Covenant AI, a developer within the Bittensor subnet ecosystem, announced Friday that it is exiting the decentralized AI network, accusing it of operating under a centralized governance structure that contradicts its decentralization claims.
In a post on X, Covenant AI founder Sam Dare said the team could no longer continue building or fundraising on Bittensor due to what he described as a lack of meaningful governance distribution.
“It is decentralization theatre,” Dare said, alleging that founder Jacob Steeves retains effective control over key decision-making bodies, resists transferring authority, and implements changes unilaterally without clear process or consensus.
The dispute strikes at the heart of Bittensor’s decentralization narrative. Covenant AI claims that Steeves—also known as Const—exerts disproportionate influence over both governance and network operations, an accusation he has denied.
Bittensor’s official governance framework outlines a transitional structure in which a “Triumvirate” of Opentensor Foundation members holds root permissions alongside a senate, rather than a fully decentralized system.
Dispute over emissions and control
Covenant AI alleged that Jacob Steeves had taken multiple actions against the project in recent weeks, including suspending emissions to its subnet, limiting moderation rights in community channels, and applying “direct economic pressure” through visible token sales during the dispute.
Steeves denied the claims, stating that he does not have the ability to halt subnet emissions and holds no special privileges beyond those of regular TAO token holders.
In a response posted on X on Friday, he said he had sold portions of his “alpha holdings” across three subnets because they were inactive and operating under near 100% burn conditions. He added that the resulting changes in emissions were simply a byproduct of normal market activity, noting that buys and sells on Bittensor affect emissions across the network.
Steeves also denied removing Covenant AI’s moderation rights, saying he only briefly restricted the team’s ability to delete posts before restoring access. He added that any large token sales would be clearly visible onchain.
“Less than 1% of what I had invested in his teams. Visibility is impossible to avoid in my position. I reserve my right to buy and sell tokens, which is what underpins the entire system of dTAO,” he said.
Bittensor had previously drawn mainstream attention after Nvidia CEO Jensen Huang praised a decentralized training run on Subnet 3, calling Covenant AI’s achievement of pretraining the largest decentralized large language model a “remarkable technical milestone” during the All-In Podcast on March 19.
TAO trading surges as price drops
The governance dispute also impacted Bittensor’s TAO token, which fell around 18% over the previous 24 hours as of Friday morning, according to market data, while trading volumes spiked ahead of Covenant AI’s departure announcement.
Sell volume for TAO spiked to its highest level since December 2024 roughly 24 hours before Covenant AI announced its departure.
“If you think that’s a coincidence, you don’t understand the game you’re playing. This was a calculated exit and execution,” crypto analyst Ardi wrote in a Friday post on X.
The dispute highlights broader concerns for projects aiming to achieve true decentralization, according to David and Daniil Liberman, co-creators of the Gonka protocol, a decentralized layer-1 blockchain.
“Decentralized networks that want serious builders have to answer one question: can the infrastructure you build on be used against you? If the answer is yes, the decentralization is cosmetic,” they said.
