🚨 Analyzing Dynamic TAO: A Transformative Upgrade for Bittensor 🚨 Shortened Version below.

Thanks, @lovingthink. $TAO is great in the East! This article is great. Here is the link for more can translate to English:

🔗A shortened thread ⬇️

1/ Dynamic TAO (BIT001) is a network upgrade proposal from the Opentensor Foundation designed to reduce Root Validator power concentration and collusion by overhauling Bittensor’s staking and $TAO reward distribution.

2/ It introduces Subnet Tokens—each subnet issues its own token (commonly called $dTAO, identified by Greek letters like α, β, γ). These tokens are traded only via dedicated liquidity pools, following a Uniswap V2-style constant product formula (τ × α = K).

3/ Under the current system, validators stake $TAO without risking their principal, with about 75.94% of the 6.25M circulating $TAO staked and an average annual return of ~19.38%.

4/ With Dynamic TAO, staking becomes more of a “swap” operation—staking $TAO on a subnet means buying that subnet’s token. The exchange is governed by liquidity pools, where the pool only grows via emissions and initial subnet creation.

5/ In these liquidity pools, 50% of newly issued $dTAO is injected alongside the allocated $TAO, while the remaining 50% is distributed to validators, miners, and subnet owners per the subnet’s own incentive mechanism.

6/ Distribution of new $TAO isn’t determined by a few root validators anymore. Instead, using Yuma Consensus V2, the price of each Subnet Token is normalized with a softmax function to decide the release ratio—higher token prices earn more rewards.

7/ This change decentralizes power: each subnet now controls its own incentives rather than a fixed split (e.g., 41%-41%-18%). Validator support for early subnets could yield returns 10x or even dozens of times the principal.

8/ On the flip side, staking $TAO is no longer a guaranteed income. If you stake on a weak or slow subnet, your principal might suffer significant losses—staking becomes an active investment decision.

9/ In short, Dynamic TAO transforms staking from a passive yield model into a market-based swap where your rewards depend on the real-time value of subnet tokens.

10/ The end result? A fair, competitive environment where:  
• Early, high-quality subnets can stand out.  
• Validators, miners, and subnet owners must all work hard to attract stake.  
• The network’s growth and token emissions become truly market-driven.

11/ This is how early markets behaved—Bitcoin started at effectively zero, with astronomical slippage and low liquidity; Ethereum launched with modest prices and little exchange depth. dTAO is following that same pattern, meaning low liquidity and high volatility are normal in these early stages.

12/ The long-term potential is huge. As adoption increases, liquidity will improve, slippage will drop, and network effects will drive true value. If you’re here now, you’re early—and the future belongs to those who understand these dynamics.

Disclaimer: This thread is for informational purposes only and does not constitute financial advice. Always do your own research before making any investment decisions.

#Bittensor #dTAO #TAO #DecentralizedAI #Crypto #Blockchain #Web3 #CryptoRevolution #AIRevolution