# Shorts and longs on subnet alpha (PR #3211)

Borrow alpha against TAO (a short) or TAO against alpha (a long) from a subnet's lending vault: 25% max loan, 100% annual interest burned, no price liquidation.

_Source: https://taostats.io/docs/concepts/protocol-changes/shorts-and-longs_

_Last reviewed: 2026-10-07_

> [!WARNING]
> **Not live on mainnet yet**
>
> This page describes [subtensor PR #3211](https://github.com/RaoFoundation/subtensor/pull/3211) (open, commit `7f634b4`). Finney runs spec 473. Loans come from the lending vault created by [superellipse pools](https://taostats.io/docs/concepts/protocol-changes/superellipse-pools).

## Terms

| Term | Meaning |
|---|---|
| Trading pool | The subnet's swap pool, on the ellipse curve. |
| Lending vault | A separate per-subnet store of TAO and alpha. All loans come from here. |
| Short | Lock TAO, borrow alpha, the chain sells it. You gain if the alpha price falls. |
| Long | Lock alpha, borrow TAO you can spend. |
| Collateral | What you lock: TAO for a short, alpha for a long. |
| Loan record | The chain's record of one open short or long. One per coldkey per subnet. |

## Where loans come from

The ellipse curve leaves TAO and alpha in each pool that no swap can reach. The upgrade moves that into the lending vault; no new tokens are created ([how](https://taostats.io/docs/concepts/protocol-changes/superellipse-pools#the-lending-vault)). Loans never come out of the trading pool.

Lending starts only once the pool switch completes on every subnet. Governance (root) can pause new loans; repaying, collection and settlement stay available.

## Rules

| Rule | Value |
|---|---|
| Max loan | 25% of collateral value |
| Leverage | None |
| Interest | 100% a year on the loan's opening value |
| Where interest goes | The TAO burn address. Total issuance is not reduced. |
| Opening or closing fee | None |
| Price-triggered liquidation | None |
| Cap per subnet | Loans of each asset ≤ 10% of the lending vault |
| Max loan records | 128 per subnet, 256 chain-wide |
| Max subnets with a vault | 256 |
| Reference price | 24-hour moving average |

Interest is fixed at opening, accrues per block, is paid from your collateral and is collected weekly.

The burn address is the chain's standard one, used by other TAO burns. It is derived from a fixed ID with no private key, so nobody can spend from it. The TAO stays in that account and still counts in total issuance; it is not recycled. The one exception: amounts too small to create an account are recycled.

## A short, step by step

Example from the PR: lock 1,000 τ.

| Step | What happens |
|---|---|
| Open | Borrow alpha worth up to 250 τ, say 700 α. The chain sells it at once and locks the TAO it gets. |
| While open | The debt stays 700 α. Interest is 250 τ a year, about 4.79 τ a week, taken from your 1,000 τ. |
| Close | The chain buys back 700 α with your locked TAO and returns it to the vault. You get the remaining TAO. |
| Close, other way | Repay the 700 α from your own hotkey instead. No buyback. |

The 1,000 τ covers about four years of interest if nothing else happens.

If the alpha price rises too far, the buyback can't be paid for and the close fails, leaving the loan record unchanged. You can still close by repaying the alpha yourself.

Our own arithmetic: about 1,250 τ is locked (1,000 τ plus 250 τ of sale proceeds), so the price would need to rise roughly 5× before a buyback fails, less interest already paid and price impact.

## A long, step by step

| Step | What happens |
|---|---|
| Open | Lock alpha from a hotkey. Receive TAO worth up to 25% of it, to spend however you like. |
| While open | Interest is taken from the locked alpha. The chain sells that alpha in the trading pool and sends the TAO to the burn address. |
| Close | Repay the TAO you borrowed. Your remaining alpha returns to the same hotkey. |

## When the collateral runs out

There is no liquidation on price. A loan ends early only when its collateral can no longer pay interest. The chain then closes it and keeps what's left; anything it can't recover is booked as a loss. The loan can't be reopened.

The PR states plainly that the high interest and small loan size do not guarantee every loan is repaid.

## When a subnet is deregistered

- New loans stop and interest freezes.
- Shorts settle at the higher of spot and the 24-hour average. Any surplus goes to the owner; any shortfall is booked as a loss.
- What shorts repaid, plus the vault's unlent TAO and alpha, go back into the trading pool.
- Alpha holders are paid from the trading pool's TAO, as today.
- Longs settle last. The payout repays the loan first and the rest goes to the owner: 50 τ owed against a 70 τ payout leaves 20 τ for the owner. A 20 τ payout leaves a 30 τ loss, and the owner is not chased for it.

Full detail: [Superellipse pools — when a subnet is deregistered](https://taostats.io/docs/concepts/protocol-changes/superellipse-pools#when-a-subnet-is-deregistered).

## btcli

```bash
# Lock 700 free alpha from this hotkey and receive transferable TAO.
btcli lending open --netuid 64 --side long --collateral 700 --hotkey <hotkey> -w mywallet

# Repay the original debt and release remaining collateral.
btcli lending close --netuid 64 -w mywallet

# A short can instead repay with alpha already held on its saved hotkey.
btcli lending close --netuid 64 --repay-from-wallet -w mywallet

# List all positions on a subnet, or one owner's position.
btcli lending list --netuid 64
btcli lending list --netuid 64 --coldkey <coldkey>
```

## What it means for Taostats data

- **Loan pages:** all open loan records, closed ones, and a per-subnet tab. Columns: collateral, debt, interest paid, weeks of interest left. There is no "underwater" state.
- **Vault per subnet:** TAO and alpha in the vault, amount lent, and room left under the 10% cap.
- **Burn tracking:** interest is a new source of TAO sent to the burn address. It shows as transfers into that account plus a per-subnet interest-burned event, not as a drop in issuance.
- **Pool numbers:** see [Superellipse pools](https://taostats.io/docs/concepts/protocol-changes/superellipse-pools#what-it-means-for-taostats-data).

> [!NOTE]
> **Previously:** an earlier shorting design (PR #2764/#3135) lent from the trading pool, allowed up to 1.5× on longs, charged 52% a year on shorts and recycled interest. PR #3211 replaces it.

Source: [Shorts and longs (Rufus)](https://s3.hippius.com/rufus/public/shorts-and-longs.html) · [PR #3211](https://github.com/RaoFoundation/subtensor/pull/3211)