Does Crypto's Top AI Project Even Work?

AI x Crypto is the talk of the town. It’s one of the hottest investment themes of this bull market.

Bittensor (TAO) is one of the leading projects of the AI narrative, both in terms of market cap and mindshare. But recently, there’s been a bit of a stir on Crypto Twitter about its utility, with some even calling it vaporware and a pointless exercise in decentralization.

But hey, there are always two sides to every coin. While critics have been vocal about their doubts concerning Bittensor and its design, we're focusing on the brighter side today.

There’s a lot of cool things happening in the Bittensor ecosystem. We're going to highlight the most impressive subnets and take a look at the DeFi projects that are growing with Bittensor and TAO.

Intro to Bittensor

Bittensor aims to democratize the process of building AI-powered 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 subnets, which are specialized protocols that use this collective intelligence to power all sorts of AI projects.

Right now, there are 32 subnets in the Bittensor ecosystem, each focused on a unique use-case. Think of voice-to-text for apps, image generation, AI-powered search engine, advanced trading strategies, and even fine-tuning Large Language Models (LLMs) for other use-cases. The possibilities are endless.

For instance, some insights in this article are from Corcel, a user-friendly tool from Subnet 18 in the Bittensor ecosystem, also known as the Cortex.t Subnet. It works similarly to chatGPT in terms of functionality, but it uses the collective intelligence of Bittensor network’s machine learning models to deliver the best responses to user queries.

Now, let's check out some of the standout subnets in the Bittensor ecosystem and their functions:

Subnet 6 — Nous Fine-tuning 

Subnet 6, run by the reputable Nous Research team, stands out in the Bittensor ecosystem. This subnet specializes in fine-tuning Large Language Models (LLMs) with synthetic data from Corcel in Subnet 18.

Every miner in Subnet 6 gets the same synthetic data daily and uses it to fine-tune LLMs for specific results. They employ their own strategies and techniques to achieve the best performance on this data.

The key competition element comes in with the TAO rewards. Miners whose LLMs have a lower "head-to-head loss" – meaning they make fewer errors – earn a larger slice of TAO rewards. This incentivizes everyone to put their best foot forward and continuously improve their models to climb up the fine-tuning subnet leaderboard.

This approach with fresh synthetic data to train LLMs is an improvement over traditional methods that rely on static datasets, as constantly changing synthetic data forces LLMs to adapt and learn continuously, making them more adaptable to real-world scenarios.

Subnet 8 — Proprietary Trading Network

Subnet 8, known as the Proprietary Trading Network (PTN) by τaoshi, is a competitive playground where top algo traders deploy quantitative models to analyze markets and forecast price movements of assets like BTC and TAO. The best algorithms, based on their profitability, win rewards in TAO.

Miners providing valuable trading signals are rewarded with TAO, validators receive 100% of the revenue from trading signal sales, and users gain access to insights that can help them potentially outperform the market.

The fact that SN8 generates revenue is an important milestone for the Bittensor community, demonstrating that viable businesses can be built on Bittensor. This signal can draw new talent, users, miners, and validators, catalyzing the growth and development of the entire ecosystem.

Recently Registered Subnets on Bittensor

As Bittensor's popularity has increased, there's been a wave of interest from reputable teams across the ecosystem to register their own subnets on Bittensor. Notable examples include:

• Subnet 3, MyShell TTS — Dedicated to democratizing access to top-tier Text-to-Speech (TTS) models.
• Subnet 5, Open Kaito —  Committed to making Web3 information universally accessible, Kaito aims to dismantle barriers, enabling collective efforts in organizing and interpreting the vast data of Web3.
• Subnet 30, WomboAI — Home to WOMBO, an immensely popular app (with over 100 million downloads) that empowers creativity through AI, transforming simple ideas into animated pictures or generating art from a few words.

Moreover, there are over 200 subnets currently in testnet, waiting to register on mainnet, each with unique objectives and reward structures.

Since the number of subnets in Bittensor ecosystem are capped at 32 at the moment, the competition is intense and the lowest-performing subnet is replaced by a new one after a one-week immunity period. This competition will only increase as more projects vie to build a subnet on top of Bittensor. It’ll be fascinating to see what the subnet landscape changes in the upcoming quarters. 

Having looked at the subnets on Bittensor, let’s move to the next part 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 was non-existent, yet now it has more than ten applications providing financial products centered around Bittensor and its native token, TAO.

Let’s look into some of these applications:

Tensorplex Stake (stTAO)

Tensorplex offers a product lineup focused on decentralized AI, 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 spaces, and news articles. Additionally, they are active miners on Bittensor subnets.

One of their offerings, Tensorplex Stake, launched on Ethereum in February 2024, enabling users to participate in staking on the Bittensor network and earn yield (currently exceeding 16%).

Here’s how it works:

• Tensorplex Stake allows users to stake their wTAO, and receive stTAO in return. stTAO represents your staked TAO and tracks the staking rewards. 
• The underlying wTAO is bridged to the Bittensor network and staked with validators, where it earns a yield. This yield is given back to the users on Ethereum. 

This approach offers a convenient way for users on Ethereum to explore yield-earning opportunities with TAO without having to bridge their assets to Bittensor.

TaoPad — Building DeFi for TAO

TaoPad stands as the first Bittensor-focused launchpad, aiming to enhance the value of the TAO token and bolster the broader Bittensor network.

TaoPad’s launchpad enables new projects, especially those focused on decentralized AI, to get kickstarted with a token sale.

