Full article by: Seth Bloomberg
The upcoming TAO halving along with the recent emission distribution upgrade has surfaced some misunderstandings of how emissions work within Bittensor. Here are a few I’ve seen floating around that aren’t correct and are worth clarifying.
Misconception 1: A Subnet is receiving 0% emissions, so miners are no longer getting rewards.
Underperforming Subnets can now receive 0 TAO emissions, whereas previously every Subnet earned some portion of the TAO emissions. So now, let’s say a Subnet has had lots of outflows recently and now has 0% TAO emissions. Does this mean miners no longer receive mining rewards? No, that’s not the case. Since the beginning of Dynamic TAO, miner rewards are given out in the subnet’s token. Miners on Subnet 1 receive the Subnet 1 token, miners on Subnet 2 receive the Subnet 2 token, etc. It doesn’t matter if the Subnet is getting 0% or 100% of the TAO emissions; the miners always earn rewards in the Subnet token. Short-term emission volatility has effectively no impact on miner rewards since they are given out in units of the Subnet token.
Misconception 2: A Subnet is receiving 0% emissions, so its price will automatically decline.
The price of a Subnet is defined as the ratio of TAO-to-Alpha in the Subnet’s liquidity pool. If more people are staking their TAO into a Subnet (i.e., buying the Subnet token), then its price will go up. If more people are selling the Subnet token, its price will go down. Nothing about TAO emissions changes that logic. In general, TAO emissions only add liquidity at the current price; they do nothing to push the price down. There are some edge cases where “surplus” emissions can be used to buy Subnet tokens, but it will never push the price down. More liquidity helps to soften or reduce price volatility, but the current price of a Subnet does not at all depend on its TAO emissions. Check out RJ’s thread here for more details.
Misconception 3: The TAO halving means the rewards to miners will be halved.
Since the Dynamic TAO launch, TAO has only been emitted directly to Subnet liquidity pools. Network participants (Subnet Owners, miners, validators, token holders) only receive Subnet tokens; they do not directly receive TAO. So, miners will be unaffected by the TAO halving; they will continue to receive the same amount of Subnet tokens as pre-halving.
Misconception 4: The TAO halving means the Subnet token staking APR will be halved.
Subnet staking rewards for token holders are given out in the Subnet’s token. The staking reward APR is independent of the TAO emissions. Just as the amount of rewards given out to miners is unchanged by the TAO halving, the same applies to Subnet token stakers. The common thread across all of these misconceptions is the same: TAO emissions are being conflated with subnet token rewards. They’re separate systems. TAO emissions flow into liquidity pools to deepen liquidity. Subnet tokens flow to miners, validators, and stakers as rewards. The halving affects one, not the other.
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