." The architecture standardizes inputs and outputs to a common tensor format, facilitating seamless interactions across different model types. It has also implemented conditional computation, which allows models to selectively query and communicate with a subset of peers. With tensor standardization and conditional computation, the system enhances the efficiency of information exchange and optimizes the learning processes.

Participants, known as miners, register in the network either by solving a proof of work (PoW) or paying a registration fee. Once registered, miners complete tasks, such as image recognition, while validators assess the quality of their work. Subnets can also collaborate using a Mixture of Experts (MoE) model, enabling collaboration among specialized neural networks. This enhances prediction accuracy by leveraging each model's strengths for complex queries.

The Bittensor protocol features a consensus mechanism called Proof of Intelligence, which requires nodes to perform machine learning tasks to demonstrate their capabilities. Nodes providing accurate outputs are rewarded with TAO tokens, which incentivize contributions to network capabilities. This incentive model is grounded in game-theoretic principles and utilizes the Shapley value framework to assess each model’s contribution based on its performance.

The TAO Token and Tokenomics 

TAO tokens are currently available for sale on multiple exchanges worldwide. The maximum supply is capped at 21,000,000 tokens, and as of October 22^nd 2024, the market cap for TAO amounted to approximately US$ 4,042,284,754. The circulating supply of RNDR tokens is around 7,381,023. The fully diluted valuation is $11,471,641,747.

TAO issuance mirrors Bitcoin’s early design — 1 TAO is issued every block, with a new block generated every 12 seconds. This results in 50 TAO every 10 minutes, or approximately 7,200 TAO issued daily. However, halvings are triggered by circulating supply rather than block intervals, allowing network activity to influence token emissions.

Security 

Bittensor employs a comprehensive security strategy to ensure the integrity of its decentralized machine learning network. Central to this approach is a token-based incentive mechanism that rewards miners for enhancing the network's collective knowledge, decentralizing control and preventing dominance by any single entity.

To maintain a fair ecosystem, Bittensor implements protocols to deter cheating and promote genuine contributions. Optional hotkey security features further protect users’ digital assets and interactions. Its open-source nature that invites global developers to review and contribute to its code further enhances the security through collective vigilance.

Bittensor’s decentralized governance that distributes ownership, allowing token holders to propose and vote on protocol upgrades, ensures that the network evolves according to the community's collective interests.

Drawbacks and risks 

The Bittensor network presents several risks, particularly for beginners. Its complex structure, with multiple layers and functionalities, requires significant time and effort to fully understand. This complexity may deter new users from engaging with the platform, causing the demand to shift. Another concern is the lack of comprehensive stress testing. While Bittensor is designed to be scalable, its performance under high demand has not been rigorously evaluated.

Similar to its peers, as countries increasingly regulate AI technologies, Bittensor could face compliance challenges that may impact its operations and adoption.

Participation in Bittensor also demands a certain level of technical expertise, which might limit its accessibility to a broader audience. Those without the necessary skills may find it difficult to engage with the network effectively.

Additionally, Bittensor recently suffered a significant security breach, resulting in an $8 million loss due to a malicious PYPi package. This incident has negatively affected TAO’s price, leading to a 3% decline within 24 hours and a total drop of 20% over the week. The breach has contributed to a bearish sentiment around the token, which has lost over 40% of its value in the past month, raising concerns about potential price decline caused by cyberattacks in the future.

Due Diligence  

Before listing TAO on the VirgoCX Platform, VirgoCX performed due diligence on TAO and determined that TAO is unlikely to be a security or derivative under Canadian securities legislation. VirgoCX’s analysis includes reviewing publicly available information on the following:  

• The creation, governance, and location of TAO and/or its primary development team; 
• The supply, demand, maturity and liquidity of TAO; and 
• Legal and regulatory risks associated with TAO.  

Statutory Rights under Securities Legislation 

VirgoCX is offering Crypto Contracts on crypto assets in reliance on a prospectus exemption contained in the exemptive relief decision Re VirgoCX Inc. dated May 30th 2024 (the Decision). Please be aware that the statutory rights in section 130.1 of the Securities Act (Ontario) and, if applicable, similar statutory rights under the securities legislation of each other province and territory in Canada do not apply in respect of the Crypto Fact Sheet to the extent a Crypto Contract is distributed under the prospectus relief in the Decision. 

Further Reading 

To learn more about the technology behind TAO, check out these in-depth resources here: 

• The official site of TAO
• Coinmarketcap’s overview of TAO
• Coingecko’s tokenomics overview of TAO
• Coinbase’s overview of TAO, along with the relevant news and blogs related to TAO.