Can Root Reborn Make Subnet Tokens Investable?

For most of dTAO’s short history, subnet investing has felt closer to trading memecoins than investing in productive networks.

Prices moved violently. A subnet could double in a week and lose most of that gain shortly afterwards. Attention often mattered more than revenue. Staking returns looked impressive, but were paid in newly created alpha tokens whose price could fall much faster than the number of tokens in your wallet increased. Even the strongest subnet teams had little control over whether value created by their product would reach their token.

The behaviour of the chain did not always help. Under the earlier flow-based emission system, TAO was allocated according to fresh staking flows rather than the underlying usefulness of a subnet. A productive subnet could therefore receive very little new TAO when no large group of stakers happened to be adding capital at that moment. The system was measuring where TAO was moving, not which subnet was doing the most useful work.

Chutes became the clearest example of how strange this could look. It had users, revenue and a genuine need to pay miners for expensive GPU capacity, yet there were periods in which the chain provided little or no meaningful TAO support. Meanwhile, far less productive subnet tokens could continue receiving capital because they happened to attract speculative staking flows.

This encouraged trading rather than investing. The easiest way for a subnet to improve its position was often to create excitement around its token. A temporary price pump attracted more capital, generated more rewards and brought more attention. When the momentum reversed, the process worked in the opposite direction.

The combination of the new price-based emission system, v440 and Root Reborn may push Bittensor towards a very different market. The changes are complicated in code, but the intended economic result is fairly simple:

TAO should increasingly flow towards subnet tokens that people are willing to hold for a long time.

If it works, subnet prices may become more stable, the strongest projects may separate themselves from the long tail and alpha tokens could begin to feel less like short-lived crypto trades. They would still be extremely speculative. But for the first time, it is possible to imagine a mature subnet market with recognisable blue chips, patient capital and a clearer connection between product success and token value.

The chain has started rewarding strength instead of fresh inflows

The first major change was the move away from TAO-flow-based emission.

TAO emission is now largely determined by the moving price of each subnet token, adjusted for miner burn. A subnet with a stronger and more sustained alpha price receives a larger share of the TAO created by the network. Temporary pumps are dampened through a slowly moving average, particularly for young subnets.

This is a more logical starting point. Chutes does not need a fresh whale to stake thousands of TAO every day to prove that the market values it. When investors continue to hold Chutes alpha at a high price, the chain can recognise that demand and allocate TAO accordingly.

The change has already produced something that looked almost absurd under the old system: the largest subnet now receives the largest amount of support from the chain. Recent snapshots placed Chutes first by subnet price and TAO emission, followed by other major markets such as Targon and Lium.

That sounds obvious. In Bittensor, it represents progress.

A higher price now has a more durable economic effect. It can lead to more TAO emission, more chain buying and better support for the miners and validators who earn alpha. The strongest subnets are no longer expected to finance the whole network while inactive projects collect a guaranteed slice of every block.

V440 reduces the subsidy for doing nothing

Price-based emission on its own still had a weakness. Every registered subnet received something.

A terrible subnet with almost no users or development could retain a small share of TAO emission. One weak subnet did not cost much. More than a hundred weak subnet markets collectively did.

The official explanation for v440 was unusually direct: the long tail was diluting the subnets doing real work. Because even an idle subnet slot produced passive income, the right to register a subnet became expensive. Teams had to pay heavily before they could even begin experimenting.

V440 introduced an emission bar. Subnets above the bar retain most of the TAO emission their price would normally earn. Subnets far below it receive only a fraction. There is no absolute cutoff, but sitting at the bottom should no longer be a viable passive-income strategy.

Spec 441 makes the bar easier to understand by pinning it, by default, to the price of the subnet ranked 64th. A subnet at rank 40 is safely above it. A subnet at rank 80 is below it. The bar can still be changed, but teams no longer need to estimate where an abstract market-wide threshold happens to fall.

This creates something closer to a real competitive market.

A new subnet can still register and begin building. It does not immediately deserve a large share of newly created TAO simply because it exists. It must first attract users, investors, revenue or some other source of credible demand.

That may sound harsh, especially for early-stage teams. It also clears the way to create many more subnet slots. If every new slot automatically drains TAO from established projects, expanding from 128 to several hundred subnets becomes expensive for the entire network. If the tail receives very little emission, Bittensor can allow far more experiments without equally dividing its scarce capital among them.

The intended structure looks increasingly like a Pareto distribution: a small group of subnets receives most of the capital, a larger middle group competes to move upwards and a very long tail receives little support until it proves itself.

