This episode features Vermo, a former Rolls-Royce engineer turned crypto analyst, detailing his journey into BitTensor, his strategic focus on subnets like TaoHash, and why he believes privacy coins are poised for a resurgence amidst the evolving digital landscape.
From Rolls-Royce Engineer to Full-Time Crypto Analyst
- Vermo, a former mechatronics engineer at Rolls-Royce—a multidisciplinary field combining mechanical, electrical, computer, and systems engineering—transitioned to a full-time crypto analyst three years ago.
- His journey began with a highly competitive Rolls-Royce apprenticeship in the UK (a program allowing simultaneous study and paid work), which he secured at 17 out of 20,000 applicants. He viewed this as a crucial stepping stone.
- Vermo, through his host Grant, emphasizes his early ambition: "My goal was always to break out of the system."
- Strategic Implication: Vermo's engineering background provided him with initial capital and a disciplined, analytical mindset, valuable assets he later applied to navigating the volatile crypto markets.
Early Forays into Crypto: Litecoin, Solana, and the Quant Network Saga
- Vermo's introduction to cryptocurrency came via a friend who showed him Litecoin (LTC), a peer-to-peer cryptocurrency created by Charlie Lee as an early alternative to Bitcoin, often referred to as "digital silver." An overnight 20% gain immediately captivated him.
- He subsequently invested early in Solana (SOL), a blockchain platform designed for high performance and decentralized applications, catching it around $2.
- A significant early bet was Quant Network (QNT), a project focused on enterprise-grade interoperability for connecting blockchains and facilitating payment rails for Central Bank Digital Currencies (CBDCs)—digital forms of a country's fiat currency issued and backed by its central bank.
- Vermo shares a poignant lesson from his Quant investment, where he rode the price from $10 to $440 but didn't sell: "When you make life-changing money, just remember to change your life."
- Actionable Insight: Early successes can build confidence, but Vermo's experience underscores the critical importance of profit-taking strategies and aligning financial windfalls with tangible life changes, a key lesson for all investors.
Taking the Plunge: Becoming a Full-Time Crypto Analyst
- The decision to leave a secure job at Rolls-Royce, a company highly esteemed in his hometown of Derby, UK, was immensely challenging.
- This leap was fueled by the confidence gained from his investment successes and an unwavering desire for freedom—geographically, financially, and in terms of time.
- Strategic Implication: Vermo's transition highlights that moving into full-time crypto investing requires not only capital and market understanding but also a strong conviction in one's goals to overcome societal pressures and inherent "scarcity mindsets."
The Drive for Freedom: Overcoming Adversity
- Vermo's core motivation to achieve financial independence was deeply personal, driven by witnessing the financial struggles of his mother and family.
- He recounts his family's history: originating from India, they moved to Uganda to work on British railways, and his mother, one of ten children, was part of the mass expulsion of Asians by dictator Idi Amin in 1972, leading them to seek refuge in England.
- Vermo reflects on this heritage: "Understanding and seeing firsthand the adversity that they went through and hearing all of the stories, it gave me this fire in my belly to try and do something different."
- Investor Psychology: This narrative reveals how personal history and a desire to break generational cycles of financial hardship can be powerful motivators in pursuing ambitious financial goals through avenues like crypto.
First Encounter with BitTensor: Decentralized Intelligence and Narrative Power
- Vermo discovered BitTensor (TAO) a couple of months before the public release of ChatGPT (a large language model developed by OpenAI). He was introduced to it by a friend.
- The concept of decentralized intelligence and BitTensor's Bitcoin-like supply halving schedule immediately appealed to him. As a self-described narrative trader, the combination of the AI and Bitcoin narratives was particularly compelling.
- Vermo found the passion of BitTensor's founders, Const and Ala, especially Const's concerns about centralized AI, highly motivating.
- The early process of acquiring TAO was risky, involving sending Bitcoin to an address on bittensor.exchange and hoping for the TAO to arrive.
