What are Alpha tokens?

When you stake TAO into a service subnet, the protocol exchanges that TAO for the subnet’s Alpha token.

That means an Alpha position represents:

• Exposure to one specific subnet
• Exposure to that subnet’s liquidity and market conditions
• Exposure to the validator association used for delegated rewards

Your wallet remains the owner of the position. The subnet and validator you choose affect how the position behaves and what rewards it may receive.

Advanced note+

The stake is recorded against your coldkey, the selected validator hotkey and the subnet’s numerical identifier, called its netuid.

Each service subnet’s Alpha token has a maximum supply of 21 million and its own halving schedule from the subnet’s launch. Per block, the protocol can create alpha_out for participant rewards and alpha_in for pool liquidity. A young subnet can mint up to one of each per block before its own halving curve and injection limits reduce that rate.

Each service subnet has an on-chain weighted pool that pairs TAO with that subnet’s Alpha token.

The protocol uses the pool’s TAO reserve, Alpha reserve and current weights to determine Alpha’s spot price in TAO terms. With the default equal weights, the price follows the pool’s TAO-to-Alpha reserve ratio.

That means:

• Alpha’s price can change over time
• Different subnets can have very different Alpha prices
• The price shown in a quote is not permanently locked in before execution

A transaction can also move the pool itself, so the average execution price may differ from the spot price. Service-subnet swaps currently use a default pool fee of about 0.05% of the input amount.

An Alpha position can receive rewards through the subnet’s incentive system.

The network currently allocates TAO emission across subnets using a moving average of each subnet’s Alpha price, adjusted by its miner-burn penalty. Inside each subnet, accumulated Alpha is split 18% to the owner, 41% to miners and 41% to validators with their stakers.

In delegated staking, rewards are linked to the validator associated with the position. A delegated position can receive a proportional share of validator-side dividends after the validator’s current take. The chain default take is 18%, but a validator can set a lower rate.

Rewards settle at the subnet’s epoch. The default tempo is 360 blocks, or about 72 minutes, although a subnet’s current setting can differ.

The result is not fixed. It can change because of:

• Validator performance
• The validator’s take
• Other stake in the subnet
• Subnet emissions
• Protocol settings
• Alpha’s changing value in TAO

A growing Alpha balance does not guarantee a growing TAO value.

Liquidity describes how much TAO and Alpha is available in the subnet pool.

A larger transaction relative to the pool can move the execution price more than a smaller one. That is price impact.

It helps to distinguish three ideas:

Price impact

Movement caused by your own transaction consuming pool liquidity.

Slippage

Additional movement caused by the pool changing before your transaction executes.

Execution limit

A boundary that restricts how much adverse price movement your transaction accepts.

The pool fee is separate from price impact and slippage. Even if a transaction succeeds within its limit, Alpha’s market value can still change afterwards.

Alpha creates exposure to both a subnet and a market.

Subnet risk

The subnet’s service or incentive design may underperform.

Price risk

Alpha can lose value against TAO.

Liquidity risk

A thinner pool can create greater price impact and weaker exit conditions.

Validator risk

Validator performance, availability, and take can change.

Protocol risk

Bittensor rules can evolve, and a subnet can be deregistered.

If a subnet is deregistered, its UIDs and Alpha market are removed. The pool’s TAO reserve is distributed proportionally across Alpha holders, so the payout can differ from the position’s earlier market value.

Compare the subnet itself as well as its token. A strong-looking price or APY does not remove service, validator, liquidity or deregistration risk.

You get a subnet’s Alpha by staking TAO into that service subnet.

You exit the position by unstaking, which exchanges Alpha back into TAO through the same subnet pool.

Moving from one service subnet to another requires:

• Exiting the first Alpha position through TAO
• Entering the second subnet from TAO

That means both pools can affect the final result.

For PotaTao’s current supported flow, follow the TAO-to-subnet-token tutorial.

To understand validator selection, read How to stake TAO in a subnet →. To change the validator linked to a position in the same subnet, read How to move stake between validators →.