As a kickass investment into TAO or a ~3%(I'm not too fussy about decimals) portco of Grayscale(largest fund by AUM in crypto), Bittensor is one of the leading DeAI projects that has held its investors their bags with a consistent market cap of $2B+ market cap consistently.
In the first version of DeAI Unlocked, I’ll talk about Bittensor and cover the following aspects:
- What is Bittensor, and what problems does it solve?
- Architecture and Overview
- Tokenomics
- Key Analytics around $TAO
- Current Community Outlook
- Overview of recent attacks and how contributors could have protected themselves.
What is Bittensor, and what problems does it solve?
Bittensor was co-founded by Jacob Steeves and Ala Shaabana as part of the opentensor foundation.
Jacod defines Bittensor as “a continuous machine learning library” distributed and unclosed(not open) in a truly decentralised manner for the greater adoption of DeAI.
Bittensor, in a lot of ways, is very similar and based primarily on Bitcoin and its history, and the mysterious figure of Yuma Rao, who had conceptualised its whitepaper post the Sophon project, also makes for a great read…
Problems Bittensor Solves
- Centralization of AI: Bittensor aims to decentralize the process of AI development, allowing for a more democratic development and distribution of tech.
- Resource Sharing: Bittensor enables resource sharing across a decentralized network, making it more affordable and accessible.
- Data Silos: Bittensor encourages the sharing of data across its neural network, improving the diversity and quality of data available for AI training.
- Incentivization: Bittensor introduces a token-based incentive system($TAO), rewarding participants for their contributions to the network.
- Transparency and Trust: Bittensor’s blockchain-based approach ensures that all contributions and transactions are transparent and verifiable.
Architecture and Overview
Let's dive into subnets
Let me take you through what a subnet is in the simplest method possible.
A subnet is comprised of 2 major entities, a miner and a validator, and it's defined with an incentive mechanism that ensures that both these entities perform regular tasks and are not corrupted.
Miners are the entities that perform a task, solve a problem, execute some operation, etc.
Validators are the entity that reviews the quality of work done by a miner and give it a rating.
These ratings are then collected and shared with the consensus mechanism, which allocates the rewards to the entire subnet.
To go deeper into subnets, think of it as a neural network, where a node(also known as a neuron in a neural network) in any neural network is a subnet.
Given the bipartite nature of such nodes, a validator can only be connected to a miner and to no other validator(the same is true for miners).
The communication of each node in a neural network is facilitated through a synapse which is basically a wrapped object with all the relevant information.
The client and server exchange these synapses to communicate with each other inside any network, and the metagraph keeps the stats of the entire subnet in this entire process.
Now comes the major question….
After all of this, how exactly is the incentive mechanism taking place?
This is where things get super exciting.
Each subnet maintains a vector of different weights.
These weights represent the performance of a miner in a network. It's the responsibility of the validator to update the weights of the miners based on their performance to the blockchain every 100–200 blocks. The blockchain forms a matrix of all the weights from each subnet and is provided as input to the Yuma Consensus(YC) on-chain.
The YC then calcs the final rewards and allocates accordingly.
Bittensor Wallet and working with keys
An external wallet can simply be created as a Google Chrome extension that allows using TAO without installing Bittensor.
However, to participate in a subnet you need to create a local wallet using CLI commands for which you can check the documentation at the official website.
A wallet consists of a coldkey and a hotkey, whereas a browser extension only consists of a coldkey.
Think of each type of key as a regular account on your average blockchain. Each type of key has a public key and a private key of itself.
A cold key can exist without a hotkey or have multiple hotkeys. You need only 1 cold key to create a subnet, but you will need to pair hotkeys in case you want to mine or validate.
Check out the use cases for using your cold keys and hotkeys
By the way, in case I forgot to mention, UID is the unique identifier for each validator or miner in a subnet, and NETUID is the unique identifier for each subnet.
The weights for these are submitted to the YC to get reward disbursement.
