Original article by: Arjun Chand
Original translation: TechFlow
AI x Crypto is a hot topic right now. It is one of the hottest investment themes in the current bull market.
Bittensor (TAO) is one of the leading projects in the AI narrative, both in terms of market cap and popularity, but recently there has been some controversy on Crypto Twitter regarding its usefulness, with some even calling it “vaporware” and a pointless exercise in decentralization.
However, every coin has two sides. While critics have their doubts about Bittensor and its design, we will focus on its brighter side today.
There are a lot of cool things happening in the Bittensor ecosystem. We’ll highlight the most impressive subnets and look at DeFi projects that are growing in tandem with Bittensor and TAO.
Introduction to Bittensor
Bittensor aims to democratize the process of building AI-driven use cases by creating an open P2P marketplace where people can share and use machine learning models.
The key idea behind Bittensor is that it forms an interconnected neural network of machine intelligence. Anyone can tap into this network and build subnetworks, which are specialized protocols that use this collective intelligence to power a wide variety of AI projects.
Currently, there are 32 subnetworks in the Bittensor ecosystem, each focusing on a unique use case such as speech-to-text, image generation, AI-powered search engines, advanced trading strategies, and even fine-tuning large language models for other use cases.
For example, some of the insights in this article come from Corcel , a user-friendly tool for subnet 18 in the Bittensor ecosystem, also known as the Cortex.t subnet. It is similar in functionality to chatGPT, but it leverages the collective intelligence of the Bittensor network’s machine learning models to provide the best response to user queries.
Bittensor subnet
Now, let’s look at some of the prominent subnets in the Bittensor ecosystem and their functionality.
Subnet 6 — Nous Fine-tuning
Subnet 6 , run by the reputable Nous research team and a standout in the Bittensor ecosystem, specifically leverages synthetic data from Corcel in Subnet 18 to fine-tune Large Language Models (LLMs).
Each miner in Subnet 6 takes the same comprehensive data every day and uses it to fine-tune the LLM to achieve specific results. They employ their own strategies and techniques to achieve optimal performance on this data.
The key competitive element is the TAO reward. LLM miners with lower " head-to-head loss " (which means they make fewer mistakes) will receive a larger proportion of the TAO reward. This incentivizes everyone to do their best and continuously improve their models to move up the leaderboard of the fine-tuning subnet.
This approach of using new synthetic data to train LLMs is an improvement over traditional approaches that rely on static datasets, because the ever-changing synthetic data forces LLMs to continuously adapt and learn, making them more adaptable to real-world scenarios.
Subnet 8 — Proprietary Trading Network
Subnet 8 , operated by τaoshi’s well-known Proprietary Trading Network (PTN), is where top algorithmic traders deploy quantitative models to analyze the market and predict price fluctuations of assets such as BTC and TAO. The best algorithms will win TAO rewards based on their profitability.
Miners who provide valuable trading signals are rewarded with TAO, validators receive 100% of the revenue from trading signal sales, and users gain insights that help them outperform the market.
Subnet 8 generating revenue is an important milestone for the Bittensor community, proving that viable businesses can be built on Bittensor. This signal can attract new talent, users, miners, and validators, promoting the growth and development of the entire ecosystem.
Recently registered subnets on Bittensor
As Bittensor’s popularity continues to grow, well-known teams from all sides of the ecosystem have shown strong interest in registering their own subnets on Bittensor. Notable examples include:
Subnet 3, MyShell TTS : Dedicated to democratizing access to top text-to-speech (TTS) models.
Subnet 5, Open Kaito : Committed to making Web3 information universally accessible, Kaito is committed to making Web3 information universally accessible, aiming to remove barriers and promote collective efforts to organize and interpret the massive amount of data on Web3.
Subnet 30, WomboAI : Home to WOMBO, a very popular app (over 100 million downloads) that enhances creativity with AI, turning simple ideas into animated pictures or generating works of art from a few sentences.
Additionally, there are currently over 200 subnets in the testnet phase, waiting to be registered to the mainnet, each with unique goals and reward structures.
Since the number of subnets in the Bittensor ecosystem is currently limited to 32, competition is fierce, and the worst performing subnets will be replaced by new subnets after a one-week immunity period. As more projects compete to build subnets on Bittensor, this competition will only increase. It will be fascinating to see how the subnet landscape changes in the coming quarters.
By looking at the subnets on Bittensor, let’s move to the next section of this article: the Bittensor DeFi ecosystem.
Bittensor’s DeFi Ecosystem
The Bittensor DeFi ecosystem is taking shape in real time. Just six months ago, it didn’t exist, but now there are more than ten applications offering financial products centered around Bittensor and its native token, TAO.
Let’s take a look at some of these applications:
Tensorplex Stake (stTAO)
Tensorplex offers a range of decentralized AI-focused products built on top of networks like Bittensor. As an active participant in the Bittensor ecosystem, they offer a range of services including Tensorplex Stream, which provides AI-generated summaries for podcasts, Twitter spaes, and news articles. In addition, they are also active miners on the Bittensor subnet.
One of their products, Tensorplex Stake , launched on Ethereum in February 2024, enables users to participate in staking on the Bittensor network and earn returns (currently over 16%).
Here’s how it works:
Tensorplex Stake allows users to stake their wTAO and receive corresponding stTAO. stTAO represents your staked TAO and tracks staking rewards.
The underlying wTAO is bridged to the Bittensor network and staked with validators to earn revenue, which will be returned to users on Ethereum.
This approach provides a convenient way for users on Ethereum to explore opportunities to earn yield using TAO without having to bridge their assets to Bittensor.
