Bittensor has a problem that every crypto ecosystem faces: when prices get volatile, people sell their tokens for stablecoins to protect their value. But most stablecoins like USDT or USDC live on other blockchains, which means money flows out of the Bittensor ecosystem entirely.
TensorUSD solves this by creating a stablecoin that lives natively on Bittensor. It’s pegged to the US dollar, backed by TAO tokens, and lets people protect their value during volatility without leaving the ecosystem. Launched on December 28, 2025, as Subnet 113, it’s one of the newest projects on Bittensor.
The idea is simple: instead of selling TAO for USDT and taking your money elsewhere, you convert TAO to TensorUSD and keep it within Bittensor, where it can be used for DeFi activities like lending, borrowing, or providing liquidity.
What TensorUSD Actually Does
TensorUSD is a stablecoin designed to always be worth one US dollar. When TAO’s price swings wildly, you can convert your TAO to TensorUSD to lock in dollar value. When you want exposure to TAO again, you convert back.
The system works through overcollateralization, meaning there’s always more TAO backing the stablecoin than the stablecoin is worth. If you have $100 worth of TensorUSD, there might be $120 worth of TAO locked up as collateral. This buffer protects the peg even when TAO’s price drops.
The stablecoin operates on Subnet 113, which runs something called a Decentralized Market Making protocol. This means miners and validators on the subnet compete to maintain the $1 peg through algorithmic trading and collateral management. They earn rewards for keeping the price stable.
For users, TensorUSD enables staying in the Bittensor ecosystem during market volatility. You can hold TensorUSD when things are uncertain, use it in DeFi protocols that require stable value, or accumulate TAO gradually without worrying about timing the market perfectly.
How It Maintains the $1 Peg
Keeping a stablecoin pegged to a dollar is harder than it sounds. Many algorithmic stablecoins have failed catastrophically when their mechanisms broke down. TensorUSD uses what they call the “Trinity Algo“, a three-token system involving TensorUSD itself, TAO as collateral, and a subnet alpha token. These three work together to maintain stability.
The key metric is the Collateral Ratio versus the Liquidation Ratio. As long as there’s enough TAO backing each TensorUSD (the collateral ratio stays above the liquidation threshold), the system is healthy. If the ratio drops too low, automated liquidations happen to restore balance.
The system includes circuit breakers, automatic mechanisms that pause certain operations if things start going wrong. This is designed to prevent “death spirals” where a stablecoin loses its peg and crashes to zero, taking all the collateral with it.
All the collateral sits in something called an Asset Backing Collateral Vault that’s audited in real-time on the blockchain. Unlike traditional stablecoins, where you have to trust a company claiming they have reserves in a bank somewhere, you can verify TensorUSD’s backing yourself.
Miners and validators continuously monitor the peg and make trades to keep it at $1. If TensorUSD starts trading at $1.02, they sell some to bring it down. If it drops to $0.98, they buy to push it up. They’re incentivized to do this well because they earn rewards based on accuracy.
Why Bittensor Needs Its Own Stablecoin
Every healthy DeFi ecosystem needs stablecoins. They’re the foundational layer that lets everything else work.
When TAO goes from $500 to $200 in a week, that’s a problem if you’re trying to run a business on Bittensor or provide liquidity to markets. You need something that holds steady value to price things in, settle transactions with, and store value temporarily.
Before TensorUSD, Bittensor users had to leave the ecosystem entirely to access stablecoins. They’d sell TAO for USDT on external exchanges, moving capital out of Bittensor. This created a constant capital drain during volatile periods.
With a native stablecoin, that capital stays within Bittensor. Someone who converts TAO to TensorUSD might use it to provide liquidity to a subnet, lend it to another user, or just hold it safely, but they’re still participating in the ecosystem. When they’re ready to re-enter TAO, the capital is already there.
This is especially important for “TAO maximalists“; people who believe in Bittensor long-term but still need stable value sometimes. They can hedge volatility without philosophically abandoning the ecosystem by moving to USDT or USDC.
How It Differs From Regular Stablecoins
Most people know stablecoins like USDT (Tether) or USDC (Circle), but TensorUSD works very differently.
USDT and USDC are centralized stablecoins. Companies hold US dollars and other assets in bank accounts. When you want to redeem USDC for dollars, Circle gives you dollars from its reserves. When you want to mint new USDC, you send Circle dollars, and they create tokens.
This requires trusting the company. You have to believe they actually have the reserves they claim. You have to trust they won’t freeze your funds. You have to hope their banking relationships stay healthy. And you’re subject to whatever regulations apply to those companies.
TensorUSD is decentralized and algorithmic. No company controls it. The collateral (TAO) sits in smart contracts that anyone can verify. The peg is maintained by miners competing for rewards, not by one company managing reserves. Nobody can freeze your TensorUSD or censor transactions.
The tradeoff is complexity and potentially more volatility. Centralized stablecoins are extremely stable because companies can intervene directly. Algorithmic stablecoins depend on their mechanisms working correctly under all market conditions, which is harder to guarantee.
TensorUSD is also overcollateralized with crypto (TAO) rather than backed by fiat dollars in banks. This makes it more decentralized, but also means that if TAO’s price crashes hard enough, the system could face stress even with safety mechanisms.
How Normal People Can Use TensorUSD
Using TensorUSD requires some technical knowledge of Bittensor and crypto in general.
You need a Bittensor wallet set up with the command-line interface. You deposit TAO into the collateral vault to mint TensorUSD. The system gives you TensorUSD tokens worth less than the TAO you deposited (because it’s overcollateralized).
