Shorting (PR

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Status: pending · Last reviewed: 2026-06-27 · Source PR

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Not live on mainnet

This page describes Subtensor PR #2764, the v3.6.1 Fixed-Liability Covered
Continuous-Unwind Model for shorting alpha tokens. The runtime flag
ShortsEnabled defaults to false and the feature is gated behind the
trading-games activation. Do not make production decisions assuming shorts
are available on mainnet. When the flag flips, this section will be
re-reviewed and cross-cut into tokenomics, staking, and chain pages.

What covered shorting is

A covered short on Bittensor is a leveraged bearish bet on a subnet's
alpha token. You fund a TAO floor P (your max loss), borrow a fixed
quantity of alpha Q from the subnet pool at today's price, and profit if
alpha depreciates. To close, you buy Q back from the pool — if the price
fell, the buyback costs less than your retained buffer R and you keep the
difference. If the price rose, the buyback eats into R and then into P.

Crucially, there is no margin liquidation. There is no liquidation price
to target, no short squeeze, no MEV-driven forced close. Default happens
only on time — when the retained buffer decays to a dust threshold — or on
subnet deregistration. Your maximum loss is capped at the floor P you
funded at open.

The model matters for subnet economics because it injects discipline
without leaving TAO stranded. Every τ removed from the pool at open is
returned: via daily decay (R and E drift back into reserves over the
position's life), via the close settlement, or — if the trader abandons —
via recycling P into the TAO emission pool as tao_in. There is no path
that permanently drains pool reserves.

Pages in this section

• Explainer — conceptual
  walkthrough: the letter glossary, opening a short, daily decay, the three
  close scenarios, how you lose, and why subnets benefit from this model.
• Flow — ledger story — the same
  short followed in three parts (open / decay / three closes) with full
  TAO/α/Price/P/E/R/Q ledger tables and the close-decision rule at the end.
• Technical reference —
  spec-to-Subtensor notation map, closed-form open math, per-block decay
  pseudocode, the three close paths, storage layout (ShortPosition and
  ShortAgg Rust structs), governance parameters, the four extrinsics
  (call indices 139–142), reserve accounting model, and terminal
  deregistration settlement.
• Simulator —
  interactive simulator for opens, closes, and decay trajectories.
  Loads Chart.js from a CDN; otherwise self-contained.

Source

These pages are the canonical migration of Rufus's HTML explainers,
authored against the PR #2764 specification (DESIGN.md §1–17 and
IMPLEMENTATION_PLAN.md). Where wording works, it has been preserved
lock, stock, and barrel.