Covenant AI, a subnet developer, has announced it is leaving the Bittensor network. The company cited concerns over decentralization and alleged punitive actions by Bittensor’s co-founder, Jacob Steeves.
In a statement released on Friday, Covenant AI’s founder, Sam Dare, explained the decision to depart from the decentralized AI network, pointing to governance disputes. Dare argued that the network’s claim of being decentralized and permissionless does not match its actual operations, calling it a “decentralized theater.” Covenant AI was a major contributor to Bittensor, managing three subnets: Templar, Basilica, and Grail. The team’s Covenant-72B model had previously helped drive a significant price rally for Bittensor’s TAO token.
Dare claimed that Bittensor’s decentralization issues are systemic, with co-founder Jacob Steeves (also known as Const) maintaining effective control over the network’s structure. He accused Steeves of resisting the transfer of authority, making unilateral changes, and taking actions against Covenant AI in recent weeks. These alleged actions included suspending emissions to its subnets, removing moderation capabilities in community channels, publicly criticizing the subnet infrastructure, and applying economic pressure through timed token sales.
Steeves responded to these allegations, denying the claims. Regarding the suspension of emissions, he stated he does not have that ability but sold some of his holdings in the three subnets because they were not operational and were on high burn code. He emphasized that he has no special privileges beyond those of regular TAO holders.
On the issue of deprecation and moderation rights, Steeves asserted that Dare had deprecated his own Discord channels and deleted posts containing genuine criticism. Steeves said he temporarily removed Dare’s ability to delete others’ posts but did not revoke his moderator role.
Alex DRocks, a member of the Bittensor community, supported Steeves’ account, noting he witnessed the post deletions and channel deprecations in real-time. He stated that the deleted posts were critiques about one of Covenant’s subnets, and that Dare seemed unable to handle simple criticism.
Finally, Steeves denied making large, visible token sales to pressure Covenant AI, stating he sold less than 1% of what he had invested in the team.
Amid the controversy, the price of Bittensor’s TAO token fell sharply, dropping 25% from around $340 to a multi-week low of $250 before partially recovering.The $260 level is significant. Analyst Ardi observed that in the 24 hours before the Covenant AI news was released, TAO’s sell volume reached its highest point since December 2024.
“If you think that’s a coincidence, you don’t understand the game you’re playing. This was a calculated exit and execution,” he stated. He explained that larger wallets, which had prior knowledge, “were unloading into the breakout attempt yesterday, using that strength to sell millions in size well before the headline hit the market.”
In contrast, smaller retail-sized wallets were left to absorb the selling pressure, forced to compete for an exit at prices roughly 20% lower.
The analyst noted that TAO had been in an “accumulation continuation phase” after its recent breakout. However, he warned that “the chart is going to have a difficult time absorbing 18-month high sell volume when it’s right at a key support level.”
Frequently Asked Questions
FAQs TAO Token Drop Covenant AIs Departure from Bittensor
BeginnerLevel Questions
1 What is Bittensor and what is the TAO token
Bittensor is a decentralized network designed to allow different machine learning models to collaborate and share knowledge TAO is its native cryptocurrency token used to reward participants who contribute computational power and AI models to the network
2 Why did the TAO token price drop recently
The price dropped sharply after a major participant Covenant AI announced it was leaving the Bittensor network This raised concerns about the networks health and stability leading to selling pressure
3 What is decentralization theater
Its a critical term suggesting a project claims to be decentralized but is in reality heavily dependent on a few key players or centralized elements Critics used this phrase because the exit of one major player caused significant disruption questioning how truly decentralized and resilient Bittensor is
4 Who or what is Covenant AI
Covenant AI was a prominent subnet on the Bittensor network known for its highperformance AI models It was a top contributor earning a large share of TAO rewards making its departure a major event
5 Is my TAO investment now at risk
Like any cryptocurrency TAO carries inherent risk This event highlights specific risks related to centralization and dependency on key contributors The longterm impact depends on whether Bittensor can attract new highquality participants to fill the gap
Advanced Practical Questions
6 What specific reasons did Covenant AI give for leaving
While official statements may vary common reasons from such departures often include disagreements over network direction economic incentives technical constraints or a strategic decision to develop independently
7 How does one entitys exit affect a decentralized network so much
If the networks value and reward distribution are concentrated among a few top performers it creates centralization risk Covenant AI was a major source of valuable AI output Its exit reduces the networks current total useful output and the perceived competition which can undermine the tokenomics