Bittensor (TAO): the synergy of blockchain and machine learning

Blockchain developers are increasingly combining decentralized network technologies and artificial intelligence — both are critical trends in the development of the new generation of the Web3 Internet.

What is Bittensor, and what problem does the project solve?

Bittensor is an open blockchain protocol that aims to create a decentralized network for collaborative machine learning. The Bittensor protocol allows shared resources to create custom AI solutions, which can then be transformed into various IT products.

The project was created by the non-profit organization OpenTensor. The Bittensor protocol was originally a Polkadot parachain, which are separate custom blockchains linked to the main or parent blockchain of the Polkadot network.

However, in March 2023, the OpenTensor team launched its sovereign blockchain to become less dependent on the Polkadot ecosystem. The new blockchain network, named Nakamoto, was modeled after Bitcoin's first decentralized protocol.

The surge of global interest in artificial intelligence technology that began in 2022 following the release of the world-famous chatbot ChatGPT was a powerful impetus for the development of AI-based decentralized platforms like Bittensor.

However, even many proponents of AI-based solutions were concerned that the technology was in the hands of a narrow set of individuals and essentially wholly centralized. Google, Microsoft, and even Elon Musk's xAI are all developing their own AI solutions that they control themselves.

Centralization leads to two serious problems:

1. Access limitation. The average user doesn't have access to new features created by developers, let alone access to machine learning models to develop and test their own effective AI solutions.
2. Isolationism. Machine learning models are isolated from each other, resulting in competition instead of synergy that promotes inclusive development and prosperity.

The Bittensor protocol solves both of these problems by, on the one hand, providing a widely accessible technology and, on the other hand, a single componentized decentralized environment in which different AI models can interact with each other, enabling the development of more advanced AI solutions.

How does Bittensor work?

The Bittensor blockchain consists of subnets, each a self-contained mini-ecosystem for machine learning in a specific area, such as text translation, image generation, content creation, data collection and analysis, or other areas.

Subnetworks are used to build and run their decentralized applications in a particular direction. For example, the Bittensor marketplace already has its analogs of the popular ChatGPT, such as ChatNI and Chattensor, as well as an analog of Midjourney's image generation bot ReplyTensor.

Like the Bitcoin network, the Bittensor blockchain network is powered by miners — nodes that mine new blocks, confirm transactions, and maintain the decentralized network's security. In the Bittensor blockchain, miners essentially act as servers that, in addition to mining blocks, transmit and respond to users' requests to subnets.

However, a key difference between Bitcoin and other popular blockchain networks is that Bittensor also has validators that check and evaluate miners' work. This approach reduces the risk of network centralization.

TAO token

TAO is the native cryptocurrency of the Bittensor network, designed to reward miners and validators. In addition to the native cryptocurrency, the asset is an ERC-20 and a wrapped WTAO token.

Due to TAO's presence in other networks, the cryptocurrency's application possibilities are greatly expanded: users can use the full functionality of the DeFi marketplace, trade tokens in a decentralized environment, provide liquidity, and use them for lending.

TAO is among the top 40 cryptocurrencies in capitalization, which was over $3.7 billion as of March 2024. It is ranked fourth among artificial intelligence-based protocols after NEAR Protocol, Render, and The Graph.

Like bitcoin, TAO cryptocurrency has a limited issuance (maximum number of assets) of 21 million. As of March 2024, only a little over 30% — 6.49 million TAO — were circulating on the market.

Like the Bitcoin protocol, Bittensor has a built-in deflationary mechanism known as halving. However, unlike Bitcoin, the reduction in rewards is determined not by block number but by the amount of TAO cryptocurrency mined. Nevertheless, the frequency of halving remains roughly the same — about once every four years.

Bittensor's prospects

Artificial intelligence and machine learning technologies are a very young but promising market. With the emergence of ChatGPT, this market began to develop rapidly. In March 2024, the capitalization of all AI-based crypto projects exceeded $43 billion.

According to Statista's 2024 data, the global AI market is estimated at ~$298 billion and is expected to reach $1.84 trillion by 2030. It is evident that decentralized AI solutions will occupy a significant market share, offering distinct advantages over centralized products, such as anti-censorship, accessibility, and interoperability. It turns out that the market share of decentralized AI solutions already accounts for more than 14% of the entire global sector, and it is likely to grow in the future.

Bittensor is already one of the leading crypto projects in this direction, so there is no reason to believe that something will change dramatically shortly. This is confirmed by statistics: only since November 2023, the capitalization of Bittensor has grown almost 3 times.