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This document aims to explain how the TAO staking and emission processes work under Dynamic TAO.

Last update: November 5th

The DTAO system is not final yet, and the document will not necessarily reflect what will end up being released.
Big thanks to Maciej and Spacetime for all the time spent answering questions on Discord, and to Maciej for his RAO simulation (2).

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The goal of Dynamic TAO is to create an environment where TAO emissions get directed to subnets by all participants in the network, instead of just a few.

By assigning their token to one subnet instead of another, TAO holders direct more emissions towards that subnet. In exchange, they receive the subnet Dynamic Token, which varies in price according to the quantity of TAO assigned to this subnet.

In other words, they are taking a risk when directing emissions to a subnet, and can get rewarded or penalized for this risk.

How do subnet pools work?

There is one pool per subnet. Each of these pools has two tokens:

• TAO
• The Subnet Dynamic Token, inside the pool (ex: alpha_in, beta_in, …)

There is a third token within each subnet:

• Subnet Dynamic Token, outside the pool (ex: alpha_out, beta_out, …) the one actually held by wallets.

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The goal of the Subnet Dynamic Token inside the pool (alpha_in) is mainly for accounting.

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Staking and unstake

What happens when I stake my TAO on a subnet?

I would send TAO to the subnet token pool, and receive alpha_out in exchange.

The price of alpha increases: there are more TAO per alpha in the pool

$$ \text{alpha\_price} = \frac{\text{tao\_in}}{\text{alpha\_in}}

$$

$$ \text{alpha\_received} = \text{alpha\_in} - \left( \frac{\text{tao\_in} \times \text{alpha\_in}}{\text{tao\_in} + \text{staked\_tao}} \right)

$$