NOTE: Nothing has changed yet. The above is just a proposal at this stage, still requires finalising, governance approval, and will then require months of development and testing. In short, it's months away.
Based on our understanding of the proposed changes, people wouldn't stake
$TAO tokens directly anymore. Instead, they would stake
#Bittensor Subnet Tokens (alpha, beta, etc).
Here's an example:
Say you have a bag of 100
$TAO, and you think "Subnets X, Y and Z are the bees knees, the cats pajamas, and the coolest thing since sliced bread" - you could convert 30
$TAO into each of the Subnet Tokens of X, Y, and Z (leaving 10 TAO as just TAO).
The price is not static. The amount of
$X,
$Y, and
$Z that you receive depends on their price at the time (denominated in TAO).
You can then stake those X, Y and Z tokens with a validator that is operating on those particular subnets to earn yield. The yield you earn is in X, Y, and Z tokens respectively (not TAO). Your remaining 10 TAO is left unstaked and just sits in your wallet.
[Similar to the current setup, a part of the calculations for how much yield you receive will be based on how well the validator you're delegating to is performing on that network - so be sure to do your homework and pick a good one... such as
#RoundTable21 🫶]
Market Forces at Play:
If other people also love Subnet X, Y, and Z - and they also swap their TAO for X, Y and Z tokens, the price (again denominated in TAO) of those subnet tokens goes up. If people think "do not want!" and dump their X, Y or Z Subnet Tokens, then their price (in TAO) goes down.
When you unstake your subnet tokens, you can swap them back to TAO.. and the amount of tao you get depends on the value of those subnet tokens at that time. From there, you can swap that TAO to Subnet
$A,
$B or
$C tokens (you cannot swap directly from
$X to
$A, etc).
To put it another way, let's imagine that
$TAO is
$ETH and "Subnet Z" is
$SHIB.
One day, you decide to swap 50
$ETH for
$SHIB.
If
$SHIB moons next week, you could swap back to
$ETH for a profit (i.e. more
$ETH than you started)
If
$SHIB flops next week, you could swap back to
$ETH for a loss (i.e. less
$ETH than when you started)
Just as the price of
$SHIB is determined by the market, so to is the price of
$X,
$Y, and
$Z Subnet Tokens.
A few of the major differences between " TAO & Subnet Tokens" and the above " ETH & SHIB " example are that:
1. While an
$SHIB could be swapped for
$ETH or
$USDT or whatever, Subnet Tokens can only be swapped for
$TAO to ensure value-capture.
2. While you could transfer
$SHIB tokens to a friend, Subnet Tokens cannot be transferred between wallets, which prevents secondary speculative markets on subnet tokens (e.g. like if you had to swap
$SHIB back to
$ETH, then transfering
$ETH instead)
3. There is a limit of how many subnets (i.e. "alt coins") will exist on
$TAO at any given point (currently: 32).
When a 33rd Subnet is registered, the lowest valued subnet (assuming by MCAP/FDV) is de-registered and all of its subnet tokens are automatically swapped for
$TAO (i.e. if Subnet X gets deregistered, all
$X tokens are automatically converted into
$TAO at the then-price from remaining liquidity)
4. Unlike
$ETH (which is expensive as hell to transact), gas prices on
$TAO are very cheap - something like ~0.000000150t per transaction 😂
5. Emissions Game Theory: The price of X, Y and Z aren't only based on buying and selling, but also how much of the daily TAO emissions that the subnet receives.
Author's Note: I believe the plans is that the more valiable a subnet's tokens are, the greater the piece of the 'daily emissions pie' it gets (i.e. the percentage of the 7200/day emissions a subnet receives), and these emissions increase the value of the subnet tokens... but there are some particulars which I'm still a little fuzzy on, so we'll save the deep dive on this bit for a later date 🫡
----------------------------
TL;DR:
Downside:
- More complicated
- Staking carries downside risk
- Will require TAO holders to actively research and manage their subnet portfolio to maximise gains
- Added risks may lower overall staking rate
Upside:
- More decentralised
- Lots of new ways to speculate for profit
- Locking large amounts of TAO supply may result in positive price action
- Lower staking rate also means higher APY for that do