IOSG: TAO is like the Elon Musk who invested in OpenAI, Subnet is like Sam Altman
Original Title: "IOSG Weekly Brief | TAO is to OpenAI What Elon Musk is to a Donation, Subnet is to Sam Altman #321"
Original Author: Momir, IOSG Ventures
The bullish thesis for TAO requires you to believe in a game-theoretical miracle. But the cryptocurrency industry has seen such miracles before.
Bittensor holds one of the most elegant narratives in the cryptocurrency space: a decentralized AI oracle market where the market mechanism allocates funding to the most impactful research. TAO is the coordination layer, subnets are the labs, and the market is the grant committee.
Stripped of its narrative facade, you'll discover some more unsettling things.
Bittensor is a grant program where cryptocurrency speculators fund AI R&D—and the grantees have no obligation to return any value to TAO.
You can think of TAO as Elon Musk—he is the first donor of OpenAI, a "non-profit" entity. Subnets are like Sam Altman—they are the fund recipients, building and delivering the product, but without any contractual obligation to share the returns. They may ultimately choose to privatize the gains rather than return any value to the initial funders.
Bittensor distributes TAO tokens to subnet operators and miners based on the subnet token price. Once a subnet receives TAO allocation, there is no mandatory mechanism requiring the AI models, datasets, or services produced to stay within the Bittensor ecosystem. Subnet operators can use Bittensor's TAO incentives to rug pull and take the real product elsewhere—onto centralized cloud servers, packaged as a standalone API, or directly sold under an SaaS shell.
TAO has no equity and no authorized contract. The only tether is the subnet token—the token price must hold up to maintain access to resources. But this is only effective before the subnet "flies away": once the product is robust enough to stand alone outside the Bittensor system, this lifeline is cut. The relationship between Bittensor and subnets, rather than being venture capital, is more like research funding—a grant to kickstart you but without taking a share.
To put it bluntly, Bittensor is fundamentally a wealth transfer: from token speculators' pockets to AI researchers' accounts—or more plainly, from lambs to tech-savvy "miners."
The principle is simple: TAO investors act as the backstop for the entire ecosystem. They buy and hold TAO to support the token price, which serves as the channel for funds flowing into the subnetwork incentive system. Subnetwork operators earn TAO inflation rewards through "performance display," which is largely about maintaining a good-looking token price for their subnetwork. The AI products built with this funding can exit at any time—the only constraint being the need to continue acquiring network resources.
This is the VC's worst nightmare: you've invested the money, the product has been built, but they don't owe you anything. All that's left is a token issuance schedule, plus a prayer.
Optimist's Interpretation
Now, let's look at it from a different perspective. The optimistic view is built on two pillars:
The ongoing need for resources means AI companies are always facing a funding shortage. Computing, data, and talent costs are high. If Bittensor can reliably provide these resources at scale, the subnetworks have a reasonable incentive to stay—not because they are locked in, but because leaving would mean losing a channel of resource supply.
There is a soft support in logic: AI's demand for resources is endless, and the scale that TAO can provide is unattainable through self-financing alone. Following this logic, subnetwork teams would proactively maintain their token valuation, without needing any enforcement mechanism, and the TAO economy would naturally form a positive feedback loop. Cryptocurrencies have excelled in aggregating resources. Bitcoin has aggregated massive computing power solely through token incentives. Ethereum's proof-of-work mechanism has also been hugely successful, becoming a powerful magnet for computing resources.
Bittensor is applying the same strategy to the field of artificial intelligence. The "enforcement mechanism" is the token game itself— as long as TAO holds value, the incentive to participate will continue to grow.
If Bittensor's future were simulated 1000 times, the distribution of results would be extremely skewed.
In most simulation scenarios, Bittensor will remain a niche funded project. The AI AI results generated by subnetworks will be insignificant. The best-performing subnetworks will gain significant attention, seize rewards, and then turn to a closed-source mode, providing no value to TAO. When the token issuance exceeds the created value, the TAO token will depreciate.
In a few simulation paths, something really takes off. A certain subnetwork delivers truly competitive AI services, and network effects begin to snowball. TAO becomes the coordination layer of decentralized AI infrastructure in the true sense—not capturing value through enforcement but relying on the gravitational pull inherent in being a reserve asset of a functioning AI economy.
In rare cases, TAO becomes an existence that defines an entirely new asset class.
Where Things Could Go Wrong
The bear case logic is simple: no stickiness. Once a subnet no longer needs TAO token incentives, it will leave. Bittensor is a transitional phase, not a final destination. Centralized AI holds overwhelming dominance. Companies like OpenAI, Google, and Anthropic have orders of magnitude more computing power and talent reserves. TAO cannot compete with the deep pockets of venture capital and private equity markets. Therefore, the best talent will opt for the traditional development path. Inflation is taxation.
TAO's inflation plan subsidizes subnets through dilution of holders. If the value created by the subnet does not match this dilution level, it is a slow bleed disguised as a "growth mechanism."
The optimistic scenario, frankly, looks more like wishful thinking than a realistically viable path to success.
Conclusion
The majority of capital poured into TAO will ultimately subsidize development activities that do not return value to token holders. However, Crypto has repeatedly demonstrated that token incentive-driven coordination games can produce results that defy all rational models.
Bitcoin theoretically should not have succeeded, but it did—even though this argument alone is not sufficient, the industry has used it to endorse numerous projects that cannot withstand first-principles scrutiny.
The core issue with TAO is not whether a coercive mechanism exists—it does not, and the efforts of dTAO have not changed that. The core issue is: whether game theory incentives are strong enough to keep the highest-quality subnets on track. Buying into TAO is a bet that a "soft guarantee" can hold up in a harsh reality.
This is either naive or visionary.
You may also like

