This episode reveals the blueprint for turning a Bittensor subnet into a revenue-generating enterprise, detailing Taoshi's journey from a raw intelligence network to a full-fledged financial product.
Meet the Taoshi Team: Jordan Bonilla & Thomas Dougherty
- Thomas Dougherty, Director of R&D, focuses on the incentive mechanism design and the strategic pipeline that connects PTN's trading signals to their commercial platform, Glitch Financial.
- Jordan Bonilla, a backend and data engineer, is responsible for the core infrastructure that ensures trading signals are processed securely and efficiently. Jordan's work was critical in the initial pivot and ongoing stability of the network.
- Both speakers credit their leader, Arash, for his vision and leadership, highlighting his role in recruiting them from major tech companies like LinkedIn and inspiring their commitment to the project.
The Pivot: From Price Prediction to a Proprietary Trading Network
- Within weeks of joining, the team decided to transition from a simple price prediction model to the Proprietary Trading Network (PTN), a more complex system that simulates a trading exchange. This was a strategic move to generate more actionable and valuable intelligence.
- Jordan Bonilla describes the technical challenge of modifying the live subnet. He explains that the limited scale of a Bittensor subnet (226 hotkeys) allowed for specific design choices that made the transition manageable.
- Thomas highlights the unprecedented nature of this live transition: "We just got here and Jordan did it. I don't know how... I'm still like, honestly, it was kind of a blur."
Navigating Early Challenges and Incentive Design
- Thomas explains that the first few months were a "brutal" cycle of identifying and patching exploits as users tried to game the incentive mechanism. The core goal was to ensure the outputs from top traders had real predictive power.
- Jordan recounts a critical incident involving a faulty price provider, which required a retroactive price update for all trades. This caused significant commotion but was a crucial step toward building a more robust, redundant system.
- Strategic Insight: The experience underscores a key reality for subnet developers: the initial phase is often a battle against exploits. Success requires rapid, iterative improvements and a focus on generating genuinely valuable, defensible output.
Building in Public: Community, Partnerships, and FUD
- The team emphasizes the value of an open-source approach, which has enabled partners like Timeless and Delta Prop Shop to build tools and interfaces on top of PTN, enhancing the ecosystem.
- Thomas notes the power of decentralization in sourcing talent, stating, "We have traders from all over the world who otherwise maybe wouldn't even be able to contribute to any kind of hedge fund or any kind of trading strategy without the SN8 platform."
- Actionable Insight: For researchers, Taoshi's model demonstrates how a decentralized network can democratize access to financial markets, sourcing trading talent globally. Investors should note how this open model can create a powerful, self-reinforcing ecosystem of third-party developers.
Glitch Financial: Monetizing Subnet Intelligence
- Glitch Financial is a non-custodial Software-as-a-Service (SaaS) platform. Users connect their own brokerage accounts and subscribe to trading strategies built from the aggregated signals of PTN's top-performing miners.
- The platform's quant team analyzes miner performance, risk exposure, and other factors to build curated, risk-managed portfolios. Revenue generated from Glitch subscriptions will be used to buy back TAO, directly returning value to the Bittensor ecosystem.
- Strategic Implication: Glitch Financial represents a critical test case for the entire Bittensor ecosystem. Its success or failure will provide a powerful signal about the viability of monetizing decentralized intelligence through traditional SaaS models.
The Active Validator Program: Crowdsourcing Alpha
- The Active Validator Program invites external quants and developers to access raw PTN signals and build their own trading strategies. These strategies will then compete on Glitch Financial.
- Taoshi will provide the necessary tools, including an open-source backtesting engine, to lower the barrier to entry. Top-performing strategy creators will be rewarded based on the revenue their models generate.
- This moves beyond simple validation to active, competitive strategy creation, creating a marketplace for alpha directly on top of the subnet's intelligence.
Collateral Contracts and the Future of Mining
- Miners will be required to post collateral (in TAO) to determine the amount of capital they can trade on PTN. This directly links their potential rewards to the amount of risk they are willing to underwrite.
- Performance will be judged not just on risk-adjusted returns but also on raw dollar returns, incentivizing miners to trade larger capital bases effectively.
- A high-watermark drawdown system will be in place. A high-watermark is the highest peak in value an account has reached. If a miner's account drops 10% from this peak, they are eliminated and risk losing their collateral, creating a strong incentive for disciplined risk management.
- Investor Takeaway: This collateral model is a significant evolution in subnet economics. It introduces a direct financial stake for miners, potentially filtering for more sophisticated and risk-aware participants and increasing the overall quality of the network's output.
The Importance of Presence and Advice for Developers
- Attending conferences is crucial for building relationships, gathering direct feedback from miners and validators, and representing Bittensor to the wider investment community.
- Jordan’s advice for developers: "You're a subnet developer. People's maybe livelihoods could potentially be in your hands... Try to make your changes more incrementally. Give plenty of notice when you're going to change anything."
- Thomas adds the importance of embracing the community, both positive and negative, and co-owning the project's vision with its most passionate users.
This discussion maps Taoshi's evolution from a raw intelligence network to a commercial financial product. For investors and researchers, their journey provides a critical case study on monetizing decentralized AI, aligning incentives through real financial risk, and building a defensible ecosystem in a competitive, open-market environment.
