In the history of blockchain consensus mechanisms, miners and validators have traditionally served as independent actors, performing the primary function of producing tamper-proof blocks on Proof-of-Work and Proof-of-Stake networks, respectively. Bittensor has creatively repurposed these roles within its Yuma Consensus mechanism to introduce a novel class of decentralized network architecture, which I refer to as Proof of Useful Work.
The Role of Miners and Validators
In Proof of Useful Work networks, the roles of miners and validators can be broadly defined as such:
This innovative architectural framework has far-reaching implications for decentralized networks that generate the majority of their economic value off-chain, as seen with Bittensor, Vana, and other emerging AI and big data networks.
At Edge City Lanna, I presented a framework for incentive design in such networks, describing this structure as a form of automated venture capital feedback loop.
In traditional venture investment, the process involves subjective, human-driven assessments of founders, technology, and a company's potential economic impact. In a nascent blockchain-based network like Bittensor, emissions serve as the primary funding mechanism for miners. Given the diverse and complex nature of miner contributions within this ecosystem, emissions resemble venture funding for software startups. Consequently, the role of validators also becomes significantly more intricate. This creates a system that increasingly resembles automated capital formation (via TAO purchasers) and allocation (through TAO emissions).
The Future of Capital Allocation
Intelligent capital allocation—such as the services provided by validators—is the single most critical component that a coordination layer must perfect to ensure long-term success. The recent announcement of Crucible Labs, touted as the "Consensys of Bittensor," is an exciting development in this space. Similarly, as newer AI coordination networks like Vana scale, aligning their validator ecosystems will be equally vital. Data quality and formatting will play a crucial role in ensuring their long-term success. At Cosimo, we are actively exploring opportunities to participate in and invest in teams tackling these challenges.
In order to add some structure to the way we allocate emissions, we've created a three tier subnet classification system inspired by venture capital frameworks:
• Premier Subnets: Series A equivalent projects with…
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*Disclaimer: Cosimo Capital is an investor in Bittensor through the TAO token.