SpaceX vs Tesla vs xAI: Which Elon Musk Trade Has the Biggest Upside in 2026?

OpenAI Reveals It Has Confidentially Submitted an S-1 to the SEC, Keeping the Door Open for a Future IPO
On June 9, according to an OpenAI announcement, the company recently confidentially submitted a draft S-1 registration statement to the U.S. Securities and Exchange Commission (SEC), beginning the preliminary compliance process for a potential initial public offering. OpenAI said it chose to disclose this proactively because it expected the news might leak; however, the company has not yet set a specific listing timeline, and related arrangements may still take some time.

Latest research from 13 top universities including Cornell University: The current state, challenges, and misconceptions of the fusion of Crypto and AI

Deconstructing Anthropic: The Best AI Company, Possibly Also a Type of Organizational Invention

Apollo and Blackstone Reportedly Back $35 Billion Anthropic Chip Financing as Deal Details Remain Unclear
On June 9, according to currently available news alerts, Apollo and Blackstone Group participated in a $35 billion financing for an Anthropic “chip project.” Based on the original wording of the report, the funding has already been raised, but public information remains limited. The financing structure, use of proceeds, project entity, and whether Apollo and Blackstone participated through equity, debt, or project financing have not yet been disclosed.

Humanity Protocol Security Incident Escalates: More Than $31 Million Stolen From Related Addresses as Attacker Continues Selling H for ETH
On June 9, according to monitoring by Onchain Lens, more than $31 million has been stolen from addresses linked to Humanity Protocol, and the attack is still ongoing, with the hacker continuously swapping H tokens for ETH. Project founder Terence Kwok later confirmed the security incident on X, saying the issue involved a private key leak.

Bloomberg: As Bitcoin Weakens, Stablecoins and RWA Continue to Drive Expansion in Crypto Businesses
In June, Bloomberg reported that despite Bitcoin falling below $60,000 last week, wiping out about $235 billion in market value within seven days, and dropping close to 50% from last year’s peak, some core businesses in the crypto industry are still expanding, mainly in stablecoins, real-world asset tokenization (RWA), payments, and infrastructure. The report also noted that overall altcoin activity has contracted significantly: altcoin market capitalization has fallen from a peak of about $431 billion in November 2021 to around $170 billion, and among the tens of millions of tokens issued in recent years, fewer than 1,700 still maintain meaningful trading activity.

Galaxy Deep Research Report: How Hyperliquid's HIP-4 Upgrade Changes the Landscape of Prediction Markets?

Binance Research: RWA Market Expected to Expand Nearly 6x from Early 2025, with Public Equities and Onchain Payments Heating Up Together
In June, Binance Research said in its monthly market report that the real-world asset (RWA) market is expected to grow by about 589% from the beginning of 2025. Bond- and money market fund-related RWA expanded by about $6.5 billion, up 83% year over year, while publicly traded equity RWAs grew by about 422%. The report also noted that monthly crypto debit card transaction volume exceeded $747 million in May, up 48.6% year to date.