A few more random but important mentions:
Commit Reveal: To send your weights to the YC, you can encrypt this information to avoid corruption. The blockchain will automatically decrypt it.
Liquid Alpha: These are consensus-based weights and basically define how dividends of the validators can be best optimised with incentives for miners to promote quality and performance. Honestly, I needn’t go into much of the technical details for this one.
Tokenomics
“TAO is a utility token that is meant to incentivise the product of machine intelligence”- OTF as it tried to ensure that each TAO reflected actualised machine learning work.
On this ideology, TAO got a fair launch instead of an ICO; i.e. no pre-mined tokens(Ballsy, I would say)
Total supply: 21,000,000 TAO
Circulating Supply: 7,092,392 TAO (33.77%)
Halving Schedule: Same as bitcoin
Objectives, Requirements and Emissions:
New TAO tokens are created from minting and validating as the network rewards miners to offer intelligence with novel neural networks and validators for ensuring the miners follow the rules according to the incentivisation mechanisms of each subnet.
Each block grants a 1 TAO reward every 12 seconds.
From each TAO that is mined, different percentages are allocated to each subnet, which is determined by the root network(its netuid is zero, and it is the OG subnet that gives weights to each subnet for their reward allocation)
As each tempo(every 360 blocks in a user-generated subnet) ends, the TAO accumulated for a specific subnet is emitted into the subnet, giving rewards to validators(Dividends) and miners(Incentives).
Currently, 7,200 TAO are created daily, and at first, halving will reduce that to 3,600 TAO daily, making mining super competitive.
Utility and Value Accrual:
Each TAO token is associated with intelligence contributed by the network through its various components.
By holding TAO, participants will get access to digital commodities interconnected with each other, resulting in the mass production of intelligence desired by different tasks and machines.
The value accrual follows simple demand and supply.
The demand, in turn, can come from validators who need to hold TAO, miners for registrations, the Senate for voting, etc.
Key Analytics around $TAO
Current Community Outlook
Earlier, the governance of the Bittensor network was centralised; however, the network has tried to shift to a decentralised governance model over time.
The governance of the Bittensor network consists of primarily two major entities.
Triumvirate: This is a group of 3 opentensor foundational employees responsible for creating proposals.
Senate: This is a group of delegates who control a significant stake and have elected to participate in proposals. I) They must've registered they’re keys to a subnet, II) Nominated as a delegate for staking $TAO, III) Hotkey stake > 2% IV) Elected to participate in the Senate
Proposals: These are approved only when I) Proposal receives (50%+1) approvals from the Senate, and II) A member of the Triumvirate has closed the proposal.
Overview of recent attacks and how contributors could have protected themselves.
In this attack, the hacker induced a malicious package(a Python package) that appeared as a Bittensor package and was designed to steal unencrypted cold key details.
The people affected by this attack were:
1. Using Bittensor and decrypting their hotkeys or cold keys
2. Downloaded the Bittensor PyPi package between the attack dates and performed specific functions.
You would not have been affected if you had been delegating your stake, using a third-party application, or not moving your funds during this period.
The malicious package has been removed, and the Opentensor team has been working with numerous exchanges to track and salvage funds.
Further Steps:
1. Enhanced package verification
2. Increased third-party audits
3. Improving security standards, including ISO 27001
4. Increased monitoring
I am adding this section to the blog to cover the important feature of schedule key swap.
Schedule Key Swap
The schedule key swap feature schedules your funds transfer from an at-risk wallet to a new secure wallet.
It doesn’t swap your TAO funds for a new cold key; it just schedules the event.
Until 72 hours, your original cold key gets locked, after which it unlocks infinitely.
P.s. -: It's ideal to use this feature if you have installed the PyPi package for the Bittensor version 6.12.2
It was interesting to explore Bittensor and its applications, diving deep into the world of DeAI.
References:
Unfortunately, when I was publishing, the medium told me this article had links to articles that weren’t allowed.
But to be fair, the mentions are to coinmarketcap, taostats, bittensor official accounts, some bittensor medium blogs, and the official bittensor news forum.
