Author: Leo Schwartz, Fortune

Translation: Felix, PANews

Amid the explosive growth of AI, investors have been searching for crypto projects that can connect with the AI industry. The decentralized AI marketplace Bittensor has attracted the attention of venture capital firms, with Polychain, Digital Money Group, and Dao5 purchasing TAO tokens worth hundreds of millions of dollars. The token powers a range of AI-related services in the protocol, such as model training and data storage.

While Bittensor's tokens were previously only obtainable through mining, secondary exchanges, and over-the-counter markets, Binance and Crypto.com have now listed TAO for trading. This marks an important step forward for this relatively unknown project.

Jacob Steeves, the founder of Bittensor, stated in an interview with Fortune magazine that the rise of centralized tools launched by companies like OpenAI, Google, and Meta validates the effectiveness of his project. Despite developing the project since 2015, Bittensor vehemently denies accusations of capitalizing on the AI hype.

Chart: BEN WEISS • Source: COINGECKO API

VC Support

Bittensor is not as well-known as Worldcoin, supported by Sam Altman. Worldcoin aims to develop a new form of identity verification using biometric technology. Worldcoin has raised over $200 million.

Nevertheless, Bittensor has still attracted some investors. According to sources, the venture capital firm Polychain, founded by early Coinbase employee Olaf Carlson-Wee, incubated Bittensor in 2019 and holds approximately $200 million worth of Bittensor tokens.

In an interview with Fortune magazine, Carlson-Wee stated, "The incentive mechanism used by Bittensor is conceptually similar to Bitcoin mining, but it is not building a payment network, it is building an open-source public artificial intelligence." However, he declined to disclose specific details of Polychain's investment. "This is an entirely new use case for blockchain."

Sources also revealed that the investment fund Dao5, founded by Polychain alumnus Tekin Salimi, holds approximately $50 million worth of TAO and is an early supporter of the Bittensor ecosystem.

Additionally, sources disclosed that Digital Currency Group, founded by Barry Silbert, is another investor, holding approximately $100 million worth of TAO. However, a spokesperson for DCG declined to comment. In a 2021 Business Insider article, DCG investor Matthew Beck listed Bittensor as one of the 53 most promising crypto startups.

The substantial support from investors validates Bittensor's rise. The Bittensor network was launched in 2021, established before the debut of ChatGPT in November 2022, which raised public awareness of generative AI.

Today, the intersection of cryptocurrency and artificial intelligence is one of the hottest speculative fields, where token prices like Worldcoin fluctuate with AI news. In late March, three crypto AI projects, SingularityNET, Fetch.ai, and Ocean Protocol, announced the creation of a decentralized AI alliance and merged their tokens FET, AGIX, and OCEAN into ASI.

Although some on X platform refer to TAO as a meme coin riding the AI hype, its price has surged by over 1000% in less than a year. However, Steeves asserts that Bittensor's track record demonstrates its efforts to build a company that can compete with OpenAI and Google. It is worth noting that Steeves previously worked as an engineer at Google.

Steeves stated, "People will come and go, and if they buy because it's a meme coin, they won't come back." "That's fine because we want people to truly understand what we are doing."

Decentralized AI

Steeves mentioned that he first conceived the idea of creating Bittensor in 2015 while researching the Bitcoin network. Bitcoin, created by the pseudonymous Satoshi Nakamoto, utilizes an innovative technology called mining to record and process transactions, creating a payment platform that does not require the involvement of individuals or institutions. The system relies on code and a complex set of participants, from developers to validators determining the direction of the protocol. "How do we create a supercomputer larger than any centralized entity like a government or a company?" "The answer is the incentive mechanism used by Bitcoin."

The emergence of Bittensor aims to reutilize Bitcoin's mechanism to meet the extensive functionalities required in the emerging AI field, including data storage and training machine learning models. Many crypto projects "pre-mine" tokens, create tokens before the project's release, or distribute held tokens to early supporters through tools like SAFT. Steeves chose the pure Bitcoin route, where participants can only obtain TAO tokens through mining, similar to Satoshi Nakamoto's design.

Despite sharing Bitcoin's DNA, Bittensor's underlying system is much more complex. In contrast to Bitcoin's simple transaction model, the Bittensor network offers different types of functionalities, where miners compete based on the functionalities they provide and are incentivized by obtaining TAO. These various tools are distributed across 32 "subnets" or specialized networks, providing services such as data storage, accessing other AI chatbots, and fetching and pricing oracles.

If you find this too esoteric, you are not alone—Bittensor's complex design has been a challenge in its growth process. Difficulty in explaining to the public has fueled the market's perception of it as a "meme coin." Nevertheless, the project has a passionate community of stakeholders, from miners and validators to projects built on Bittensor. Steeves specifically mentioned the AI company Corcel, which created products, including chatbots powered by Bittensor, as an early real-world application example in the protocol.

In addition to support from venture capital firms like Polychain, other well-known companies also support Bittensor by acting as validators, guiding the development of subnets through their holdings of TAO. DCG's Bitcoin mining giant Foundry operates a subnet, incentivizing miners to predict the S&P 500 index during trading hours.

Is Bittensor Competitive?

With Bittensor's rapid development, its most significant breakthrough to date may be its recent listing on Binance, enabling TAO token trading. Steeves pointed out that the annualized trading volume of TAO on the first day of listing on Binance exceeded the GDP of Peru, where he had lived for the past four years.

Nevertheless, Steeves insists that the project's ambition far exceeds the price trend of its tokens. Due to its intricate subnet system and related projects, the network will continue to evolve dynamically based on demand and the balance between miners and validators as they strive to create equilibrium through the incentive mechanism.

Steeves stated in the interview, "This is an ongoing turmoil—a battle between light and darkness." "This is why we like the Taoist symbol of the Tai Chi diagram."

As companies like OpenAI continue to dominate, Bittensor will provide an answer to what Steeves perceives as the real threat of artificial intelligence. Steeves stated, "The real problem is not AI ruling the world, but what is being marketed." "The power of humanity and the world is so concentrated, and we are all just slaves to these big companies."

Related Reading: Surging Over 10 Times in Six Months, Is Bittensor the Ethereum of the AI Industry or a New Meme Factory?

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