Issues with the Bittensor Project and Concerns about Its Future Development

Although Bittensor claims to be a "fair mining" project, its underlying Subtensor is neither a PoW nor a PoS public chain, but rather a single chain managed by the foundation, with an opaque mechanism. Its governance structure consists of three foundation employees and 12 validator nodes, all of whom are insiders or stakeholders.

From the network activation in January 2021 to the launch of the testnet in October 2023, 5.38 million TAO have been mined. However, during this period, the distribution rules of the tokens and their final flow are not clear, and they may have been divided among insiders. Based on the current issuance of 8.61 million, at least 62.5% of the TAO is held by insiders. Including the validation nodes operated by the foundation and investors, the actual proportion may be even higher.

The staking rate of TAO has always been maintained between 70% and 90%. Based on a market capitalization of 2 billion USD, at least 1.4 billion USD of TAO is not in circulation, resulting in an actual market value of only 600 million USD, while the fully diluted market value reaches 5 billion USD, making it a typical low circulation and high market value project.

The dTAO upgrade seems to provide an exit opportunity for early participants. By issuing subnet tokens, TAO becomes the base currency, with its value supported by multiple subnets. The high appreciation of subnet tokens creates buying pressure for TAO, shielding validating nodes from sell-offs. However, the closed ecosystem and market environment have not attracted sufficient external liquidity, and the increase in the number of subnets has also diluted overall liquidity.

Since the launch of dTAO, approximately 300,000 TAO( worth 70 million USD) have flowed out from the root network and may have been liquidated on centralized exchanges. This indicates that large holders are withdrawing.

The dTAO model is unfavorable for subnet project parties, undermining the original alignment of interests. Subnet tokens lack effective use and liquidity, making it difficult for project parties to formulate tokenomics. Verification nodes become a privileged class, continuously profiting, while project parties and miners need to subsidize the ecosystem instead. This model could lead to project parties leaving the platform.

Overall, Bittensor faces multiple challenges such as the collapse of its economic model, liquidity exhaustion, and the differentiation of interests among core participants, raising significant concerns about its future development.