TaoPad: Building DeFi for TAO
TaoPad is the first Bittensor-focused launchpad designed to enhance the value of TAO tokens and support the broader Bittensor network.
TaoPad’s launchpad enables new projects to get started, especially those focused on decentralized artificial intelligence, through token sales.
TAO is the foundation of TaoPad's design. Here's how it uses TAO to its full potential:
Reward system: TaoPad distributes rewards to holders in the form of wTAO.
Launchpad Participation: The TaoPad Launchpad allows users to participate in the launch of new projects using wTAOs. This creates a use case for wTAOs and promotes the growth of the Tao ecosystem by introducing new projects. To participate in a project launch on TaoPad, investors allocate a portion of their $wTAO to the project's funding pool. The larger the amount of wTAOs a user commits, the more favorable the price they receive for the new project's tokens.
TaoBank: Lending Protocol
TaoBank is a lending protocol running on Ethereum and Arbitrum. It enables users to use wTAO as collateral to obtain interest-free loans, with the loan asset being $taoUSD, a stablecoin soft-pegged to the US dollar designed to maintain low volatility.
For TAO holders, TaoBank offers the opportunity to unlock liquidity in their holdings without having to sell, which is particularly attractive in a bull market. This functionality enables DeFi strategies such as loops, where users can leverage their loans to acquire additional TAO.
Interestingly, TaoBank was incubated by TaoPad and, in fact, was the first project to come out of that launchpad. This is a great example of two Bittensor-focused projects collaborating to create new utility for TAO.
Tao Accounting System (TAS)
TAS is a protocol that introduces token standards to the Bittensor network.
The first of many experimental token standards they launched was Tai Request for Comment (TRC-20), similar to the ERC-20 standard in the EVM ecosystem. TRC-20 established a unified set of rules for token creation, exchange, and governance on Bittensor, creating a standardized method for anyone to launch a TRC-20 token.
TAS operates as a ledger system that records TRC-20 token balances, stored on their recently registered subnet 31. Soon, they plan to activate miners and validators on their subnets to keep these records accurate.
Once the TAS subnet is launched, anyone can easily deploy and trade TRC-20 tokens on Bittensor.
Currently, users can only participate by purchasing $TAS tokens and staking them to earn yield and benefit from TAO emissions allocated to the TAS subnet.
Additionally, TAS provides a bridge for users to convert wTAO on Ethereum to tTAO (TAS’s encapsulated version of TAO), enabling them to transfer it to the Bittensor network or stake it for yield.
RivusDAO: Providing Liquid Staking for TAO
RivusDAO provides liquidity staking services for AI-centric blockchains, including Bittensor. It introduces a liquidity staking mechanism for TAO via $rsTAO, enabling users to stake their wTAO on Ethereum and receive $rsTAO in return for staking rewards.
The vision of $rsTAO is to be integrated in DeFi applications in the ecosystem. For example, rsTAO can be used as collateral on Aave and other lending platforms.
Additionally, RivusDAO is developing a bridge to transfer assets from selected blockchains to Bittensor.
Hyperliquid: Perpetual Contracts for TAO
Hyperliquid has become the leading perpetual swap DEX, with over $100 billion in total trading volume since launch. It provides an excellent user experience for trading perpetual swaps on-chain and has become the platform of choice for many traders.
In February, Hyperliquid expanded its product line by launching $TAO, providing users with the opportunity to trade on TAO with leverage up to 5x. This new addition increased the trading volume of TAO.
DeFi strategy around TAO in the MultiversX ecosystem
Last month, Hatom Labs launched several DeFi products around TAO in its MultiversX ecosystem, aiming to increase the utility of TAO and integrate it into DeFi platforms.
Key DeFi features of TAO in the MultiversX ecosystem include:
Liquidity Staking : Users can stake their wTAO and receive swTAO, enabling them to earn returns on their staked assets.
Lending : wTAO and swTAO can be lent out on various markets. Currently, the annualized lending yields for these tokens are 45% and 36%, respectively.
LP on xExchange : Users can provide wTAO in the wTAO/EGLD liquidity pool on xExchange.
LP on AshSwap : Users can provide wTAO in the wTAO/USDC liquidity pool on AshSwap.
Sturdy's AI DeFi subnet on Bittensor
Sturdy is a lending protocol running on Ethereum and Mode, as a two-layered money market with independent lending pairs and aggregated vaults. These vaults are designed to store multiple loan pairs with the goal of maximizing yields and securing the best interest rates.
Currently, aggregate vaults rely on manual intervention or simple algorithms to decide deposit allocations, which is both inefficient and centralized. To address these limitations, Sturdy launched a subnet on Bittensor.
On this subnet, miners can propose the best allocation strategy for the aggregated treasury and compete with each other to obtain TAO rewards. In this way, users can get better rates and the allocation process of aggregators becomes open and competitive.
While this is not exactly similar to the other DeFi opportunities in this article, it sets a precedent for other DeFi applications to leverage Bittensor to optimize their current products. Additionally, applications can leverage Sturdy’s subnets to optimize their operations without having to build their own subnets on Bittensor.
Conclusion
The Bittensor ecosystem is going through a period of growth and evolution, as evidenced by the clear increase in interest among notable entities registering subnets, and the growing user engagement on applications like Corcel.
The DeFi landscape in Bittensor is also expanding, although it is still in its early stages and currently only covers liquidity staking, bridges, and a few lending protocols. However, these are the foundation of any ecosystem.
Clear signs of registered subnets, increasing application engagement, and an expanding DeFi ecosystem all indicate that the Bittensor ecosystem is poised to become a truly vibrant and innovative place, bringing new perspectives and opportunities to the AI and cryptocurrency sectors.
