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

TAO, the native token of Bittensor, fell sharply within 24 hours after a public dispute raised concerns about governance and network control. The move followed the exit of Covenant AI, a key contributor, which cited operational and structural concerns.

Covenant AI exit raises governance questions

A post shared by Coin Bureau on X described 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.

🚨NEW: Bittensor TAO crashes 16% as Covenant AI exits over centralization claims.

Covenant's statement:

• Revenue halted without warning
• Governance stripped from community
• Infrastructure changes implemented top-down
• "Controlled by a few actors, not decentralized"

Covenant AI also said governance mechanisms shifted away from community participation. According to the team, decision-making authority appeared concentrated among a limited group of actors, raising questions about whether the network still operates under decentralized principles.

The group further pointed to infrastructure changes introduced without broader consultation. Covenant AI described these changes as top-down, saying they altered how participants interact with the system and leaving contributors uncertain about the network’s direction and governance structure.

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

Market reaction follows centralization allegations

After the announcement, TAO dropped from $337 to $270 within a single day. The rapid decline reflected a market response to the allegations about governance and operational control.

The project had previously received public recognition from prominent figures in artificial intelligence. Jensen Huang acknowledged the initiative, and a co-founder of Anthropic expressed support for its development approach.

Despite that earlier attention, the latest developments shifted focus to internal dynamics within the network. Market participants reacted quickly as concerns about decentralization surfaced, contributing to increased volatility in TAO’s valuation.

Impact and ongoing monitoring

The dispute also fed into broader discussions about how governance structures evolve as decentralized AI 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, leaving market participants to assess the available information.

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