Subnet Deregistration
A proposed reintroduction of subnet removal mechanisms for Dynamic TAO, designed to free up TAO emissions and protocol resources.
Subnet deregistration is a process to remove subnets from Bittensor. This mechanism existed before Dynamic TAO but was disabled with its introduction. The current proposal reintroduces deregistration in a Dynamic TAO-compatible format.
When a subnet will be deregistered, the TAO in its pool is shared fairly with ALPHA token holders. The subnet owner will get back their locked TAO (from registration), minus the emissions they already received.
BIT-0016 PROPOSAL
This proposal is still not final or ready for use. There is no ETA of its arrival and a Senate vote would be considered before integrating into "mainnet".
A deregistration would happen when the protocol reaches its defined subnet limit (256 subnets), and a new subnet tries to register. The protocol then identifies which existing subnet to remove using on-chain criteria.
The currently proposed criteria is the ALPHA Distribution Ratio (ADR). Only subnets with an ADR less than 1 would be eligible for deregistration. Among eligible subnets, the protocol then selects the one with the lowest ALPHA price. New subnets will have a 6-month immunity period when they cannot be deregistered.
The "ALPHA Distribution Ratio" shows how ALPHA tokens are split between the pool and participants:
When ADR is less than 1, more ALPHA tokens exist in the pool than are held by participants. This can happen when users stake TAO for ALPHA, but more ALPHA returns to the pool through unstaking/selling than what is taken out through staking /buying.
The protocol injects between 0 and 1 ALPHA token into the pool per block . In ideal cases, the protocol injects 1 ALPHA into the pool, matching the 1 ALPHA given to participants. When ADR drops below 1, it indicates a lower demand for the subnet's ALPHA.
The ADR directly affects the liquidation price during deregistration. When the ADR is above 1, the pool holds less liquidity, resulting in a lower liquidation price. When the ADR is below 1, the pool holds more liquidity that gets distributed to ALPHA holders during liquidation. This provides ALPHA holders with more TAO than the current ALPHA price suggests, making deregistration beneficial for all parties involved.
TERMINOLOGY OF ADR
The community initially introduced this metric as "NAV", but the traditional NAV term may not be appropriately applied here. We propose using "ALPHA Distribution Ratio (ADR)" as a clearer alternative that better reflects what the metric actually measures. We hope this terminology will be officially adopted to reduce confusion.
As mentioned, new subnets will get a 6-month immunity period. During this time, subnets cannot be deregistered no matter their ADR or ALPHA price. This protection allows new subnets time to establish themselves and build community support.
Since Dynamic TAO began, some subnets labeled as "inactive" still consume TAO emissions and resources. About half of the current subnets have an ADR below 1, showing less demand for their ALPHA token.
Because of how subnet pools work, about half of the TAO in pools stays locked and cannot be unstaked. Deregistration lets the protocol "unlock" these TAO tokens to be distributed elsewhere. It also helps ALPHA holders by giving them more TAO from liquidation than regular unstaking. This occurs because the ADR acts as a "multiplier" relative to the liquidation price. For example, if the ADR is 0.5, the liquidation price will be 2 times the current ALPHA price.