That is probably what a functioning subnet market should look like. Not every experiment deserves equal funding.

Root Reborn creates long-term buyers

The second part of the change comes from Root Reborn.

Root stakers currently earn dividends derived from alpha across the subnet market. Previously, those alpha dividends were repeatedly sold into TAO. The system continuously created alpha and then immediately sold part of it again.

Root Reborn changes what happens after the sale. The resulting TAO is reinvested into a portfolio of subnet tokens selected by the root validator. Yuma might build a relatively conservative large-cap basket. Another validator may prefer a broader portfolio or give more weight to emerging subnets. Root stakers gradually earn shares in that portfolio, which remains invested and compounds until they decide to claim.

This creates a class of buyers that barely existed before: subnet holders that are not trying to trade every short-term move.

A validator basket does not buy Chutes on Monday because it is trending on X and sell it on Thursday because another subnet launched a campaign. It can continue allocating a percentage of incoming root dividends to Chutes every block, for months or years.

The same may happen with Targon, Lium, Score and other recognised large caps. If the largest root validators broadly agree on the strongest ten subnet markets, those tokens could receive a recurring stream of buying independent of daily retail sentiment.

That is likely to make price action more boring.

In crypto, boring is often an improvement.

Instead of depending mainly on occasional speculative pumps, a leading subnet could have several persistent sources of demand:

• investors staking directly into the subnet;
• TAO emission allocated by the chain;
• chain buys created by the emission mechanism;
• revenue used by the team for buybacks;
• Root Reborn baskets buying the token continuously.

The price can still fall. Miners, validators, owners and existing holders will continue selling alpha. Root stakers can eventually claim their basket shares, which requires selling part of the underlying subnet holdings back into TAO. But the market would have a larger group of natural long-term buyers on the other side.

The likely result is not the end of volatility. It is a change in the type of volatility.

Prices may spend longer periods moving gradually as baskets accumulate. Sharp corrections may occur when many root stakers claim profits after a strong rally. The endless sequence of isolated pumps and collapses could become less dominant, particularly among the largest subnet tokens.

A subnet blue-chip market may emerge

When many validators build portfolios, they will probably select many of the same names.

Large subnet markets have an obvious advantage. They are more liquid, better known and easier to explain to root stakers. They also have enough depth for a validator to buy and eventually sell meaningful positions without destroying the price.

Chutes, Targon and Lium are natural candidates for this emerging blue-chip group. They are already among the largest subnet markets and operate services that require real economic resources. Chutes, Targon and Lium need to attract expensive GPU capacity. Their miners cannot be expected to work indefinitely for tokens nobody wants to own. Recent market snapshots already place these names near the top of the subnet market.

If Yuma, taostats and several other large validators all allocate heavily to these tokens, their lead can reinforce itself.

A higher price brings more TAO emission. More TAO emission supports the token. Root baskets see a large, liquid and well-supported market and keep buying it. Miners have greater confidence that their rewards can be converted into meaningful value. The subnet can attract more capacity and improve its product.

This is how a Pareto distribution begins to harden. The strongest projects receive most of the capital because they appear safest, and they appear safer because they receive most of the capital.

There are clear benefits. Bittensor finally develops a group of subnet tokens that long-term investors may be willing to hold without watching the chart every hour. The leading tokens begin to resemble risky infrastructure investments rather than lottery tickets.

There is also a danger. Once every large validator owns the same subnet tokens, young competitors must overcome more than product quality. They must compete against years of accumulated capital, chain support and institutional familiarity.

The subnet market could become more investable while also becoming less forgiving.

The middle of the market becomes more interesting

Root Reborn will probably not send all capital to the top ten.

Validators also need to outperform one another. Buying exactly the same blue chips as everyone else may produce acceptable returns, but it will not produce exceptional returns.

The most interesting opportunities may sit around the new rank-64 emission bar. A subnet at rank 68 may need only a modest amount of recurring validator buying to move above it. Once that happens, it receives both the Root Reborn purchases and a larger share of TAO emission.

That creates much greater upside than adding the same amount of TAO to an already enormous subnet market.

Good projects in the middle can therefore climb quickly when a few respected validators select them. RedTeam, Yanez or another revenue-producing subnet may not need to convince the entire market. Inclusion in two or three meaningful root baskets could provide enough sustained buying to improve its price, emission and visibility.

This should make subnet fundamentals more important. Validators will need reasons to choose one mid-sized project over another. Revenue, real customers, useful miner output and transparent token policies become more valuable signals than a temporary social-media campaign.

