A high-profile departure from Bittensor has led to a steep sell-off in the decentralized artificial intelligence network, wiping almost $900 million from its market capitalization in hours, while internal disputes spilled into the public spotlight.
On April 10, Covenant AI, the development team behind one of the network’s largest subnets, announced that it is leaving the Bittensor ecosystem.
The departure of the developer who built a groundbreaking AI model with 72 billion parameters sent shockwaves through the crypto AI sector and exposed deep ideological rifts over the network’s governance.
Data from CryptoSlate showed that the price of Bittensor’s native token, TAO, plummeted 27% after the announcement, from $338 to a low of $285 within a two-hour span, before recovering slightly to $294.
CoinGlass data also showed that the crash prompted $11 million in liquidations of long positions. Meanwhile, the collateral damage extended far beyond the core token; According to CoinGecko, more than $300 million was wiped out of TAO’s broader subnet ecosystem.
Notably, the crisis abruptly ended a period of significant growth for the subnets. Over the past month, TAO is up 30%, driven by institutional interest and technology milestones. Just days before the crash, the network’s subnet token category had a combined market cap of over $1.5 billion.
Covenant leadership claims Bittensor is leading a “decentralization theater.”
At the heart of the conflict are allegations of centralized control.
In a blistering state statement on
Dare wrote:
“The whole premise of Bittensor, the promise that attracted builders, miners, validators and investors to this ecosystem, is that no single entity controls it. That promise is a lie.”
Dare claimed that Steeves used unilateral power to reassert dominance over Covenant AI after the project became too big to manage.
According to Dare, these actions include the sudden suspension of token emissions to Covenant’s subnets, the withdrawal of the team’s moderation capabilities through its own community channels, and the application of direct economic pressure through large, visible token sales that coincided with operational disputes.
Bittensor operates on a delegated structure, managed by a triumvirate that oversees a multi-signature wallet for network upgrades.
However, Dare claimed that this setup merely serves as a legal shield, arguing that Steeves maintains effective control and implements network changes without decentralized consensus.
The statement reads:
“When a single actor can suspend a subnet’s emissions, remove an owner’s authority… and use token sales as a coercive mechanism to enforce compliance, that’s not decentralization. It’s centralized control with decentralized branding.”
Steves has rejected these accusations against
The Bittensor co-founder also stated that he sold less than 1% of what he invested in Dare’s projects.
A costly departure and ‘exit liquidity’
Despite the lofty rhetoric about network management, Covenant’s departure was marred by aggressive financial maneuvers that infuriated market participants.
Before the public announcement, Dare reportedly staged a massive sell-off, liquidating 37,000 TAO worth of subnet alpha tokens in the Templar, Grail, and Basilica subnets.
The dump created intense selling pressure in an already fragile market, functionally wiping out the portfolios of private followers and investors tied to Covenant’s projects.
Crypto traders and analysts widely condemned this move as a blatant extraction of value.
The optics deteriorated further when a video on social media, platform
The combination of Dare’s governance complaints and his aggressive token dumping led to severe community backlash. Several users labeled the exit strategy as a selfish and dishonorable way to settle internal network disputes, causing private investors to take responsibility.
An argument over Discord that resulted in a market crash?
Insiders suggest the $900 million market destruction may have surprisingly trivial origins.
Siam Kidd, Chief Investment Officer of the Bittensor-focused DSV Fund, characterized its consequences as the culmination of an escalating interpersonal conflict rather than a true ideological crusade.
According to Kidd, the dispute arose on a Discord server when Dare began deleting community posts amid mounting criticism from users. Steeves intervened by technically revoking Dare’s ability to delete those posts.
This minor administrative clash reportedly escalated, prompting Steeves to sell off some of the alpha tokens and prompting Dare to leave the ecosystem entirely.
Kidd defended the network’s co-founder, arguing that Steeves’ motives remain aligned with Bittensor’s long-term health.
He stated that “Const is not a power-hungry troll reluctant to relinquish control,” while dismissing the current volatility as standard “growth and teething problems” inherent in permissionless systems.
Bittensor’s technical triumphs were overshadowed
The acrimonious split is a major blow to Bittensor’s technical prestige, as Covenant AI was not a fringe player within its ecosystem.
The project was the architect behind Subnet 3 (Templar), a decentralized training environment that essentially worked like Bitcoin mining for AI models.
The team successfully trained Covenant-72B through this infrastructure. By processing 1.1 trillion tokens through more than 70 independent contributors using off-the-shelf consumer hardware, the project proved that decentralized, permissionless LLM training was viable.
The model achieved a score of 67.1 on the standardized MMLU benchmark, putting it in direct competition with AI giants like Meta’s Llama 2 70B.
This achievement received much appreciation from traditional tech titans. NVIDIA CEO Jensen Huang and venture capitalist Chamath Palihapitiya publicly praised the training methodology, and sees it as a critical counterbalance to the proprietary models hoarded by the Silicon Valley giants.
Covenant has promised to take this technological framework into a new, undisclosed ecosystem.
Bittensor promises ecosystem resilience
In the aftermath of the crisis, Bittensor’s leadership signals a structural change to prevent future network destabilization.
While avoiding direct involvement in Dare’s specific allegations, Steeves announced that Bittensor will introduce “lock-based subnet ownership.”
This new framework is designed to explicitly link a project’s valuation to the long-term commitment of the development team.
Under the proposed mechanisms, investors will receive transparent, advance notice when a subnet owner unlocks their tokens. This would allow the open market to proactively reprice a subnet before founders can use their communities as exit liquidity.
Furthermore, the system will enable investors to smoothly transfer their invested capital to alternative management teams. Steeves claims this will produce the first subnets that run “headless and like real goods.”
At the same time, proponents of the network remain unfazed by the short-term carnage as institutional interest in the project remains high.
For context, Digital Valuta Group’s Yuma continues to build in 14 different subnets. Additionally, the network is moving ahead with plans to expand from 128 to 256 active subnets later this year, while the possible approval of a Grayscale TAO spot ETF looms.