The sudden withdrawal of Covenant AI from three critical subnets on the Bittensor network has caused $TAO prices to plunge to around $265, prompting concerns over network stability and decentralization. The incident opened a broad community debate about governance, transparency, and trust within decentralized AI ecosystems.
Covenant AI exit triggers turmoil for Bittensor’s top subnets
Covenant AI, a technological collective best known for building advanced AI infrastructure within blockchain ecosystems, had been pivotal in operating Bittensor’s influential subnets 3, 39, and 81. These subnets were widely regarded as top performers, particularly in scaling large-model AI development and serving as benchmarks within the protocol.
The abrupt departure left significant gaps in both technical resources and leadership for these subnets. Many Bittensor miners and contributors were forced to quickly reorganize, relying on the project’s open-source foundation to maintain operational continuity. Without Covenant AI’s infrastructure, community members faced a complex recovery process to keep the affected subnets functional.
Covenant AI’s role in the ecosystem was crucial not just in technical capacity but also in driving traffic and value to the wider protocol. The loss of its specialized nodes triggered immediate doubts over the future competitiveness and resilience of Bittensor’s AI network.
Allegations emerged from Covenant AI that Bittensor was struggling with centralization issues, accusing co-founder Jacob Steeves of actions that undermined decentralization. In particular, claims surfaced around emission suspensions and scheduling of token sales that, according to the departing team, ran counter to the permissionless philosophy underpinning the blockchain.
These developments fueled volatility in the $TAO token, with highly visible price swings impacting both short-term and long-term holders. Although $TAO eventually stabilized near $265, questions lingered around whether such central points of failure could have been avoided through different governance mechanisms.
Steeves responds with personal apology and looks to technical solutions
Jacob Steeves, co-founder of Bittensor, addressed the community with a direct apology for the fallout, acknowledging both the financial losses and the emotional toll suffered by $TAO holders. Steeves is a well-known computer scientist and blockchain engineer, recognized for building decentralized AI protocols and leading Bittensor’s technical roadmap.
He reflected on the difficulties caused by the break with Samuel Dare, a key figure at Covenant AI, and described the incident as a deep personal setback involving a former close collaborator. Steeves emphasized that harms often arise in open networks from those once trusted most, an unavoidable risk within permissionless systems.
Steeves expressed regret for the disruption, urging the community to focus on the foundational values of openness and to continue advancing decentralized AI despite setbacks.
Following the event, community miners rapidly coordinated efforts to restore the three affected subnets by leveraging the platform’s open-source codebase. Ongoing discussions even involved former Covenant AI contributors, who indicated interest in supporting the technical handover and continuity of services.
To address the vulnerabilities exposed by this crisis, Steeves proposed a protocol upgrade known as the Locked Stake model. This initiative would require subnet owners to lock their $TAO tokens for a predetermined period, effectively binding team accountability to their staked assets and signaling genuine long-term commitment.
Steeves admitted delays in implementing such a solution and suggested that its earlier adoption might have helped prevent the recent breakdown. The community is set to discuss the Locked Stake idea in detail during an upcoming scheduled call on the Bittensor Discord.
The episode has underscored the importance of cryptographic solutions to measure and enforce team commitment in decentralized environments. For the Bittensor community, the challenge remains to secure trust and resilience without relying on conventional contractual or legal enforcement.