- Strategic Implication: Vermo's entry into BitTensor was driven by its innovative vision, the founders' commitment, and a strong market narrative. This highlights the importance for investors of identifying projects with compelling long-term stories and foundational strength, even in their nascent, riskier stages.
BitTensor's Evolution: Weathering Storms and Embracing Dynamic Tao
- Vermo's conviction in BitTensor has evolved alongside the protocol itself. He diligently followed network updates and discussions with early community members ("OGs") like Const and Caro.
- A significant challenge was the "Cabal situation," where a small group of individuals mined tens of thousands of TAO, which Vermo saw as damaging to the network's goal of creating real-world value.
- The introduction of Dynamic Tao (DTO)—a mechanism that dynamically allocates TAO emissions to subnets based on their perceived value and contribution—was a pivotal moment that resolved these concerns.
- Actionable Insight: The successful implementation of Dynamic Tao by the OpenTensor Foundation (the organization supporting BitTensor's development) demonstrates the ecosystem's ability to adapt and address critical issues. For investors, a project's capacity for self-correction and governance improvements is a key indicator of long-term viability.
Deep Dive into Subnets: The TaoHash Case Study
- Vermo is particularly interested in TaoHash, a subnet (a specialized, incentivized neural network operating within the broader BitTensor ecosystem) that applies BitTensor's incentive mechanism to optimize Bitcoin mining.
- He explains that validators in TaoHash receive Bitcoin and are then incentivized to purchase TaoHash's Alpha token, creating a flywheel effect—a positive feedback loop where initial success drives further growth and value accrual.
- Vermo notes TaoHash's impressive early performance: by capturing approximately 0.6% of the $16 billion annual Bitcoin mining market, it was generating roughly $90 million in annualized revenue within its first 30-40 days.
- He speculates that major Bitcoin miners like Foundry (whose owner, Barry Silbert, is a known TAO supporter) could allocate resources to TaoHash, significantly benefiting the entire BitTensor ecosystem by increasing TAO's value and overall subnet funding.
- Investor Takeaway: TaoHash serves as a prime example of a BitTensor subnet with a clear, quantifiable revenue model. Investors should seek subnets that demonstrate tangible value creation and transparent performance metrics.
Evaluating BitTensor Subnets: Prioritizing Teams, Revenue, and Real-World Utility
- Vermo acknowledges the current difficulty in precisely valuing subnets. His evaluation process heavily emphasizes the quality and track record of the teams behind them.
- He cites Const's involvement in a new subnet as an example of how a trusted founder can immediately lend credibility and value.
- Another subnet he highlights is Liquidity (Subnet 77), founded by CreativeBuilds, the engineer behind the TAO-Ethereum bridge. This subnet aims to address thin liquidity (a market state with insufficient buyers/sellers, leading to price volatility and poor execution) in various liquidity pools.
- Vermo states: "A lot of my analysis comes from understanding the teams behind the subnets because that then gives me confidence in those people delivering the vision."
- Strategic Consideration: For Crypto AI investors, assessing the expertise and execution capability of subnet teams is crucial. Projects like TaoHash and Liquidity, which tackle identifiable problems and offer trackable progress, are more attractive.
Demystifying BitTensor: A Black Hole for Compute and Intelligence
- Vermo, while self-admittedly not deeply technical, describes his understanding of BitTensor as a "black hole" that attracts and integrates excess compute power and open-source models (AI models with publicly available source code) from entities like Anthropic and Meta.
- He views subnets as individual "companies" operating within this larger BitTensor network, each specializing in a distinct vertical of artificial intelligence.
- The core incentive mechanism ensures that miners providing valuable intelligence are rewarded, while those providing poor intelligence are not, fostering a competitive environment that drives rapid, exponential improvement.
