Bittensor (TAO) Tokenomics

Bittensor’s TAO token underpins a decentralized, incentive-driven network for AI and computational resources. Its tokenomics are designed to balance network growth, security, and utility through a dynamic, emission-based model. Below is a comprehensive breakdown of the token economics, including issuance, allocation, usage, incentives, locking, and unlocking mechanisms.

Issuance Mechanism

• Maximum Supply: 21,000,000 TAO
• Issuance Rate: 1 TAO is issued every block (approximately every 12 seconds), equating to 7,200 TAO per day.
• Halvening Cycle: The issuance rate is halved each time 50% of the remaining supply to be mined is issued. The first halvening occurs after 50% of the total supply is mined, and subsequent halvenings occur at each 50% threshold of the remaining supply.
• Dynamic Emissions: The protocol can dynamically adjust emissions to subnets based on price signals and subnet performance, as proposed in the Dynamic TAO architecture.

Allocation Mechanism

Token Distribution Table

• Subnet Allocation: Emissions from the root network are distributed to subnets based on validator votes.
• Validator Delegation: Within the validator share, 82% is distributed to delegators, and 18% remains with validators.

Usage and Incentive Mechanism

• Primary Use: TAO is used to incentivize miners, validators, and subnet owners for contributing resources and maintaining network security.
• Subnet Creation Fee: Users pay a minimum of 100 TAO to create a subnet, with the fee potentially increasing based on demand.
• Staking: As of December 2024, ~5.97 million TAO (~80.95% of the total token supply) is staked across validators, with significant concentration among the top five validators.
• Rewards: Participants earn TAO for performing useful tasks (mining, validating, subnet operation) and can receive additional rewards and fees.
• Recycling: TAO tokens sent to the “recycle bin” are removed from circulation and returned to the unissued supply for future emissions.

Locking Mechanism

• Staking Lock: TAO tokens staked with validators are locked for the duration of the staking period, which is determined by the network’s protocol and validator requirements.
• Delegation: Delegators can stake TAO with validators, subject to the validator’s terms and the network’s staking rules.

Unlocking Time

• Continuous Unlocking: All TAO emissions are distributed daily to miners and validators, with the unlocking process continuing until the maximum supply is reached (projected to 2075).
• No Cliff or Vesting: There is no evidence of cliff or vesting schedules; tokens are unlocked and distributed as they are mined.

Summary Table

Additional Notes

• Governance: Validator votes determine subnet emission allocations. Proposals like Dynamic TAO may further optimize emissions based on subnet value.
• Network Security: The incentive structure is designed to maximize honest participation and resist collusion.
• Scalability: The architecture supports dynamic subnet creation and emission adjustment to meet AI and computational demand.

Bittensor’s tokenomics are engineered for long-term sustainability, decentralization, and adaptability, supporting a robust ecosystem for decentralized AI and computational services.