Rayon Labs: The Subnet Trifecta

Alphas Ascending

Since dynamic TAO was launched in mid-February, the top ten subnet alpha tokens have grown to around $300M in market capitalization collectively. Compared to some individual AI protocols, these tokens are quite small. But against a difficult market and macro backdrop, alpha tokens have been a haven of sorts. The average token in the top 10 is up more than 90% in the past 30 days. As validators and their stakers have shifted their allocations away from the Root network (subnet 0) to various subnets, new subnets are gaining a greater share of the network’s total daily emissions.

For a quick refresher on Bittensor and the interaction between validators, miners, and stakers check out our piece from late last year. As a reminder, after the dynamic TAO upgrade, every subnet gets their own alpha token which is priced in TAO. Before the upgrade, validators would decide which subnets to direct emissions to. Post upgrade, Bittensor allows stakers to choose which validators to stake with on specific subnets. Stakers take on new capital risk by effectively exchanging their TAO for the alpha token.

Each alpha token is paired with TAO in its own AMM pool. Each day, 7,200 TAO are emitted to subnets. More TAO is emitted to subnets with higher alpha token price (i.e., tokens with greater market demand), which is why the emission chart has the same rankings as the market cap chart. TAO emitted to subnets is first deposited into the TAO reserves of the individual subnet pools, and alpha tokens are injected in proportion to the TAO injected, which keeps the price constant. Every block, a matching amount of alpha tokens is marked for participant rewards - this is called alpha outstanding. This accumulated alpha is distributed to the three participants in the network every 360 blocks: 18% to subnet owners, 41% to miners, and 41% to validators and their stakers.

While the circulating market capitalization chart in USD makes every subnet look like a winner, we have to consider that TAO is up approximately 80% from the early April lows, and every subnet is priced in TAO. It also obfuscates the relative winners and losers among the top 10. Chutes (64), Gradients (56), and Templar (3) have seen the largest increase in share of emissions, while Targon (4) and PTN (8) have steadily lost share. Chutes, Gradients, and Nineteen.ai are all being built by a global team called Rayon Labs.