The Bittensor Thesis: Commodifying Intelligence with AI Blockspace
Bittensor is the first of its kind blockchain for artificial intelligence. It is the bitcoin moment for AI.
INTRODUCTION
Over the past year, artificial intelligence (AI) has become one of the most important technological developments in human history. This is evidenced by OpenAI’s ChatGPT becoming the fastest growing application in history — reaching 100 million users in three months.
As advances were made in AI, developers began to play with, and try to build, open source AI. Given how computationally intensive AI is, it became clear that open source AI would need a way to amass resource to run models. This is when the idea of using a blockchain to create a market system for AI outputs and resource collaboration began to take shape.
With Bittensor putting AI and intelligence on a decentralized network, AI has now become open source, composable and uncensorable. Tapping the Bittensor subnets allows anybody to access intelligence like a commodity.
As demand for decentralized intelligence grows, Bittensor blockspace becoming the scarce resource users pay to access.
Intelligence as a commodity is a new and profound idea that will ensure access to AI technology. This will be important in preventing the further centralization of power.
The Importance of Decentralized AI:
As the power of AI has become better understood, many of the brightest minds in the field have expressed concerns about the potential power of artificial general intelligence (AGI) and the centralizing nature of the technology itself. These issues reached a climatic tipping point when the world woke up to Sam Altman’s firing from OpenAI in an attempted coup.
Since this incident, many prominent AI researchers and technologists have expressed interest in, and support for, decentralized AI. During December 2023, Balaji Srinivasan, one of the most important public intellectuals in Silicon Valley, did a video podcast dedicated to decentralized AI. Stateless Ventures thinks the decentralization of AI will be an important topic and the strongest narrative for this crypto cycle. One of the most interesting projects building decentralized AI is Bittensor.
Bittensor Overview
Similar to the origins of OpenAI, Bittensor is developed by a non-profit organization called OpenTensor, and launched its own blockchain in March 2023. It is modeled after Bitcoin in many regards (including sharing similar tokenomics).
Bittensor is an open-source decentralized AI protocol that utilizes blockchain technology to create a peer-to-peer network for sharing and monetizing AI models. It aims to revolutionize the way AI is developed and deployed by enabling anyone with access to the internet to contribute their resources to the network. It does this by creating an incentivization framework for the resources necessary to create AI output.
The Bittensor model of AI fundamentally differs from the current centralized AI companies. For centralized AI, models are siloed and thus are not able to learn from each other or build off one another. With its decentralized incentivization framework, Bittensor aims to leverage the compounding and composable elements of open-source development to create more inclusive AI.
Functionally, Bittensor has three components to their technology stack: subnets, blockchain, and API.
Subnets are incentive based competition mechanisms dedicated to a specific task. Bittensor currently has 32 subnets and will gradually expand to 128 subnets and beyond. The idea being users could spin up their own subnet for a certain task and begin incentivizing competition for the best output for said task. The tasks include text prompting, image generation, and data scraping.
The Bittensor blockchain (subtensor) is the hub for the subnets and ensures the decentralization and permissionless-ness of the system by using the Yuma Consensus protocol. This protocol was specifically designed for Bittensor and combines the advantages of proof-of-work and proof-of-stake. The API simply connects the subnets and the blockchain.
There are three parties that participate in the system: miners, validators, and queryors (users).
- Miners: responsible for training and maintaining machine learning models on the network.
- Validators: verify the accuracy and integrity of machine learning models submitted by miners.
- Queryors: users who want to access machine learning models on the network.
Miners function as off-chain nodes that facilitate the network’s operation. Their role involves addressing user requests within each subnet, offering pertinent responses based on their models. Subnet validators assess these responses, assigning a rank that determines a reward in Bittensor’s native token, TAO. Thus, models are consistently ranked and rewarded based on their accuracy and improved with more usage. Miners delivering consistently inaccurate or suboptimal responses face reduced incentives, leading to their exit from the subnet, thereby upholding subnet quality.
Validators review and assess the work submitted by miners in the subnet. While subnet owners can supply a validation template, validators can also express their preferences through personalized validation, fostering diversity in learning and mitigating the risk of network centralization, preventing the model from being forced in a specific direction.
Subnet users, acting as end users, submit requests to the subnet for a given task, fulfilled by the corresponding miners. These users can access subnet through BitAPAI, compatible with popular programming languages like Python, Node.js, Golang, and Rust.