- Key Concept: BitTensor's unique strength lies in its elegant incentive structure, which aligns the contributions of individual miners and specialized subnets with the overarching goal of advancing decentralized AI and creating a high-quality, distributed intelligence network.
BitTensor's Versatility: Applying Incentives Beyond Pure AI
- The host, Grant, questions how BitTensor's AI-centric framework applies to a subnet like TaoHash, which focuses on Bitcoin mining.
- Vermo concedes this is a technical question best answered by TaoHash's developers but underscores the free-market principles governing BitTensor.
- He argues: "If you can utilize this incentive mechanism to create value and to create value to the whole ecosystem, then why not?"
- Emerging Trend: While BitTensor's genesis was in decentralized AI, its powerful incentive mechanism is proving adaptable to other value-generating applications. This flexibility could unlock new investment and research opportunities, though the precise AI integration in non-traditional subnets warrants ongoing scrutiny.
Investment Strategy: Narrative Trading and the Resurgence of Privacy Coins
- Vermo identifies as a narrative trader, strategically following liquidity flows and prevailing market themes.
- After a period exploring AI-themed meme coins (highly speculative cryptocurrencies inspired by internet trends, such as those birthed from "Goat See" and "Truth Terminal"), his primary focus has shifted to BitTensor's Dynamic Tao and promising subnets.
- He is also actively researching privacy coins such as Monero (XMR) and Zcash (ZEC). These are cryptocurrencies engineered to enhance user privacy by obscuring transaction details like sender, receiver, and amount.
- Investor Alert: Vermo's shift towards privacy coins, influenced by a mentor, signals a potential re-emerging narrative. Crypto AI investors should monitor this sector for signs of renewed interest and capital rotation.
The Impetus for Privacy: CBDCs and Financial Surveillance
- Vermo's growing interest in privacy coins is significantly tied to the anticipated global rollout of CBDCs.
- He believes that as traditional financial systems incorporate CBDCs, which may offer less transactional privacy, the demand for genuinely private digital currencies will surge.
- Vermo asserts: "Privacy will have huge value going forward."
- Strategic Outlook: The development and implementation of CBDCs could act as a major catalyst for the privacy coin sector. Investors should track CBDC progress and its potential to drive demand for privacy-preserving alternatives. Notably, Barry Silbert has also recently expressed interest in Zcash.
Perspective on Privacy Tools like Tornado Cash
- When questioned about his views on privacy-enhancing tools like Tornado Cash (a decentralized cryptocurrency mixer designed to obscure the transaction history of funds on blockchains like Ethereum), Vermo offers a balanced perspective.
- He emphasizes the importance of fairness and societal contributions, such as paying taxes, suggesting that while privacy is a fundamental right, tools offering extreme levels of obfuscation should be used responsibly and sparingly.
- Ethical Consideration: This discussion touches upon the complex interplay between privacy, regulation, and the potential misuse of anonymizing technologies in the crypto space, a critical area for ongoing industry and investor dialogue.
AI: The Dominant Investment Theme
- Beyond AI and privacy, Vermo's investment focus remains concentrated.
- His recent two-month visit to San Francisco, initially intended to explore angel investment opportunities in broader tech, revealed an overwhelming concentration: 90% of the founders he met were working on AI projects.
- This experience solidified his conviction that AI will attract the lion's share of capital flows over the next 12 to 24 months.
- Market Trend: The intense focus of venture capital and entrepreneurial talent on AI underscores its continued market dominance. Crypto AI investors should ensure their strategies are aligned with this powerful macro trend.
Networking and Talent Scouting: Insights from San Francisco and Austin
- Vermo's extensive travels, including to innovation hubs like San Francisco and Austin, are driven by a desire to gain fresh insights, diverse perspectives, and connect directly with talent.
- He recounted staying in a San Francisco "hacker house" with 14 AI engineers and founders, an experience that provided him with invaluable firsthand observations of their work ethic and innovation processes.
