Bittensor faces crisis after Covenant AI’s departure from the network wiped around 25% off TAO’s price in 24 hours

Bittensor is trying to rebuild investor confidence following one of the most damaging internal scuffles in the decentralized artificial intelligence sector’s short history.

Ironically, it plans on rectifying the challenges by launching a recovery plan that was drafted by the very man who just walked out the network’s door. 

Jacob Steeves, co-founder of the network, shared the above information in an extended statement that is also seen as a response to Samuel Dare’s announcement of the departure of subnet developer Covenant AI from the Bittensor network.

Bittensor’s native token, TAO, lost about a quarter of its value in under 24 hours, following Dare, who is Covenant AI’s founder, publishing a scathing public statement accusing Steeves of running a centralized operation behind a decentralized facade.

What drove one of crypto’s most prominent AI builders to the exit?

Covenant AI operated three subnets in Bittensor’s network and delivered the Covenant-72B, which many in the decentralized AI sector considered a landmark achievement.

Covenant-72B is a 72-billion-parameter language model trained permissionlessly across more than 70 independent contributors on commodity hardware.

In his April 10 statement, Dare alleged that Steeves had suspended emissions to Covenant AI’s subnets, overridden the team’s moderation authority over its own community channels, unilaterally deprecated its subnet infrastructure, and applied economic pressure through large, timed token sales. 

He criticized Bittensor’s governance, alleging that it is not decentralized as portrayed. Dare wrote, “Bittensor operates a triumvirate structure, three individuals who manage the multisig for network upgrades, presented to the community as distributed governance. It is not. It is decentralization theater.”

Dare added, “Jacob Steeves maintains effective control over the triumvirate, resists any meaningful transfer of authority, and deploys changes unilaterally whenever he chooses, without process and without consensus. The individuals involved serve as legal shields, people who can be held accountable and sued while he remains insulated.”

Dare’s comments triggered an immediate sell-off, compounded by reports that Covenant AI had itself offloaded around 37,000 TAO tokens, worth more than $10 million, prompting accusations of a coordinated exit at retail investors’ expense. 

How badly did the drama damage TAO and Bittensor’s institutional standing?

The market has not reacted favorably to TAO, which dropped from the $337 range to a low of $254 within 12 hours, a decline of over 25%. The token has since come up a bit, trading around $261 as of the time of writing.

The episode arrived at a particularly delicate moment for Bittensor’s institutional narrative. Just days before the crisis broke, asset manager Grayscale had filed an amendment to its S-1 registration statement with the US Securities and Exchange Commission, advancing its effort to convert its over-the-counter Bittensor Trust (GTAO) into a listed spot exchange-traded fund. 

However, with the latest development, that institutional momentum now faces a more skeptical audience.

GTAO is currently trading at $9.20, a decline of over 12.5% as of the close of trading on April 10.

Can a proposal built by the man who just left save the network?

Steeves’ recovery plan is based on a feature called Locked Stake. The mechanism would introduce a time dimension to token ownership on Bittensor. 

Subnet owners would be able to lock their holdings for a defined period, making the combination of stake size and remaining lock duration a new, publicly legible measure of commitment. 

In his statement, Steeves wrote that Locked Stake was among the last pieces of work Dare completed before departing the Opentensor Foundation, adding that his failure to implement it sooner was his “real error,” suggesting that the mechanism might have prevented this 25% value drop.

On the network’s operational continuity, Steeves said members of the mining community, and potentially former Covenant team members, are already organizing to sustain work on subnets 3, 39 and 81. 

Steeves added that the governance proposal will be put to the community at Bittensor’s next open Thursday call on its Discord server.

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