Bittensor's Decentralization Theater Exposed: Investigation Uncovers Self-Dealing Subnet Practices

Covenant's Bittensor was called 'decentralization theater' by some due to its alleged manipulation of TAO emissions. According to an investigation, Covenant and other subnets were found to be running puppet subnets that pay each other with subsidized TAO, counting the payments as 'revenue.' The transactions are not from real external customers but rather internal transfers that boost emissions.

The design of dTAO rewards alpha-token activity over external customer revenue. As a result, building vertical pipelines of self-dealing subnets is an optimal strategy to maximize emission shares and profits. This was revealed by the investigation, which found that Covenant's three subnets - Templar, Basilica, and Grail - mine TAO emissions together, capturing around 990 TAO per day at peak.

The investigation also discovered that network-wide, Bittensor pays out $148M in subsidies annually against a mere $3-15M in real external revenue. This discrepancy highlights the potential for manipulation within the system.