- He is currently considering an investment in an individual who was Head of AI at a YC Combinator (a highly regarded American seed-stage startup accelerator) company. This individual is now developing an AI agent (a software program using AI to perform tasks or services for users) aimed at simplifying smartphone application usage for the 60+ demographic, with long-term ambitions to integrate this technology into robotics for elder care.
- Due Diligence Tip: Vermo's approach highlights the irreplaceable value of direct engagement with founders and immersion in innovation ecosystems for identifying promising early-stage investment opportunities. Evaluating the "people" behind the projects is paramount.
The BitTensor Ecosystem: A Hub of Unprecedented Talent
- Vermo describes the concentration of talent within the BitTensor ecosystem as "nothing like I've ever seen before," comprising highly intelligent individuals from diverse backgrounds collectively pushing the boundaries of AI.
- He found the Endgame conference, a major BitTensor event, to be a "dream-like experience," enabling him to connect in person with influential figures like Will Squires, Ala, and Mog, whom he had previously followed online. The event was organized by Shad.
- Vermo passionately states: "I think Bit Tensor specifically has the opportunity to affect the lives of billions of people, you know, and that's pretty damn cool."
- Ecosystem Strength: The high caliber and collaborative spirit of the talent within the BitTensor community is a strong bullish indicator for its long-term growth and innovation potential. Events like Endgame are crucial for fostering this community and showcasing progress.
Critiquing Ethereum: Still Searching for a Killer App
- While Vermo acknowledges Ethereum's significant contributions to the crypto space, particularly in enabling creative applications through smart contracts (self-executing contracts with agreement terms coded directly onto the blockchain), he also offers a critique.
- He describes Ethereum as "slow, clunky, and expensive," arguing that a majority of tokens launched on its platform have been extractive in nature.
- In his view, Ethereum has yet to deliver a "killer application" that profoundly impacts the lives of billions, despite the utility of certain protocols like Aave (AAVE), a decentralized lending and borrowing platform.
- Comparative Analysis: Vermo's assessment reflects ongoing concerns about Ethereum's scalability and transaction costs, positioning alternative platforms like BitTensor as potentially more disruptive if they can achieve mass adoption with truly transformative applications.
Why Attend Crypto Conferences: Direct Engagement and Building Rapport
- Vermo attends crypto conferences primarily for the opportunity to engage directly with the founders and developers building new protocols.
- He seeks to understand their motivations, the total addressable market (TAM) for their ideas, and to build personal rapport, which he finds far more insightful and effective than purely online interactions.
- Investor Strategy: Conferences provide invaluable opportunities for in-depth due diligence through face-to-face conversations, allowing investors to assess team dynamics, project viability, and founder conviction beyond what is presented in whitepapers or online forums.
Vermo's Investment Counsel: Sacrifice, Calculated Risks, and Long-Term Perspective
- Vermo offers pragmatic advice to aspiring crypto investors, especially younger individuals: save aggressively, work diligently (he himself started an Indian street food business with his mother to save capital), maintain a low personal burn rate, and gain practical experience by actively participating in the market—"getting into the arena."
- He emphasizes that an investor's risk appetite should naturally decrease with age and increasing life responsibilities.
- His own journey to financial independence was built on sacrifice, relentless effort, disciplined saving, and, most importantly, the willingness to take calculated risks.
- Vermo concludes with a powerful statement: "You have to take those risks because without those risks, there's no reward and you'll never develop financial independence and financial security."
- Actionable Philosophy: Vermo's core message for investors is a blend of financial discipline, continuous learning, and the courage to embrace informed risks, particularly during the early stages of one's investment journey, as essential components for achieving long-term financial freedom.
Reflective and Strategic Conclusion
Vermo's journey underscores BitTensor's disruptive potential through its unique incentive model and focus on real-world value via subnets like TaoHash. Crypto AI investors should prioritize projects with strong teams, clear revenue models, and the adaptability to capture emerging narratives like AI and privacy.
