dTAO, demystified: Everything you were afraid to ask...

dTAO's here, but so too are a few lingering doubts. From the simple to the sophisticated, these FAQs cover a wide range of questions to help you prepare for the coming change.

This is it: dTAO drops this week. With so much change coming, the Bittensor ecosystem is teeming with questions.

Rather than wait and see, we’ve compiled answers to the most common questions around dTAO, from staking to setting weights, liquidity pools to long-term prospects.

That ‘this-is-probably-dumb-but’ question that you didn’t want to ask out loud? You’re likely to find it here. And if it’s not, join our Discord server - our community channels are ready to answer.

Finally, and as ever: none of this constitutes investment advice. It’s only intended to help explain how dTAO will work, so that you can navigate your own way through.

What happens to my staked TAO when dTAO launches?

Your staked TAO will remain safe- it’ll get migrated to the Root Network.

However, given that the APY is likely to change, and that dTAO is expected to cause price volatility, you might want to consider your staking options regardless. And as subnets begin offering Alpha, better rates will quickly become available.

How does staking work in dTAO?

There are two ways to stake.

The first is to Root Network (Subnet 0), which works much like staking does now: you stake TAO for an APY, and regain your TAO when you unstake.

The second is staking to a subnet’s liquidity pool. Here, your TAO is swapped for the subnet’s Alpha token - for a more attractive APY than staking TAO on Root. When you unstake, the Alpha is swapped back for TAO, at whatever the exchange rate between the two happens to be at that point.

The subnet Alpha’s price movement should reflect that subnet’s performance, its perception on the ecosystem, and ultimately its ability to deliver on its promises. Subnets that do well (or are perceived to be doing well) should see their Alpha token price rise relative to other subnets - rewarding the stakers who backed the subnet.

dTAO exposes individual subnets to market dynamics - forcing them to improve their offer, and rewarding those who stake to them.

How are emissions set now?

TAO emissions are determined by the price of each alpha token. The higher the price, the more TAO is get released.

So miners, validators, and subnet owners no longer earn TAO?

No, miners and validators will no longer earn TAO for their activities. They’ll earn the subnet’s alpha token that they’re working on.

However, when new alpha tokens are released (via emissions), new TAO will get released, too. Instead of it going to a specific participant, it will go to the liquidity pool, so that it remains balanced.

Is there really an ‘oligarchic voting system’ in the original version of Bittensor?

Validators, high-profile investors, and trusted members of the Bittensor community hold senate-style votes on certain issues. These individuals set emissions on different subnets. While the voting aspect is democratic on some level, it favours the viewpoints of a handful of participants.

dTAO aims to replace this by no longer having these high-powered individuals set emissions on subnets, and instead emissions will be determined by the market price of each subnet’s specific tokens (referred to as alpha tokens).

Is there any scarcity to alpha tokens?

Alpha is emitted with its own halvening and, like TAO, has a max supply of 21M.

TAO itself has scarcity, as there’s a still fixed supply (21 million TAO). Alpha tokens cannot be released if there is no more TAO. This means there is a type of implicit, inherited scarcity.

So how do you get TAO now?

You can still, of course, buy TAO on a typical trading platform.

By staking to the root network, your APY will be denominated in TAO (just as it has been denominated in the legacy pre-dTAO system). If you have already swapped your TAO for alpha tokens, you can swap them back TAO using a specific subnet’s liquidity pool.

Can you swap alpha tokens for other alpha tokens?

It’s theoretically possible, but at present liquidity pools are only for specific subnet tokens and TAO. Each subnet’s Alpha must be swapped for TAO, before you can then swap that TAO for a different Alpha token in another subnet’s liquidity pool.

However, there may be a future where a DEX (decentralized exchange) exists which lets you swap alpha for alpha. With Bittensor’s recent connection to EVM, it’s possible that a DEX serving subnet-to-subnet swaps will be built.

Are alpha tokens governance tokens?

Not inherently. They don’t hold voting power that you might expect in a decentralized autonomous organization (DAO).

But it’s theoretically possible for a subnet to treat them as governance tokens, and set up smart contracts via EVM that allow for voting to occur on pressing matters - giving their community greater cause to hold their Alpha rather than sell.

Also, while Alpha doesn’t necessarily offer any official governance powers, wallets that accumulate a subnet’s Alpha will gain an outsized vote in weight setting - effectively giving those Alpha holders more sway.

What happens if a liquidity pool gets hacked and one side gets drained? Does the subnet die?

As there’s no known method of extracting from only one side, this is a hypothetical scenario. But it’s an interesting thought experiment.

If the TAO gets drained, then the subnet becomes worthless as alpha cannot be exchanged. The subnet might not die, but it might be broken for some time.

However, if the alpha tokens get drained, then the price of alpha could potentially skyrocket, as it would be harder to obtain, meaning supply couldn’t meet demand. But it would mean that no new users can enter the subnet.

A solution could be for subnet owners to hold stores of alpha which they can inject into the liquidity pools if alpha gets drained. They could also hold some TAO, in case the same situation happened.

If an exploit happened on a specific liquidity pool, would Bittensor be responsible?

Yes. Liquidity pools are being made automatically when dTAO launches. This means Bittensor (or the Opentensor Foundation) would be responsible for them. While liquidity pools are specific to subnets, subnet owners are not the ones making them. If an exploit occurs, it’s on OTF to fix. But we cannot know for sure what they would do if this occurred?

How might switching to dTAO affect the long-term price of TAO?

While there is likely to be significant volatility around launch, dTAO should theoretically make Bittensor more attractive.

By removing the centralised emissions system, it eliminates one of the core challenges to the protocol’s claims to decentralization.

By exposing subnets to market dynamics, it should ensure that the subnets delivering real value rise to the top, while weeding out those lacking utility.

And by giving TAO holders the chance to back the specific projects they actually believe in, dTAO should encourage a greater sense of ownership, engagement, and usage across Bittensor.

Together, these benefits could create a powerful virtuous cycle, propelling Bittensor forward and proving to potential investors that it’s the best protocol for DeAI’s future.

To discuss these questions in more depth, join our Discord and Telegram communities.