TAO Drops 16% After Covenant AI Exit Raises Fresh Centralization Concerns in Bittensor

TLDR:

• TAO fell from $337 to $270 within 24 hours after Covenant AI announced its exit over governance concerns.
• Covenant AI claimed revenue was halted abruptly, and decision-making power shifted away from the broader community.
• Infrastructure updates were reportedly introduced without consensus, raising concerns among contributors about control.
• The project, once backed by major AI figures, now faces scrutiny over whether it still operates as decentralized.

Bittensor’s native token, TAO, recorded a sharp decline within 24 hours after a public dispute raised concerns about governance and network control.

The development followed the exit of Covenant AI, a key contributor, which cited operational and structural concerns.

Covenant AI Exit Raises Governance Questions

A recent post by Coin Bureau on X detailed Covenant AI’s departure from the Bittensor ecosystem. The statement alleged that revenue streams were halted without prior notice, disrupting ongoing operations tied to the project.

Covenant AI further stated that governance mechanisms had shifted away from community participation. According to the team, decision-making authority appeared concentrated among a limited group of actors. This shift raised concerns about whether the network still operates under decentralized principles.

The group also pointed to infrastructure changes introduced without broader consultation. These changes, described as top-down, reportedly altered how participants interact with the system. As a result, contributors expressed uncertainty about the network’s direction and governance structure.

Covenant AI was known for developing Covenant-72B, a large-scale language model built through contributions from over 70 participants. The model was trained using consumer-grade hardware, reflecting a collaborative approach within decentralized AI development.

Market Reaction Follows Centralization Allegations

Following the announcement, TAO experienced a rapid price drop, falling from $337 to $270 within a single day. The movement reflected a strong market response to the claims surrounding governance and operational control.

The project had previously gained recognition from notable figures in the artificial intelligence sector. Jensen Huang had publicly acknowledged the initiative, while a co-founder of Anthropic expressed support for its development approach.

Despite this recognition, the latest developments placed attention on internal dynamics within the network. Market participants reacted quickly as concerns about decentralization surfaced, leading to increased volatility in TAO’s valuation.

The situation also drew attention to broader discussions around decentralized AI systems. Questions emerged regarding how governance structures evolve as projects scale and attract more contributors.

At the time of reporting, no additional clarification from the Bittensor core team had been referenced in the initial statement. The absence of an immediate response left market participants assessing the available information.

TAO’s decline followed a period of steady activity, making the sudden movement notable within the digital asset market. Traders and observers continue to monitor developments as further details may emerge from involved parties.

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