The Bittensor project has found itself at the center of a major scandal, leading to a sharp decline in the TAO token and significant loss of trust among investors and the community. The catalyst was the departure of one of the key developers, Covenant AI, who publicly accused the project’s leadership of effective centralization and pressure on ecosystem participants.
This is reported by Finway
Allegations of a “Decentralization Theater” and Market Impact
One of the founders of Covenant AI, Sem Dyer, announced his exit from Bittensor, emphasizing that the network’s governance contradicts the stated principles of decentralization. He noted that the team can no longer operate under conditions where key decisions are made unilaterally, and the promised decentralization has turned out to be merely an illusion.
“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.”
Covenant AI accused Bittensor co-founder Jacob Steeves of maintaining de facto control over the network, despite the formal “triumvirate” governance model. Among the complaints are the suspension of emissions for Covenant subnets, restrictions on moderating its own community, unilateral “deprecation” of infrastructure, and economic pressure through large-scale token sales at critical moments. According to Covenant, these were punitive actions undermining the trust of investors and developers.
The consequences of the conflict for the market were immediate. The price of the TAO token fell by 18.5% in a day, dropping to $262, while the total capitalization of the ecosystem decreased by more than $820 million. Additional pressure was caused by the sale of nearly 37,000 TAO by the Covenant team, equivalent to about $10 million. This contrasted sharply with the dynamic growth of the token in March 2026, when it demonstrated over 150% returns in 40 days amid high interest in decentralized artificial intelligence.
Bittensor’s Response and New Changes in the Ecosystem
Jacob Steeves did not provide a direct response to the allegations but announced planned changes to the architecture of Bittensor. According to him, autonomous subnets will be introduced, which will operate independently and become true “assets” within the ecosystem. He also announced the implementation of a subnet ownership model based on token locking, which is expected to allow investors to transparently assess the actions of subnet owners and effectively redistribute capital among various teams.
Part of the community reacted critically to both the actions of Bittensor’s leadership and Covenant AI’s decision to exit the project without prior warning. Despite the sharp conflict, many major investors remain optimistic about the future of Bittensor. In particular, Bittensor Fund partner Mark Jeffery emphasized that the ecosystem is significantly broader than a single subnet, and the TAO token has the potential for recovery.
“Bittensor is much more than just one subnet, and TAO will do just fine without it.”