Bittensor(TAO): The World First Blockchain Neural Internet

By Andy Wang | Crescent City Capital Market Analyst Intern

What is Bittensor?

Bittensor, a groundbreaking project at the nexus of blockchain and AI, is on a mission to create a decentralized open-source ecosystem that seeks to solve bottlenecks created by big corporations like Google, Microsoft and IBM.

It is a protocol seeking to decentralize AI development by leveraging community resources for creating, training, sharing and trading machine learning models. Founded by AI researchers Ala Shaabana and Jacob Steeves, Bittensor was initially launched on Polygon, but in March 2023, it pivoted to focus on its proprietary chain.

AI is the backbone of applications like ChatGPT, Gemini and Claude. Typically, AI development models are siloed from each other, meaning models like Chat GPT are developed separately from other models. Traditionally, developers start from scratch creating these models, allowing only those with high computational resources to pursue development. This structure is a byproduct of large corporations being the only players developing and advancing AI because of their immense resources. This is a problem because AI is becoming increasingly centralized, keeping the power in the hands of a few limiting the growth potential of AI development.

Bittensor aims to address the issue of centralized resources and slow innovation. The Bittensor protocol is an open-source ecosystem democratizing resources for AI development that would otherwise be available only to big corporations. According to its whitepaper, Bittensor aims to create a marketplace where “intelligence is priced by other intelligence systems peer-to-peer across the internet.” Bittensor is the infrastructure that could enable decentralized AI development leading to faster advancements through an incentivized economy, making AI open source and part of the public domain. AI models could develop, learn and develop from each other through community.

How does Bittensor work?

Bittensor consists of three core components: subnet, blockchain, and Bittensor API. According to their official documentation, Bittensor is simply “a protocol for decentralized subnets.” Subnets are a competitive mechanism based on paying incentives to users for performing a specific task. Users can create custom subnets for their own programs or join the existing competition mechanism. The Bittensor blockchain supports subnets and ensures the ecosystem is decentralized, permissionless, and collusion-resistant. Meanwhile, the Bittensor API connects subnets and blockchains, ensuring reward distribution to miners and validators across the subnet.

How do subnets work?

Subnets are Bittensor’s solution for decentralizing the training of Machine Learning models. Each subnet is a closed economic market for training and cultivating different forms of machine intelligence such as: text translation, image generation, text generation, data collection, etc. Subnets are managed by their owners and will include three types of users: miners, validators, and users.

Bittensor includes miners, sometimes referred to as servers, which are off-chain Machine Learning nodes that activate the network’s functions. They are responsible for handling requests from subnetworks coming from users and providing appropriate feedback based on their models. This feedback is evaluated by the subnetwork’s validators, who will assign ratings to them, and miners are rewarded with Bittensor’s native token, TAO. Miners continuously providing inaccurate feedback will be gradually expelled, facing reduced rewards and eventually leaving the subnetwork to ensure its quality.

Validators perform the task of verifying the quality of work done. The subnetwork owner can provide a template for validation, but validators can also express their own views through personal validation about what the subnetwork should learn. This increases diversity in learning and reduces the risk of centralization in a network where models are forced in a specific direction.

Finally, users of the subnetwork submit requests to the subnetwork as end-users, and corresponding miners respond to these requests. Users can access these subnetworks through BitAPAI (accessible through popular programming languages like Python, Node.js, Golang, and Rust). This service is currently free to encourage development on the platform, although limits have been set to prevent API abuse. However, requests can be made to increase limits, depending on further questions and approval from the BitAPAI team.

The project is built on top of Bittensor, creating a decentralized and incentivized ecosystem for machine learning and artificial intelligence.

Miners: Nodes (computers) that provide machine learning services like computing and answering questions. TAO, the native currency of Bittensor, is used to incentivize miners to offer these services.
Users: The individuals seeking answers to their questions or looking for machine learning services.
Validators: The decentralized middleman, validators play a crucial role in ensuring the integrity of the network and verifying the proper exchange of resources in the Bittensor network.

Let’s say a user in the Bittensor network submits a request for sentiment analysis on a set of data. Bittensor’s consensus mechanism routes this request to a miner capable of handling the request. After completing the request, the miner sends the completed request to the network, where a validator evaluates the quality and accuracy of the miner’s job. If the validator agrees this request was fulfilled, it gets sent back to the user, and the miner and validator are rewarded with TAO tokens for their services. The user may have to pay smart contract fees for this transaction.

