We’ve been spending more time in the Bittensor ecosystem lately. At this point, it’s literally foolish for anyone to ignore.

Our fast idea:

Bittensor is the most compelling place to watch Crypto x AI unfold in the near term.

Especially because it’s a time of major change for the ecosystem. Winds of change always bring huge opportunities for the observant.

Bittensor was built when no one cared. It launched in 2021, before Crypto x AI was a thing. That gave it room to grow without distraction. No speculative hype. No VC incentives shaping the roadmap. Just a small group of people aligned around a shared goal.

The TAO token launched fairly. No early allocations or fundraising rounds. That structure matters. Early contributors not only participated: they owned it. Some reinvested. Some built subnets. Some just did their part by shilling on Twitter.

In short, it’s a cult.

There’s weird stuff, sure. But also real conviction. There’s actual activity on the subnets. This is where attention is concentrating, and that alone creates second-order effects.

Of all the crypto-native AI projects we’ve seen, Bittensor is the most structurally aligned with Web3’s first principles: fair launch, open participation, and live incentives for coordination.

Bittensor, the Internet of AI?

Some call TAO the Bitcoin of AI.

Others say it’s the internet of AI, like this investor deck slide above from Fundstrat Capital (a TradFi asset manager and research firm).

The idea is that it acts as a base layer, an index across a growing set of subnets working on everything from training to inference.

There’s some truth in that. But if we’re being frank, there’s also a lot of narrative dressing.

We’re not here to repeat slogans. What we’re trying to do at Chain of Thought is offer a clearer look at how the system actually works, so you can make your own judgment and position accordingly.

The New Rules: dTAO and the Market-Driven Bittensor

The way Bittensor operates has fundamentally changed in 2025.

With the launch of dTAO, validator gatekeeping is gone. Instead, capital now flows to subnets based on real, market-driven demand. The old playbook no longer applies.

The Old System:

Under the previous system, emissions were routed through validator votes on Subnet 0—the “Root.” Validators were supposed to evaluate AI outputs from different subnets and allocate TAO based on quality. In theory, this was a meritocracy. In practice, it broke down fast.

A few problems kept coming up:

• A small validator set couldn’t meaningfully assess dozens of fast-evolving subnets. Most of the time, they defaulted to what they knew.

• Rewards kept flowing to the earliest, best-networked subnets. New projects had a hard time getting noticed.

• Some validators were running their own subnets. That created obvious conflicts. Emissions could be steered through personal incentives, backchannels, or informal side deals.

• Regular TAO holders had no say in how emissions were distributed.

The system was slowing down innovation, concentrating influence, and eroding trust. A reset was inevitable.

How dTAO Changes the Game

Without getting into the math, here’s the core shift:

dTAO hands the decision over to the market. Subnets now have to earn emissions by proving demand.

Each subnet issues its own token, called Alpha. Miners, validators, and operators are paid in Alpha instead of TAO.

Every Alpha token is paired with TAO in a liquidity pool, similar to a Uniswap AMM. If you want to earn emissions, you stake TAO into that pool to buy Alpha: essentially swapping out your TAO. A high Alpha price signals investor demand. A low one signals weakness.

TAO emissions are distributed based on those prices. A high Alpha price means more emissions. Low price means less. To avoid short-term price manipulation, emissions adjust gradually using a rolling average of Alpha prices.

This removes the need for centralized validator decisions. Subnets now have to convince TAO holders that their token holds value.

Some critics argue that dTAO adds unnecessary complexity, and we can see their view. But at its core, it solves a crucial problem: aligning incentives. If subnet owners or miners sell their alpha tokens, their emissions decrease.

563 had a good thread on how different participants should react to dTAO, which is still very relevant today:

Builders, miners, validators, and stakers are now all pushing toward the same goal—creating subnets that deliver real utility, attract real users, and sustain real economic value.

Navigating the New Landscape: Takeaways for Investors & Founders

As an investor, owning TAO still matters, but it’s no longer enough. You have to go deeper, into the subnets.

• Which ones are solving real problems?

• Who’s building with long-term conviction?

• And most importantly, which subnets are creating demand for their Alpha tokens?

Evaluating fundamentals is now essential. Alpha tokens give you leveraged exposure to subnet success. But that leverage cuts both ways. Inflation is high. Liquidity is thin. Volatility is baked in. Some subnets like Chutes (SN64), Targon (SN4), and TAO Hash (SN14) are already at $1B+ fully diluted valuations.

So, how do you navigate this? With patience and sharp analysis.

Time spent understanding subnets > trying to time the buy

Ultimately, the “real Alpha” lies in spotting undervalued subnets before the market catches on. Look for subnets with credible teams and signs of early traction.

We’ve included a list of tools we use at the end of the article to help you with that search.

The current state of dTAO

We track several metrics to get a clear sense of how the dTAO ecosystem is evolving. All of this data is public and updated live at tao.app (really good data website)