Author: Thinking Weird

The dTAO upgrade of Bittensor, long awaited, is finally set to launch on February 14. What exactly is the dTAO upgrade? @HelloLydia13's article "Five-Minute Quick Guide to Bittensor" provides insights.

For retail investors, the most significant change is that all 64 existing subnet projects on Bittensor can now issue their own tokens. This means that Bittensor truly has its own ecosystem. This is undoubtedly a huge benefit for $TAO.

The significance of this event for Bittensor is roughly equivalent to the launch of the AI Agent LaunchPad by Virtuals Protocol last October. Following that, $VIRTUAL surged over 50 times.

The dTAO upgrade essentially introduces a market competition mechanism to Bittensor's Yuma consensus, fundamentally decentralizing the value discovery of subnet projects.

The previous $TAO distribution model, determined by votes from the root network, will now change to a distribution based on the value ratio of $TAO and dTAO tokens in each subnet's dTAO token pool. $TAO holders can "vote with their feet" by purchasing subnet tokens to decide which subnets should receive more $TAO rewards.

The subnet represented by the dTAO token that has higher market demand will receive a larger share of $TAO emissions. Since holders of dTAO tokens will also benefit from this, it will, in turn, promote market demand for that dTAO token, creating a positive feedback loop for its value. Therefore, if you want to share in the dividends of Bittensor's ecosystem rise, a more exciting strategy than simply holding $TAO is to stake $TAO to obtain different subnet dTAO tokens (here, "staking" actually means using $TAO to purchase the corresponding subnet tokens).

Since the staking has shifted to trading subnet tokens, the staking returns on $TAO are no longer guaranteed profits. However, if you pick a promising subnet token, you can achieve excess returns. This will attract a lot of hot money and speculators looking to arbitrage into Bittensor.

As for how to identify promising subnet tokens, you can check which subnets are receiving more $TAO emissions.

Derived investment opportunities also include trading DEX projects that provide dTAO trading platforms, including @taodotbot and @HotKeySwap, both of which are established projects that have already issued tokens. The market cap of $HOTKEY is only $5 million, seemingly just 1/7 of $TAOBOT. Meanwhile, the established TAO liquidity staking protocol @TensorplexLabs is also planning to launch its own dTAO trading platform @BackpropFinance. However, the official Twitter account has not posted much content yet; you can check out this related introduction: https://x.com/TensorplexLabs/status/1888942127520075920

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