TAO is the foundation that TaoPad’s design builds upon, and here's how it leverages TAO to generate utility:

• Rewards System — TaoPad distributes rewards to its holders in the form of wTAO.
• Launchpad Participation — The TaoPad Launchpad allows users to participate in new project launches by using wTAO. This creates a use case for wTAO and fosters the growth of the Tao ecosystem by bringing new projects on board. To participate in a project's launch on TaoPad, investors allocate a portion of their $wTAO to the project's funding pool. The greater the amount of wTAO committed by a user, the more favorable the pricing they receive for the new project's tokens.

TaoBank

TaoBank is a lending and borrowing protocol live on Ethereum and Arbitrum. It enables users to use wTAO as collateral to secure interest-free loans in $taoUSD, a stablecoin with a soft peg to the US dollar, designed to maintain low volatility.

For TAO holders, TaoBank offers the chance to unlock liquidity from their holdings without selling, an especially attractive feature during a bull market. This functionality allows for DeFi strategies, such as looping, where users can leverage their loans to acquire additional TAO.

Interestingly, TaoBank was incubated by TaoPad, and in fact, it was the first project to go live on its launchpad. It’s a great example of two Bittensor-focused projects working together, creating 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 that they’ve launched is Tao Request for Comment (TRC-20), akin to the ERC-20 standard in the EVM ecosystem. TRC-20 establishes a uniform set of rules for token creation, exchange, and governance on Bittensor, creating a standardized approach for anyone to launch TRC-20 tokens.

TAS operates as a ledger system that records TRC-20 token balances, stored on Subnet 31, which they have recently registered. Soon, they plan to activate miners and validators on their subnet to maintain the accuracy of these records. 

Once the TAS subnet is live, anyone will be able to deploy and trade TRC-20 tokens on Bittensor easily.

At the moment, users can only participate by buying $TAS tokens and stake them to earn yield, benefiting from TAO emissions allocated to the TAS subnet.

Additionally, TAS provides a bridge for users to convert wTAO on Ethereum into tTAO (TAS's wrapped TAO version), enabling them to transfer it onto the Bittensor network or stake it for yield.

RivusDAO — Liquid Staking for TAO

RivusDAO provides liquid staking services tailored for AI-centric blockchains, including Bittensor. It introduces a liquid staking mechanism for TAO via $rsTAO, enabling users to stake their wTAO on Ethereum and in return, receive $rsTAO to accrue staking rewards.

The vision for $rsTAO is to integrate it across DeFi apps in the ecosystem. For instance, rsTAO could be used as collateral on Aave and other lending/borrowing platforms.

Additionally, RivusDAO is developing a bridge to facilitate the transfer of assets from select blockchains to Bittensor.

TAO perps on Hyperliquid

Hyperliquid has established itself as a leading perpetual DEX, boasting over $100 billion in total trading volume since launch. It offers an exceptional user experience for trading perps onchain and has become a go-to platform for many traders.

In February, Hyperliquid expanded its offerings by listing $TAO, providing users with the opportunity to take long or short positions on TAO with leverage of up to 5x. This addition has increased the trading volumes of TAO.

DeFi Strategies around TAO in the MultiversX Ecosystem

Last month, Hatom Labs introduced several DeFi products around TAO within their MultiversX ecosystem, aiming to boost TAO's utility and integration into DeFi platforms.

Key DeFi features for TAO in the MultiversX ecosystem include:

• Liquid staking — Users can stake their wTAO and receive swTAO, enabling them to earn yield on their staked assets.
• Lending — wTAO and swTAO can be lent out in various markets. The current APY for lending these tokens is an impressive 45% for wTAO and 36% for swTAO.
• LP on xExchange — Users can supply wTAO in the wTAO / EGLD liquidity pools on xExchange.
• LP on AshSwap — Users can supply wTAO in the wTAO / USDC liquidity pools on AshSwap.

Sturdy’s AI DeFi Subnet on Bittensor

Sturdy, a lending protocol on Ethereum and Mode, operates as a money market with a two-tier structure featuring isolated lending pairs and aggregator vaults. These vaults are designed to deposit across multiple lending pairs, aiming to maximize yields and secure the most favorable rates.

Currently, aggregator vaults rely on manual intervention or simple algorithms for deciding deposit allocations, a method that's both inefficient and centralized. To address these limitations, Sturdy is launching a subnet on Bittensor.

On this subnet, miners can come up with the best allocation strategies for the aggregator vaults and compete with each other to receive TAO rewards. This way, users get better rates and the process of allocation by aggregators also becomes open and competitive.

While this is not exactly a DeFi opportunity similar to others on the list, it sets a precedent for other DeFi apps to leverage Bittensor for optimizing their current offerings. Moreover, applications can tap into Sturdy’s subnet to optimize their operations without the need to establish their own subnet on Bittensor.

Closing Thoughts

The Bittensor ecosystem is experiencing a period of growth and evolution. There's a noticeable uptick in interest from reputable entities looking to register subnets, and user engagement is on the rise with apps like Corcel. 

The DeFi landscape within Bittensor is also expanding, albeit in its nascent stages, currently featuring liquid staking, bridges, and a handful of lending and borrowing protocols. Yet, these are the foundational blocks of any ecosystem.

The evident signs of adoption, increasing DeFi opportunities, and a growing interest in subnet registration suggest that Bittensor might just be more than vaporware. 

Share your perspective with us — do you view Bittensor as mere vaporware, or do you believe it holds genuine promise?