The Funding: Why Bittensor (TAO) is drawing in crypto investors

There has been a noticeable uptick in chatter around Bittensor lately. Its native token, TAO, is up about 60% in the last month. A Bittensor-focused liquid fund quietly launched in April. Digital Currency Group’s Barry Silbert suggested TAO may be the next Bitcoin on The Block’s podcast earlier this week. And several crypto funds already hold large positions in TAO. Add the growing excitement around decentralized AI, and Bittensor is suddenly back in focus. I spoke to investors and builders to understand what’s driving the momentum — and what might come next.

 

At its core, Bittensor is a platform built around incentives. People contribute intelligence by helping AI systems improve and earn TAO tokens based on how useful their work is. The more value one adds, the more they’re rewarded. It’s open to anyone and designed to coordinate AI in a permissionless way.

The broader crypto-AI or decentralized AI narrative is rooted in the idea that AI is too powerful to be controlled by centralized actors like OpenAI or nation-states. And that’s where Bittensor’s positioning is starting to resonate. “One of the strongest narratives in Token2049 Dubai was, yet again, the intersection of AI and blockchain,” said Joscha Kuplewatzky, investment manager at Wintermute Ventures, who attended the event earlier this week. “In the short term, this is bullish for TAO because investors that may want indexed exposure to the AI crypto space may buy TAO as a proxy. In the medium to long-term, Bittensor can be expected to benefit structurally from this increase in AI projects if they launch as subnets.” Kuplewatzky declined to disclose whether Wintermute Ventures is an investor in TAO.

Bittensor has been around since 2021, but recent developments have brought it more visibility. One of the main catalysts was its Dynamic TAO (dTao) upgrade in February, which introduced “alpha” tokens for subnets or applications built on Bittensor — all still denominated in TAO. “Subnets and especially dTao have been foundational upgrades and completely shifted market dynamics for Bittensor, while still keeping the game intact where any and all roads lead to TAO,” said Mitch Boom, co-founder of Taofu, who goes by Axilo on X. Taofu is building a Bittensor subnet launchpad and tokenization platform to help subnet owners raise capital without selling their alpha tokens.

Another driver of attention: Bittensor implemented Ethereum Virtual Machine (EVM) compatibility in late 2024, making it easier for developers to build on the network. And in February, TAO’s Coinbase listing added more liquidity and visibility.

As crypto-AI funding heats up, with projects like Nous Research, Sentient, and Sahara AI recently raising around $200 million cumulatively, most of these projects focus on single AI markets like inference or computing. Bittensor, in contrast, is positioning itself as a coordination layer for all of it. Despite raising several hundred million dollars combined, these projects have shipped and produced value “that doesn’t even scratch the surface of what Bittensor has produced,” said Joseph Jacks, founder and general partner of OSS Capital, an investor in TAO and Nous Research. “Bittensor has raised zero dollars from venture capital.”

Jacks argues these aren’t true competitors to Bittensor — and many of them should actually become subnets within its ecosystem and become bigger companies. He points to Chutes — a serverless AI compute subnet built by Rayon Labs that’s processed nearly 2 trillion pieces of text within a few months of its launch — as one example. “If this one subnet was valued as a startup like Anthropic or Cohere or Mistral, it would probably be worth $10 billion, maybe $15 billion,” he said.

Jacks isn’t just backing TAO as an investor. His other company, Latent Holdings, is building ecosystem tools like TAO.app (a metrics tracker) and TAO Hash, a subnet aimed at decentralizing Bitcoin hashrate. “Bittensor is to capitalism what Bitcoin is to fiat,” Jacks said.

Bittensor is often compared to Bitcoin by its proponents, largely due to their shared fixed 21 million token supply, halving mechanism, and permissionless ethos. But that comparison is a “gross oversimplification and doesn’t really do justice to either,” said Wintermute’s Kuplewatzky. He also noted that TAO’s price action is more in line with other Layer 1 tokens, which suggests investors are seeing TAO as an ecosystem token, not a store of value like bitcoin.

Bittensor’s future depends on whether subnets can produce applications with real traction. “The biggest fundamental risk to Bittensor is that the individual subnets fail to achieve product-market fit,” said Tekin Salimi, founder and managing partner of dao5 and formerly a general partner at Polychain Capital. “For Bittensor to attract a critical mass of users, some number of its subnets need to generate profits to be able to survive without relying on subsidies in the form of TAO inflation.”  

Dao5 was one of TAO’s earliest backers, alongside DCG and Polychain — whose holdings were reportedly worth over $50 million, $100 million, and $200 million, respectively, about a year ago. Today, DCG is the largest TAO holder, with around 500,000 TAO — roughly 2.4% of the total supply — worth about $175 million, according to Jacks of OSS Capital. DCG did not immediately respond to The Block’s request for comment.

Notably, dao5, DCG and Polychain all run Bittensor validators — including dao5 via its tao5 entity and DCG via its Yuma subsidiary. “Bittensor is one of our highest conviction positions and we look forward to supporting the network for years to come,” said Salimi.

Robert Myers, CEO of Bittensor ecosystem-focused Manifold Labs, a former Bittensor employee and one of the largest TAO holders, also said much of the network’s long-term strength depends on the fundamentals of its subnets. “There must be substance behind subnets for it to sustain long term” Myers said, who also revealed that he started mining TAO in January 2021 as the first miner besides Bittensor co-founders Jacob Steeves and Ala Shaabana then stopped mining in mid-2024.

Bittensor’s miners matter, too. If miners find better incentives elsewhere, the network “bleeds performance,” said Sami Kassab, managing partner of Unsupervised Capital and formerly of OSS Capital and Crucible Labs. “Just like Solana and Ethereum won with developers, Bittensor’s edge is its miners — the elite operators who make it worth building on. Lose them, and the flywheel stalls,” he said.

Unsupervised Capital, which recently launched a Bittensor-focused liquid fund, is anchored by Crucible Labs, which was founded by Bittensor co-founder Shaabana and CapitalG’s David Lawee, Kassab said. The fund’s goal is to accumulate more TAO for its limited partners, he added.

“We do that by investing in subnets where we see asymmetric upside — finding mispriced tokens, backing undiscovered teams with real edge, and leaning into markets where decentralized AI can win,” Kassab noted.

The bet Bittensor investors are making is that breakout apps will emerge and subnet teams will level up — a trend already visible, according to some. “Over the last year, the developer quality has become so much stronger,” said Max Bronstein, an early TAO backer and former Coinbase Ventures investor. “I’m looking to see that trend accelerate as more builders enter the ecosystem and funding is more easily made available to them.”

Boom of Taofu echoed that sentiment, reflecting on Bittensor’s first event, Endgame, held in Austin late last month. “The builder sentiment around Bittensor has been solid — and the vibes during the event were amazing.”

As with much of crypto: the infrastructure is here. The applications? Still loading.