The Bittensor Network Structure

Bittensor uses a unique network structure to achieve its goals. Bittensor uses a consensus mechanism called proof of intelligence (PoI), which borrows aspects from proof-of-work (PoW) and proof-of-stake (PoS) consensus mechanisms. Instead of solving complex mathematical problems in traditional PoW consensus, miners complete machine-learning tasks. The higher the machine intelligence or ability to provide these tasks, the more likely a miner will be selected to add a new block to the blockchain and receive TAO. Miners are added to subnets grouped by their machine intelligence. The Bittensor network is compiled of these subnets, which are connected to the main network or subtensor through the Bittensor API.

To become a validator, you stake TAO like traditional PoS consensus. The number of TAO tokens that can be released is capped at 21 million and gradually released over time through network processes like mining and validating. Scarcity helps incentivize miners and validators to participate to the best of their abilities.

TAO Token and its Tokenomics

Like the Bitcoin network that Bittensor is modeled after, the design of the TAO token closely follows that of Bitcoin with a total supply of 21 million. Aiming for as fair a launch as possible, Bittensor does not have any presales or private investors, with even the founders and founding team having to mine their own tokens. Likewise, TAO also follows Bitcoin’s Halving model, emissions are also halved every 10.5 million blocks. The first halving is scheduled to take place in September 2025, with a total of 64 halving events.In addition to the native TAO token, TAO also exists as an ERC-20 version on the Ethereum mainnet as wrapped TAO (wTAO). WTAO can be connected back to the Bittensor network via the TAO Bridge. However, please note that TAO Bridge is a community-run project and is not officially run by the Bittensor team.

Future outlook for Bittensor

The current state of Machine Learning training is hampered by a siled approach and a lack of composability. As the Bittensor network continues to grow and develop, they aspire to one day become the center of all things machine intelligence, with users, start-ups and even large corporations Harness the network for machine intelligence capabilities, with all services paid for in TAO tokens.

Market Recap:

The Bittensor price today (April 8, 2024) is $591.06 USD with a 24-hour trading volume of $22,959,226 USD. Bittensor is up 6.16% in the last 24 hours. The current CoinMarketCap ranking is #34, with a live market cap of $3,877,543,449 USD. It has a circulating supply of 6,560,305 TAO coins and a max. supply of 21,000,000 TAO coins.

Analysis:

The intersection of AI and crypto is more than pairing two buzzwords together. Centralized corporations control the AI revolution. Projects like Bittensor seek to level the playing field by democratizing the resources needed to advance AI. By leveraging blockchain, Bittensor has created an open-source ecosystem using incentives to foster participation. Bittensor models can develop and leverage each other, growing faster through pooled resources. By breaking traditional barriers, Bittensor contributes to open-source AI, equalizing opportunities for all. Open source development is crucial for advancing AI, as it enables borderless collaboration, transparency and accessibility; accelerates innovation; and ensures that AI’s benefits are equitably distributed. The incentivization and consensus mechanisms that blockchain and crypto enable will play vital roles in the future of AI development.

Despite being a young protocol, there are already a number of projects starting to build on the Bittensor network, relying on the services of specific subnets, with most targeting text or image generation. A popular type of project are ChatGPT-style bots such as ChatNI, Chat with Hal, and Chattensor, all of which act as chat support assistants where users can type questions or requests and receive answers from bot. Another popular project built on Bittensor is ReplyTensor, which uses an image and text generation subnet to generate automated responses on Twitter, Telegram, and Discord. ReplyTensor is developed by Neural Internet, an AI research decentralized autonomous organization (DAO) and one of the main builders on Bittensor’s resources.

Now switching from the fundamental aspect to the technical side, TAO has undergone a bullish trend against Bitcoin following an accumulation phase of a about 200 days, resulting in a remarkable 530% return, outpacing Bitcoin’s performance.

However, the RSI has been trending downwards and fallen into a neutral situation, hinting at a price consolidation or correction that might test previously established support levels, which is $464.13, from my perspective. And this support level is nearly close to the lowest Fib-retracement level, somehow pointing to a buy opportunity. Both Stoch RSI and RSI showed a pick up in the momentum, therefore I believe once the price breaks through its previous high, the first price target we should aim for is $980.01 to $ 1329.98.

Amid burgeoning interest in AI-related cryptocurrencies and an extreme greed in market sentiment, TAO should gain more contraction.For long-term investors optimistic about TAO, this could present a potential buying opportunity.

Reference:

https://coinmarketcap.com/currencies/bittensor/

https://bittensor.org/
https://www.tradingview.com/chart/VrTWdVLu/?symbol=MEXC%3ATAOUSDT