Bittensor's 'Decentralization Theatre' Exposed: Major AI Developer Exodus Sends TAO Plummeting 15%

Covenant AI, a major subnet developer on the AI-focused blockchain network Bittensor, announced on Thursday that it is leaving the ecosystem entirely.

In a statement on X, Covenant AI Founder Sam Dare declared the company can no longer build on Bittensor because the network's governance contradicts its stated commitment to decentralization.

"The entire premise of Bittensor, the promise that drew builders, miners, validators, and investors into this ecosystem, is that no single entity controls it," Dare wrote. "That promise is a lie."

The Covenant founder explained that the team has been building on the conviction that AI model training should not be controlled by a single entity, delivering on that mission by developing Covenant-72B into the largest decentralized case of LLM pre-training run in history. These efforts positioned Covenant as one of the most prominent subnets on Bittensor.

Despite this success, Covenant has decided to exit the network, citing Bittensor Co-founder Jacob Steeves (also known as Const) as the primary reason for departure.

'Decentralization Theatre'

Dare claimed that Bittensor operates under a "triumvirate structure" with three individuals managing multisig for network upgrades, presenting it as distributed governance to the community.

"It is not. It is decentralization theatre," Dare said. "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."

Dare alleged that Steeves has recently taken actions against Covenant that undermine Bittensor's decentralization principles, including:

• Suspending emissions to Covenant's subnets
• Removing the team's moderation capabilities over its community channels
• Unilaterally deprecating its subnet infrastructure
• Applying direct economic pressure through large, visible token sales timed to coincide with operational conflicts

"They were punitive actions taken by one man who never relinquished control of a network he tells the world he no longer runs," Dare added.

The Covenant founder stated that the team's efforts in decentralized AI training will continue outside of Bittensor and will announce new projects in the near term.

Market Impact and Reactions

The price of Bittensor's TAO token fell sharply following Covenant's announcement, dropping 15% to a low of $285 from $338 within just two hours. The price has since recovered to $294.

The statement sparked a wave of reactions on X, with many users expressing shock at the sudden departure while also criticizing Covenant for leaving without prior communication to its community.

"This was a very egotistical and non-classy and dishonorable way of dealing with internal issues by Sam and team," one X user wrote in a reply to the statement.

Bittensor's Response

Steeves indirectly responded to Covenant's announcement without addressing Dare's specific claims.

"This will prove to birth the first subnets on Bittensor that run headless and as true commodities," Steeves wrote on X.

In a following X post, Steeves wrote — "The outcome of this eventful evening is that Bittensor will invent lock-based subnet ownership." The Bittensor co-founder explained this means ownership will be determined by a team's long-term commitment to a project.

"This will mean: 1) investors see long in advance if an owner has unlocked their tokens, 2) be able to reprice the subnet before the owner, and 3) liquidly direct their own conviction to another team, or agent, to manage the system," Steeves wrote.

Mark Jefferey, partner at Bittensor Fund, also commented — "Bittensor is quite a LOT more than Subnet 3, and $TAO will carry on fine without it."