Bottlenecked Transformers: Periodic KV Cache Consolidation for Generalised Reasoning

Transformer LLMs have been shown to exhibit strong reasoning ability that scales with inference-time compute, most prominently through token-space “thinking” (i.e., chains of thought). A growing line of work pushes this extra computation into the model’s latent space (adjacent to standard decoding) which we term Auxiliary Latent-Space Computation (ALSC). Existing ALSC methods largely fall into three buckets: (i) token-mediated latent or special-token rollouts, (ii) residual/activation steering, and (iii) memory compression via cache pruning, merging, or summarization. An underexplored alternative is memory consolidation and reconsolidation, two processes in the brain that are responsible for stabilising newly formed memory traces, and, upon recall, transiently rendering established traces plastic such they can integrate new contextual information before restabilising. In a Transformer LLM, this can be seen as analogous to performing in-place global rewrites of incoming KV segments, and rewrites of past segments conditioned on newly observed tokens. In this work, we give a theoretical justification as to why memory (re)consolidation via KV cache rewrites is beneficial for improved reasoning. We do this through the lens of Information Bottleneck (IB) theory, which posits that model generalisation emerges from an optimal balance between input information compression and retention of predictive information in latent representations. We prove using IB theory that Vanilla decoder-only Transformers are inherently constrained in their ability to form task-optimal sequence representations. We then introduce the Bottlenecked Transformer, which augments a decoder-only backbone LLM with a lightweight Cache Processor, an auxiliary Transformer that performs periodic, non-causal, in-place KV rewrites at newline-delimited reasoning step boundaries. The processor consolidates recently written KV entries and reconsolidates a small, top-$k$ attention-selected set of prior entries, conditioned on recent context. We evaluate our Bottlenecked Transformer architecture on seven mathematical reasoning benchmarks, with four backbone LLMs. Our model sees consistent performance gains over vanilla Transformers and pause-token augmented Transformer baselines, with gains of up to +6.6pp for selected tasks and backbones.