Bittensor, a leading decentralized artificial intelligence (AI) protocol, is facing a severe crisis following the dramatic departure of prominent subnet developer Covenant AI from its network. The exit, announced by Covenant AI founder Samuel Dare on April 10, 2026, triggered a massive sell-off of Bittensor's native token, TAO, which lost approximately 25% of its value within 24 hours, plummeting from around $337 to a low of $254.
The conflict centers on accusations of centralized control. In a scathing public statement, Dare accused Bittensor co-founder Jacob "Const" Steeves of running a "decentralization theater." Dare alleged that Steeves had unilaterally suspended emissions to Covenant AI's three subnets (3, 39, and 81), overridden the team's moderation authority, deprecated its subnet infrastructure, and applied economic pressure through large, timed token sales. He criticized Bittensor's governance as a "triumvirate structure" effectively controlled by Steeves, where upgrades are deployed "without process and without consensus."
The market reaction was swift and brutal. The sell-off was compounded by reports that Covenant AI itself offloaded around 37,000 TAO tokens, worth over $10 million, leading to accusations of a coordinated exit at retail investors' expense. As of April 12, TAO was trading around $261, still down significantly. The crisis also damaged institutional momentum; Grayscale's Bittensor Trust (GTAO) fell over 12.5% to $9.20 on April 10, casting a shadow over its effort to convert into a spot ETF.
In an extended statement, co-founder Jacob Steeves responded to the allegations and outlined a recovery plan. Steeves apologized to holders who lost money in the affected subnets and characterized Dare's actions as a betrayal intended to cause "maximum pain." His proposed solution is a protocol feature called Locked Stake, a mechanism that would require subnet owners to lock their token holdings for a defined period. This "time plus stake" model is designed to create a publicly visible measure of long-term commitment and prevent sudden, damaging exits.
Ironically, Steeves revealed that the Locked Stake proposal was among the last pieces of work Dare completed before leaving the Opentensor Foundation. Steeves admitted his "real error" was not implementing it sooner, suggesting it might have averted the crisis. He also confirmed efforts are underway to revive subnets 3, 39, and 81, with mining community members and potentially former Covenant team members organizing to sustain the work.
The governance proposal for Locked Stake will be put to the community during Bittensor's next open Discord call. The protocol's short-term price outlook remains uncertain, with TAO finding immediate support at $240-$250 and facing resistance at $300. Market recovery is contingent on the community's acceptance of the new proposal and the successful revival of the affected subnets.
