The Bittensor ecosystem is under mounting pressure after a major fallout involving one of its key contributors. Covenant AI’s abrupt exit has triggered a sharp decline across subnets and sparked deeper concerns about governance, transparency, and control within the network.
Over $300M Wiped Out Following Covenant AI Exit
In a recent X post, CoinGecko revealed that more than $300 million has been wiped out from the TAO subnet ecosystem. The capital outflow was triggered by the departure of Covenant AI, a major developer of Bittsensor subnets. Notably, the firm owns key subnets, including SN3, SN81, and SN39, making its exit particularly impactful.
The sudden withdrawal has had a cascading effect across the ecosystem, with liquidity drying up and investor confidence weakening. CoinGecko further reported that subnets tied to Covenant AI saw significant declines in activity and valuation, amplifying the broader market impact. The scale of the decline highlights the structural dependence of parts of the network on a few dominant contributors.
Allegations Against Bittensor Co-Founder Drive Exit Narrative
Meanwhile, Covenant AI has leveled accusations against Bittensor’s co-founder, Jacob Roberts Steeves, identified as Const on X, and these issues ultimately laid the foundation for its sudden departure. According to the subnet developer, the claims include suspending emissions to Covenant-based subnets and removing moderation rights from its community channels.
The firm further alleged that the co-founder unilaterally undermined its subnet infrastructure, raising serious governance concerns. Additionally, Covenant AI claimed that large token sales were strategically executed during periods of conflict, potentially applying economic pressure amid disputes.
These allegations have significantly intensified scrutiny around transparency, fairness, and the true decentralization of the network. The situation has sparked widespread debate within the crypto community, with many questioning whether Bittensor’s governance model can withstand such high-profile internal disputes.
“Decentralization Theatre” Accusation Raises Red Flags
Covenant AI also directly attacked the decentralized nature of the Bittensor network, labeling its “triumvirate” multisig structure a sham. The firm claimed that Jacob Roberts Steeves uses the other two members of the triumvirate as a legal shield while effectively exercising unilateral control over the network, reducing its decentralization to what it described as a mere illusion of distributed governance.
Meanwhile, since the announcement of the fallout, TAO, the native token of the Bittsensor network, has plunged by 16.9% over the past 24 hours, trading around $276.14. The sharp decline reflects growing investor unease as confidence in the network’s governance framework continues to erode. With credibility now under pressure and capital already exiting, market participants are closely watching whether Bittensor can restore trust or face prolonged instability following one of its most significant internal crises.
Josiah Oluwadare
The CoinRemark Team
