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A new proposal from Bittensor co-founder Const could fundamentally change how capital flows through the network by replacing the automatic sale of subnet rewards with a system that continuously reinvests those rewards back into the ecosystem.
The proposal, titled "Root Reborn," was submitted as Pull Request #2759 and introduces a new mechanism for how root staking rewards are distributed.
Today, root staking functions as Bittensor's closest equivalent to a risk-free rate. Root validators earn dividends generated from subnet activity, but those rewards are automatically swapped into TAO before being distributed to stakers.
According to Const, that process creates a structural issue.
"Every block, root dividends are auto-swapped out of subnets into TAO," the proposal states. "The rate that's supposed to anchor the network is funded by continuously dumping the very assets that give TAO its value."
Under Root Reborn, that flow would reverse.
Bart Hillerich
Instead of automatically selling subnet rewards into TAO, root validators would define allocation weights across subnets. Dividends earned by root validators would then be reinvested into those subnets, creating a continuously compounding basket of subnet exposure. Root stakers would still be able to redeem their positions back into TAO on demand, but the underlying rewards would remain invested until claimed.
It's a significant shift in incentive design.
Supporters argue that the current system generates persistent sell pressure on subnet alpha tokens because rewards must be liquidated before reaching root stakers. Under the proposed design, those same rewards would instead create buy pressure as capital is recycled back into subnet markets.
Updating To Active Capital Allocation
Today, root largely acts as a passive distribution mechanism. Subnet dividends flow into root, are automatically sold into TAO, and are distributed to stakers. Capital passes through the system, but little judgment is involved.
Root Reborn introduces a new role for validators. Instead of simply collecting rewards, validators would actively determine where root capital is deployed by setting allocation weights across subnets, meaning root staking could evolve into a continuous, stake-weighted capital allocation market. Validators that identify promising subnets, therefore, would direct more capital toward them through their basket allocations. Subnets that lose validator confidence would receive less reinvestment and less support from root capital.
The proposal effectively allows the market itself to determine where a portion of Bittensor's largest capital pool flows, a change that would have significant broader implications for the network's economics.
Instead of generating yield by continuously selling subnet assets into the market, root would generate yield by accumulating and compounding exposure to those assets. Validator baskets would remain redeemable for TAO, but the underlying capital would stay invested until redemption occurs.
Supporters argue this creates a fundamentally different dynamic. Yield that previously created ongoing sell pressure becomes a source of buy pressure. Capital that once exited subnet markets is recycled back into them.
If successful, the mechanism could create a self-reinforcing flywheel. Reinvested capital supports subnet valuations, stronger subnet performance increases root dividends, and higher root yields attract additional stake to root. That new stake is then deployed back into the network through validator-curated baskets.
Debate Emerges Around Validator Influence
The proposal has already sparked discussion within the Bittensor community, with some participants questioning whether the new system would give validators too much influence over capital allocation.
The most prominent critic has been famed crypto influencer Algod (most known for his dispute with Do Kwon and LUNA collapse prediction), who argues that TAO already functions as an index-like asset representing the broader subnet ecosystem and does not require an additional layer of validator-directed allocation.
Let me try to explain:
— Algod (@AlgodTrading) June 16, 2026
Validators often have subnets, you have good validator owners and bad validator owners. Lets go through a few scenarios
-validator is neutral and allocates to best subnets
-validator is biased, strongly allocate towards his subnets, you can argue that if… pic.twitter.com/NkCGJRsqxB
His primary concern centers on potential conflicts of interest. Because some validators are also subnet operators or investors, he argues that validator-directed allocation could create incentives to favor certain subnets over others. Some critics have also pointed to governance concerns from the pre-dTAO era, when relationships between validators and subnet operators were a frequent source of controversy within the network.
Additional concerns focus on whether emissions-driven selling pressure is actually a problem that needs to be solved. Algod argues that reward recipients selling a portion of emissions is a natural part of token economics and helps distribute dilution across market participants.
Supporters of Root Reborn, meanwhile, view validator-directed allocation as a feature rather than a flaw. The proposal's design assumes that validators who consistently allocate capital poorly would become less attractive to root stakers over time, while those generating stronger returns would attract more stake. Under this view, capital allocation becomes a competitive market driven by validator performance rather than a passive distribution mechanism.
Looking Ahead
The proposal is still under review and has not been activated on the network.
If implemented, Root Reborn would redefine root from a passive yield conduit into an active allocator of capital, giving validators a direct role in shaping how value flows throughout the Bittensor ecosystem.
We want to hear from you (subscribe to comment!). Should Bittensor's risk-free rate be funded by selling subnet assets, or by continuously reinvesting in the network that creates those rewards?
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