Being compared to Bitcoin is the highest compliment a cryptocurrency can receive, but it's also a fast way to get confused about an asset's fundamentals. On that note, the AI services cryptocurrency Bittensor (TAO 0.51%) just earned the comparison after exploding upward by 111% over the past 30 days (as of March 24), propelled by a handful of different catalysts.
But can Bittensor actually become the next Bitcoin?
Image source: Getty Images.
What's fueling the rally
In case you aren't familiar, Bittensor is a blockchain that hosts a bunch of subnets.
Each of those subnets contains pooled computing resources routed from the chain's miners, which can accomplish specific tasks articulated by the subnet's owner, for a fee. Each subnet has a different specialization, and there are more than 120 of them so far.
Many of the most-utilized subnets are dedicated to computing-intensive tasks like training new AI models. To buy the computing power from a subnet and have it do the advertised work for you, it's necessary to pay it in Bittensor's TAO, which is the native token of the chain and the main asset we're discussing here. TAO itself is similar to Bitcoin in that it's mined, it experiences regular halvings, and it has a 21 million limit on the token's supply.
CRYPTO: TAO
Key Data Points
Right now, Bittensor's market cap is about $3.5 billion, whereas Bitcoin's is $1.4 trillion. So the former certainly has plenty of room to grow despite its recent run. But as you may have guessed, Bittensor is a very different project than Bitcoin, and its supply-and-demand dynamics, despite appearing mostly the same at the root, are in fact also quite different.
With that in mind, the primary catalyst for expanding by more than double was a recent segment on the All-In Podcast, in which investor Chamath Palihapitiya discussed one of Bittensor's recent technical accomplishments with Nvidia Chief Executive Officer Jensen Huang.
In short, the network had just completed training Covenant-72B, a 72-billion-parameter open-source large language model (LLM) built by more than 70 different contributors using ordinary internet-connected hardware rather than a centralized data center. Huang appeared impressed and said that centralized and open-source AI platforms are likely complementary to each other rather than in direct competition.
Some investors interpreted that claim as direct validation of Bittensor's platform from the CEO of the world's most valuable company. Whether Huang meant his words in that way, the reality is that training the Covenant-72B model was a major milestone because it demonstrates that Bittensor's computing resources can actually be harnessed to accomplish big and valuable tasks without the need for large capital expenditures in a centralized format. And it's likely the combination of those two factors that drive the coin's price skyward.
Still, that doesn't really answer the question of whether it's the next Bitcoin, so let's turn to that now.
Bittensor doesn't need to be Bitcoin
A big part of Bitcoin's value proposition is its simplicity. After 17 years of existence, four halving cycles, and widespread adoption by financial institutions and even some countries, it has proved that its combination of ever-increasing scarcity and an unchanging nature makes for something that's widely considered to have value. It will almost certainly still be around 10 years from now.
CRYPTO: BTC
Key Data Points
Bittensor, on the other hand, has existed for roughly five years. The coin has yet to survive a full market cycle as a widely held asset.
Bittensor's utility is both its greatest asset and its most significant vulnerability. Because TAO functions as the gateway currency to a decentralized services marketplace, its value depends on whether those subnet services attract and retain paying users. If use of the various subnets continues to grow (as it has quite rapidly so far), the demand side of the equation strengthens well beyond what any pure-scarcity asset like Bitcoin can produce, and the price of the coin is very likely to rise significantly over time.
On the other hand, if its traction stalls, the tight supply of Bittensor means very little, as Bitcoin becomes a much better option by default owing to its much wider distribution. And over the long run, the fact that Bittensor is composed of a bunch of independent subnets, each having its own set of interests, could prove troublesome for governance, which is a problem that Bitcoin simply doesn't have.
So Bittensor is probably never going to become the next Bitcoin. Nonetheless, if your crypto portfolio already holds Bitcoin, and if you're comfortable with a hearty helping of altcoin-level risk, and if you believe that AI training infrastructure will be a generational theme, Bittensor deserves a serious look. There aren't any other coins just like it, and it appears to be achieving something that looks like a product-market fit.
