The Bittensor project has found itself at the center of a major scandal, leading to a significant drop in the value of the TAO token and a loss of investor trust. The conflict arose from a statement by the Covenant AI team announcing their exit from the ecosystem amid accusations of centralized network governance.
This is reported by Business • Media
Loss of Key Developer and Accusations of “Decentralization Theater”
One of the main developers of Bittensor, the Covenant AI team, officially announced their departure from the project, openly accusing the network’s leadership of actual centralization and coercive influence over ecosystem participants. Covenant AI founder Sam Dyer explained that further collaboration had become impossible due to violations of fundamental decentralization principles.
“The entire premise of Bittensor, the promise that brought developers, miners, validators, and investors into this ecosystem, is that no single entity controls it. This promise is a lie.”
The Covenant AI team accused Bittensor co-founder Jacob Steeves (Const) of maintaining de facto control over the network despite the formal “triumvirate” governance model. According to their statements, Steeves implemented changes unilaterally, blocked token issuance for Covenant subnets, denied access to community moderation, and exerted economic pressure through large-scale token sell-offs at critical moments. In Covenant’s view, this creates risks for investors, as the infrastructure could be dismantled at any moment by a single individual.
TAO Token Crash: Market Reaction and Next Steps
Following Covenant AI’s explosive statements, the market reacted with a swift decline: the TAO token dropped by 18.5% in just one day, with the price falling to $262, and the total ecosystem capitalization decreasing by over $820 million. Additional pressure was caused by the Covenant team selling approximately 37,000 TAO (around $10 million).
This decline contrasts with the recent rapid increase in the token’s value: in March 2026, TAO rose by more than 150% over 40 days due to high social activity and interest in decentralized artificial intelligence.
Bittensor’s Position and New Subnet Model
Jacob Steeves did not respond directly to the accusations but announced changes in the network architecture. He reported the implementation of a subnet ownership model based on token locking, which will allow investors to see owners’ decisions in advance, reassess subnets, and redistribute capital among participants. Steeves also emphasized that the new model would ensure the autonomous operation of subnets and promote greater transparency.
Part of the community, in turn, criticized Covenant AI itself for the sudden exit without warning. Meanwhile, some funds remain optimistic about Bittensor’s future. In particular, Bittensor Fund partner Mark Jeffery noted:
“Bittensor is much more than a single subnet, and TAO will do just fine without it.”