It will still be a political market. Subnet teams will pitch themselves to validators. Accelerator relationships and private holdings may influence decisions. Some validators may simply follow the choices of larger operators. But at least the competition begins to revolve more around long-term inclusion than short-term attention.

Revenue buybacks become harder to avoid

The upgrades also clarify why subnet owners such as Chutes are willing to spend substantial revenue buying their own alpha.

A subnet owner does not strictly need to do this. Chutes could use every dollar of revenue to hire employees, buy hardware or expand the product. RedTeam could operate a successful cybersecurity company while its subnet token declined. Alpha is not a legal share in the company.

The problem appears when competitors do return revenue to their tokens.

Imagine two similar subnets. Both earn $1 million. The first uses part of the revenue to buy alpha. The second keeps everything inside the private company.

For an alpha investor, the choice is easy. The first subnet has a recurring buyer linked to real product usage. The second may have an excellent business, but its token holders have no clear path to benefit from that success.

The first subnet is also more attractive to root validators. Its revenue supports the token, the stronger token price can produce more TAO emission and the combination makes its basket position easier to defend.

Buybacks therefore become more than a reward for existing holders. They become part of the competition for capital.

Chutes is effectively using revenue to strengthen the market in which its miners are paid and to defend its share of Bittensor’s future TAO emission. If those purchases help it retain a top position, the chain may provide much more economic support than Chutes spent on the original buybacks.

As more subnets generate revenue, investors may begin expecting some portion to return to alpha. Teams that refuse will need a very good alternative explanation for why their token should be held.

This could produce healthier token economics. It could also create a buyback race in which teams spend too much defending their alpha price and too little improving their products. The balance will matter.

More talent can enter without immediately buying an expensive slot

The most promising long-term outcome may have less to do with existing subnet prices.

Bittensor wants more subnets. More subnets mean more experiments, more competition and a greater chance that genuinely useful products emerge. The earlier system made this difficult because every slot carried passive emission value. Registering a subnet could cost teams heavily before they had written meaningful code or found a customer.

V440 tries to remove that passive value from idle slots. The official thesis is that a subnet slot should eventually cost little more than the registration transaction. A new team buys the opportunity to compete, not a guaranteed income stream.

If the number of slots expands after this, Bittensor may become much more open to talented developers.

A small team could launch an idea without borrowing a large amount of TAO merely to acquire a place in the network. Most new projects would begin below the emission bar and receive little subsidy. That is not necessarily a flaw. They can test the product, attract early users and prove that their miners produce something valuable before the wider network begins funding them.

The best projects can climb. The weak ones can remain small or disappear without draining much TAO from everyone else.

Opening the market while concentrating the rewards sounds contradictory. In practice, the two ideas support each other. Bittensor can allow far more people to try because it no longer promises meaningful funding to everyone who turns up.

Subnet investing may finally become investing

None of this makes alpha tokens safe.

They remain young, illiquid and dependent on experimental protocol rules. Their holders do not own shares in the companies operating the subnets. Validator baskets can create crowded trades. Large root claims can sell many of the same blue-chip tokens at once. A popular subnet can still lose users, revenue or miner quality.

The upgrades do, however, create the foundations of a more serious market.

The chain now directs more TAO towards subnet tokens with sustained demand. The emission gate reduces the subsidy received by the long tail. Root Reborn introduces recurring portfolio buying and allows capital to remain invested for longer. Revenue buybacks can connect real customers to token demand. More subnet slots can attract new teams without requiring the network to subsidise every experiment equally.

The likely result is a market with fewer spectacular pumps among the strongest projects and a clearer division between blue chips, competitive mid-caps and largely ignored experiments.

That may sound less exciting than the subnet market of early dTAO. It is probably what has to happen for larger investors to take alpha seriously.

A market in which every token behaves like a memecoin can attract traders. It cannot efficiently fund a decentralised economy for intelligence.

V440 and Root Reborn are attempts to change that. They may turn subnet investing from a game of predicting the next pump into the harder and more useful task of identifying which networks can attract capital, produce revenue and retain a place in Bittensor’s emerging economic hierarchy.

I find it cool that Bittensor is going to see different ETF like baskets of subnets through root reborn, managed by validators. We could see lots of different strategies like bluechips, universe, or sector specific baskets. Have a look at trusted stake. They have been running different strategies for a couple of months now and I think they can teach you a lot about how the future might look like after root reborn. https://app.trustedstake.ai/strat?strategy=top-10