Bittensor Overhauls TAO Emissions, Mandating 0% for Subnets with Negative Net Inflows

Bittensor has announced a significant upgrade to its TAO token emission mechanism and introduced a new "Root Claim" feature, fundamentally altering how subnets are incentivized on its decentralized network. The changes, detailed in a recent announcement by Learn Bittensor, aim to address inefficiencies in the previous system by prioritizing subnets that demonstrate genuine growth through net TAO inflows.

Under the updated protocol, TAO emissions are no longer determined by Exponential Moving Average (EMA) prices. Instead, the system now uses the "net TAO inflow" – the sum of TAO staked minus TAO unstaked – to decide which subnets receive incentives. This net inflow is smoothed over an 87-day Exponential Moving Average to prevent temporary volatility, ensuring that "subnets with stronger, more sustainable net inflows will get larger emission shares," as stated in the announcement.

The previous price-based emission model presented several challenges. According to Learn Bittensor, it "made TAO emissions biased by the liquidity of a subnet's pool" and allowed "subnets with high ALPHA prices and higher liquidity [to be] able to easily absorb negative net inflows." This mechanism also "reinforced the subnet's current EMA price (fixating them)," hindering organic growth and efficient resource allocation within the network.

In conjunction with the emission overhaul, Bittensor has introduced "Root Claim," a new feature for root stakers. This allows them to choose how they receive their dividends. Stakers can either "Swap" their ALPHA tokens for TAO, as was the default before, or "Keep" their ALPHA tokens on the subnets they are earning from. The "Keep" option is designed to support subnets by reducing sell pressure on ALPHA, offering exposure without risking staked TAO.

The Root Claim feature is expected to foster more equitable price discovery and empower stakers with greater control over their investments. By allowing stakers to hold ALPHA, it reduces the automatic sell pressure that previously impacted the market. This enables individual stakers to "support subnets by reducing their sell pressure on ALPHA," promoting a more engaged and selective community.

These strategic updates are part of Bittensor's broader effort to enhance the network's scalability and optimize its economic model. By directly rewarding subnets that effectively sequester TAO, the protocol aims to incentivize active development and value creation, ensuring that emissions are directed towards projects demonstrating real utility and sustained growth.