The Bittensor protocol is designed to be secure, efficient, and censorship resistant. All data and transactions on the network are stored on a public blockchain, which makes it tamper-proof and transparent.
The Bittensor Thesis
The introduction and usage of AI post the launch of ChatGPT has made it the fastest growing app in history. We are now witnessing an arms race in AI to build advanced models. As a result, Goldman Sachs forecasts that global AI investment will exceed $150.0 billion by 2025.
As LLM’s scale, the cost of creating AI agents will decrease over time while the models produce better output. This will create a world in which AI agents will outnumber humans online. In this future, we (humans) will need technology to control and audit AI. To accomplish this there needs to be digitally native financial and legal infrastructure. Fortunately, this is exactly what the blockchain industry has been building for a decade. Blockchain infrastructure can be used to train LLM models and deploy AI agents on-chain in a decentralized manner.
The recent attempted coup at OpenAI and continued battle between ideologies has illuminated the problem with centralized control over this technology. In the wake of those events, the Firm is seeing increased attention on centralized vs decentralized AI.
Stateless Ventures sees Bittensor as the most exciting project working at the intersection of blockchain and AI. Bittensor represents an incentive mechanism and entirely new framework for the creation of AI in a decentralized way.
Stateless Ventures believes the market is currently in the early innings of a new bull market cycle for the crypto industry. The industry has shown incredible resilience and continued to grow despite many obstacles. The most exciting narrative that will catalyze this bull market will be decentralized AI. While Stateless Ventures has been early to form this view, other market participants are beginning to agree. VanEck recently published a deep dive research piece on decentralized AI that specifically highlights Bittensor and its subnets.
Bittensor is the best risk-reward investment to make for this emerging crypto bull market. Further, there is not a clear way to invest in the AI narrative in public markets.
Bittensor Comparable Companies:
Bittensor Tokenomics
Much like the Bitcoin network from which Bittensor was modeled after, the TAO token’s design closely follows that of Bitcoin with a total supply of 21 million tokens. Aiming for the fairest launch possible, Bittensor did not have any presales or private investors, with even the founders and founding team having to mine their own tokens. Likewise, TAO follows Bitcoin’s halvening model as well, where emissions are cut in half every 10.5 million blocks. The first halvening is expected in September 2025, with 64 halvening events in total.
Traction & Roadmap
Bittensor launched its own unique blockchain in March 2023. Since then, in October 2023, subnets went live on mainnet. Since the launch of subnets, the 32 initial subnets slots have quickly filled.
The Bittensor network has seen rapid growth over the past few months. As of the end of January 2024, the network has over 105,000 accounts and is growing.
We also expect the number of subnets to grow substantially, next to 64, then 128 etc etc.
Bittensor is a new blockchain design tackling a new blue ocean market opportunity of creating decentralized artificial intelligence networks.
Similar to how bitcoin was mis understood at its beginning, the world may take a long time to truly understand Bittensor.
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Resources:
https://twitter.com/Old_Samster/status/1734977722424938993
https://www.plaintextcapital.com/blog/bittensors_ai_vision/
https://theknower.substack.com/p/a-short-report-on-bittensor-and-ai
https://messari.io/report/the-dynamic-pulse-of-bittensor
https://twitter.com/balajis/status/1734982567127044210
Disclaimer:
The information herein was prepared by Stateless Ventures LLC (“Stateless”) and is believed by Stateless to be reliable and has been obtained from public sources believed to be reliable. Stateless makes no representation as to the accuracy or completeness of such information. Opinions, estimates and projections in this presentation constitute the current judgment of Stateless and are subject to change without notice. This is not an offering or the solicitation of an offer to purchase an interest in any fund managed by Stateless (collectively, the “Fund”). Any such offer or solicitation will only be made to qualified investors by means of a confidential private placement memorandum and only in those jurisdictions where permitted by law. The identified investment does not represent or approximate all of the investments purchased, sold, or recommended for the Fund. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the identified investment. An investment in the Fund is speculative and involves a high degree of risk. Opportunities for withdrawal, redemption, and transferability of interests are restricted, so investors may not have access to capital when it is needed. There is no secondary market for the interests, and none is expected to develop. The fees and expenses charged in connection with this investment may be higher than the fees and expenses of other investment alternatives and may offset profits. No assurance can be given that the investment objective will be achieved or that an investor will receive a return of all or part of his or her investment. Investment results may vary substantially over any given time period.
