The Bittensor blockchain is on the verge of its first halving.
Like Bitcoin, Bittensor is programmed to halve rewards of its native TAO ($301.70) token approximately every four years. Unlike Bitcoin, which halves based on block count, Bittensor’s halving is triggered by the total supply of TAO tokens.
Once the network has distributed 10.5 million TAO — half of Bittensor’s 21 million total supply — the number of newly created tokens will drop from 7,200 TAO per day to 3,600.
At the current rate of inflation, that’s set to happen on December 14 at around 3:30 am London time.
Investors are hopeful the event will give the network a much-needed boost.
Supportive environment
The TAO token has fallen some 47% over the past year, dragged down by a stagnating crypto market.
“When inflation falls and demand stays steady, the environment becomes more supportive for long-term price appreciation,” Arrash Yasavolian, founder of Taoshi, a firm focused on leveraging the Bittensor blockchain, told DL News.
“Historically, networks with halving mechanisms see stronger long-term performance because supply contracts as usage grows.”
Yet such an outcome isn’t guaranteed.
Even with the amount of new TAO entering circulation decreasing, it can take time before it has an impact on the token’s price — if at all.
Macroeconomic factors, such as President Donald Trump’s ongoing trade wars and slower-than-anticipated interest rate cuts from the US Federal Reserve, are weighing on the broader crypto market, hampering prices across the market.
‘Zombie’ subnets starve
Bittensor is a blockchain network designed to offer an alternative to centrally controlled artificial intelligence powerhouses like OpenAI and Google.
The network enables anyone to contribute their computing power to AI applications, known as subnets. These entities are usually referred to as miners.
In return, those miners are rewarded with TAO tokens, similar to how the Bitcoin blockchain rewards those who process transactions with new Bitcoins.
The subnet economy will be shaken up after those rewards are slashed by 50%.
“We expect a ‘flight to quality’ where capital aggressively condenses into the few subnets generating real revenue, while the ‘zombie’ subnets starve,” Karia Samaroo, founder of xTAO, a crypto treasury company focused on accumulating TAO tokens, told DL News.
Tightening margins
Just as with Bitcoin, the halving will also squeeze the miners who contribute their computing power to Bittensor.
Bitcoin block rewards halving from 6.25 to 3.125 in April 2024 has forced many miners to diversify into artificial intelligence and seek out cheaper sources of energy to power their machines in a bid to remain profitable.
Samaroo expects the same for Bittensor.
“We expect margins to tighten temporarily, forcing a consolidation of hash power toward the most performant actors,” he said.
The halving will introduce more turbulence into the four-year-old Bittensor blockchain. Yet its proponents say it will make the network stronger in the long run.
“The combined effect is a healthier and more efficient ecosystem,” Yasavolian said.
“Inflation drops, emissions become more selective, and resources move toward subnets that generate value with stronger economics.”
Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at [email protected].