From there, you can hold TensorUSD as a stable store of value, use it in Bittensor DeFi applications for lending or liquidity, or redeem it for TAO when you want to re-enter the market.
For technical users, there’s also the option to participate as a miner or validator on Subnet 113, helping maintain the peg and earning rewards. This requires running infrastructure and understanding the market-making mechanisms.
The project is working on making access easier, but right now it’s definitely not user-friendly for beginners. You need comfort with command-line tools and an understanding of DeFi concepts.
Why Invest in the Alpha Token
Like all Bittensor subnets, SN113 has its own alpha token that you get by staking TAO to the subnet.
The alpha token represents a bet that Subnet 113 will succeed and grow. If TensorUSD sees adoption and becomes important infrastructure for Bittensor DeFi, the alpha token should capture some of that value.
Alpha holders earn a share of the subnet’s emissions, currently around 0.4% of network emissions, or about 0.01 TAO recycled daily. This comes from Bittensor’s reward system for active subnets.
The alpha token also plays a technical role in the Trinity Algo system that maintains TensorUSD’s peg. By holding or staking alpha, you’re contributing to the stability mechanisms and earning rewards for that contribution.
The speculation case is straightforward: if Bittensor’s DeFi ecosystem grows and TensorUSD becomes widely used, alpha tokens should increase in value. But this is highly speculative given how new everything is.
The risks are substantial. The subnet is brand new and unproven. The team is still being revealed. The mechanisms are complex and could have unforeseen flaws. The alpha token could lose significant value if adoption doesn’t materialize or if problems emerge.
This is only for people with high risk tolerance who believe in both Bittensor’s future and the specific vision of TensorUSD. For most people, safer bets would be staking regular TAO or investing in more established subnets.
The Team Behind TensorUSD
TensorUSD is a new project, launched in late December 2025, and the team has been gradually revealing who’s involved.
The CEO is Khem Raj Regmi, announced in January 2026. He’s an AI and blockchain engineer who builds DeFi products, with experience at a German tech company and education from Rhine-Waal University. He’s based in Germany and has worked on multiple AI and blockchain projects.
The advisor is Ajit Khanal, who was also announced in January 2026. Details about his background are limited, but he’s described as a core advisor helping guide the project’s development.
Beyond these two, the full team hasn’t been publicly disclosed yet. The project has committed to revealing more team members in phases, including people working on protocol design, engineering, and operations.
There are also community rumors about involvement from a Bittensor co-founder, which would signal strong institutional backing within the ecosystem. However, this hasn’t been confirmed officially.
The gradual team disclosure has created some community concerns about transparency. People investing in new projects naturally want to know who’s building them. The TensorUSD team acknowledges this and says they’re working toward full transparency while protecting team members during the early launch phase.
For a project dealing with financial mechanisms and user funds, team transparency matters. The fact that they’re revealing members over time rather than hiding completely is a positive sign, but full disclosure would build more community trust.
The Current State and Risks
TensorUSD is extremely new, launched just weeks ago in late December 2025. As of early February 2026, it’s trading around $0.80, close to but slightly below the $1 peg. This slight deviation is normal for algorithmic stablecoins, especially new ones still building liquidity and stabilization mechanisms.
The total market cap is small at around $244,620, and daily trading volume is minimal. These numbers show the project is still in the early adoption phase and hasn’t been stress-tested by major market volatility
Community discussions on Reddit and other forums show mixed sentiment. Some are excited about a native Bittensor stablecoin. Others raise questions about transparency, particularly around fund custody and smart contract audits. When a project deals with user funds, people want to see independent audits proving the smart contracts are secure and the collateral exists as claimed.
The gradual team disclosure mentioned earlier ties into these transparency concerns. The more open the team is about who’s involved, how funds are managed, and what audits have been completed, the more trust the community will have.
The risks are significant. Algorithmic stablecoins have a history of failures, the most famous being TerraUSD, which collapsed spectacularly and lost billions. While TensorUSD has different mechanisms designed to prevent similar collapses, it’s unproven.
The overcollateralization helps, but it isn’t a guarantee. If TAO’s price drops suddenly and severely, the system could face liquidation cascades. If not enough people use TensorUSD to create deep liquidity, maintaining the peg becomes harder. If there are bugs in the smart contracts or flaws in the economic model, funds could be at risk.
Anyone using TensorUSD should understand they’re early adopters taking on significant risk. Only use funds you can afford to lose completely.
What Happens Next
The roadmap for TensorUSD involves proving the system works, building adoption, and expanding use cases. If TensorUSD succeeds, it unlocks a lot of value for the Bittensor ecosystem.
Right now, when markets get volatile, TAO holders have limited options beyond just holding and hoping or selling for external stablecoins. A working native stablecoin gives them a third option, preserving value while staying in the ecosystem.
This capital retention matters enormously for building DeFi. You can’t have robust lending markets, liquidity pools, or complex DeFi protocols without stable units of value. TUSDT provides that stability while keeping everything on Bittensor.
It also reduces friction between subnets. Instead of constantly converting between different subnet alpha tokens and TAO, users can hold TUSDT as a stable medium of exchange that works everywhere. This makes the multi-subnet ecosystem feel more unified.
For subnet projects that want to offer financial services, having a native stablecoin to build on makes everything easier. They don’t need to integrate with external bridges or deal with the complexity of cross-chain stablecoins.
The success isn’t guaranteed, and the project faces real challenges around adoption, liquidity, and maintaining its peg. But the potential impact on Bittensor’s ecosystem is significant enough that it’s worth watching how TensorUSD develops.
Learn more: docs.tensorusd.com
Check out their GitHub at manifold-inc/hone
Follow @TensorUSD on X