Japan to Assess a Framework for Yen Stablecoins and Crypto ETFs as Asia’s Compliant Payments Narrative Heats Up
Recently, according to the original report, Japan is considering the launch of yen stablecoins and cryptocurrency ETFs. Public information remains limited at this stage, and there is still no complete policy text, regulatory draft, or clear implementation timeline, so this is better characterized as a “policy discussion” rather than formal implementation. The original wording also noted that advancing stablecoin regulation in Asia is driving XRP usage and supporting growth in the XRPL ecosystem. However, based on currently available public information, there is not enough evidence to directly establish a clear causal relationship between this round of discussion in Japan and XRP or XRPL.

ZachXBT: Humanity private key leak and abnormal surge in H token should be viewed separately
On June 9, according to related disclosures, on-chain investigator ZachXBT posted an update on Humanity’s roughly $31 million security incident, saying that after further analyzing fund flows, he currently tends to believe the project team was not involved in an “inside job” or a self-staged attack. According to him, the official explanation about the private key leak was broadly accurate, but before the token unlock, the price of H had been artificially pushed higher, and the hacker later took advantage of that market environment; therefore, the private key leak and the earlier abnormal price pumping should be regarded as two separate and independent events. This reframing has shifted the market’s understanding of the nature of the incident. Earlier discussion around Humanity had focused on whether the team directly participated in the attack or used the security incident to cover up internal operations. ZachXBT’s latest remarks shift the focus from “whether it was self-theft” to “whether there were pre-unlock market structure issues.” He also questioned whether the team may have.

Morning Report | OpenAI has submitted an S-1 registration statement draft to the U.S. SEC; Morpho completes $175 million financing

Morning Report | BitMine increased its holdings by 126,971 ETH last week; trader Eugene announced his exit from the crypto market

Wang Chuan: How can one not feel anxious after the neighbor Old Wang made thirty times profit by investing in storage stocks? (Seven) - A quarter-century cycle

Cryptocurrency CEXs are flocking to sell US stocks, and traditional brokerages are facing an "uninvited guest."

$75 billion in foreign capital has fled, and South Korean retail investors have absorbed it all using leverage

Japan’s Three Megabanks Plan Joint Stablecoin Issuance in Fiscal 2026
MUFG, SMBC, and Mizuho reportedly plan to jointly issue fiat-pegged stablecoins in fiscal 2026, signaling Japan’s growing push into bank-led digital payment infrastructure.

Humanity Discloses H Token Dual-Chain Attack Details, With Losses on Ethereum and BSC Exceeding $36 Million
Humanity said the H token attack across Ethereum and BSC caused more than $36 million in losses after leaked ProxyAdmin keys enabled malicious contract upgrades and token minting.
SpaceX vs Tesla vs xAI: Which Elon Musk Trade Has the Biggest Upside in 2026?
OpenAI Reveals It Has Confidentially Submitted an S-1 to the SEC, Keeping the Door Open for a Future IPO
On June 9, according to an OpenAI announcement, the company recently confidentially submitted a draft S-1 registration statement to the U.S. Securities and Exchange Commission (SEC), beginning the preliminary compliance process for a potential initial public offering. OpenAI said it chose to disclose this proactively because it expected the news might leak; however, the company has not yet set a specific listing timeline, and related arrangements may still take some time.
Latest research from 13 top universities including Cornell University: The current state, challenges, and misconceptions of the fusion of Crypto and AI
Deconstructing Anthropic: The Best AI Company, Possibly Also a Type of Organizational Invention
Apollo and Blackstone Reportedly Back $35 Billion Anthropic Chip Financing as Deal Details Remain Unclear
On June 9, according to currently available news alerts, Apollo and Blackstone Group participated in a $35 billion financing for an Anthropic “chip project.” Based on the original wording of the report, the funding has already been raised, but public information remains limited. The financing structure, use of proceeds, project entity, and whether Apollo and Blackstone participated through equity, debt, or project financing have not yet been disclosed.
Humanity Protocol Security Incident Escalates: More Than $31 Million Stolen From Related Addresses as Attacker Continues Selling H for ETH
On June 9, according to monitoring by Onchain Lens, more than $31 million has been stolen from addresses linked to Humanity Protocol, and the attack is still ongoing, with the hacker continuously swapping H tokens for ETH. Project founder Terence Kwok later confirmed the security incident on X, saying the issue involved a private key leak.

