Bittensor Proposal Recasts Validators as Onchain Fund Managers

The “Root Reborn” proposal would allow TAO validators to actively select which subnets to support and reinvest rewards into them, instead of continuously selling subnet tokens to fund staking payouts. The proposal is currently under review and has not yet been implemented.

A new governance proposal for Bittensor, the decentralized AI network behind the TAO token, aims to overhaul validator incentives by shifting their role closer to that of fund managers.

Bittensor consists of multiple subnets, each functioning as a marketplace for specific AI tasks and operating with its own token. TAO serves as the network’s primary token, and users earn yield by staking it with validators on the root layer, which is considered the most secure capital allocation layer.

The proposal introduces a fundamental change to how staking rewards are distributed.

Currently, rewards are funded by selling subnet tokens earned by validators and converting them into TAO for stakers. This creates constant selling pressure on subnet tokens, weighing on their market value.

The “Root Reborn” proposal, introduced by developer “unconst,” seeks to reverse this dynamic.

Instead of liquidating rewards, validators would allocate capital across selected subnets, similar to constructing a portfolio. Rewards would then be reinvested into these chosen subnets, forming a compounding basket that is restaked with the validator. Stakers would continue receiving yield and retain the option to convert it into TAO at any time.

This approach could reduce persistent sell pressure and potentially shift it into net buying, offering support to subnet token prices.

Under the new model, validators would evolve from passive distributors of yield into active capital allocators. Subnets they support would attract more capital, while weaker or less trusted ones could see reduced funding.

The proposal has been submitted to Bittensor’s GitHub and is currently targeted for testing on a testnet rather than immediate deployment on the main network.

An initial automated review identified two key concerns: a potential bottleneck during upgrades involving large data volumes, and a payout issue that could disadvantage stakers if a subnet shuts down. The proposal’s author responded that these issues have been addressed, with additional refinements planned before any mainnet rollout.

Over the past year, TAO has declined about 28%, compared to a roughly 38% drop in bitcoin over the same period. Meanwhile, staking TAO currently offers an annual yield of approximately 17% for long-term holders.