The recent departure of a significant developer from the decentralized artificial intelligence network, Bittensor, has led to a drastic $900 million decrease in its market value within hours. This event has brought internal conflicts into the spotlight.
On April 10, Covenant AI, responsible for developing one of Bittensor’s largest subnets, announced its exit from the ecosystem. The developer behind a notable 72-billion-parameter AI model left, causing turmoil in the crypto-AI sector and highlighting governance disagreements within the network.
According to CryptoSlate data, Bittensor’s native token, TAO, experienced a sharp 27% decline following the announcement, dropping from $338 to a low of $285 over two hours before slightly recovering to $294. CoinGlass indicated that this drop resulted in $11 million worth of long position liquidations. Furthermore, the broader subnet ecosystem suffered a loss exceeding $300 million, as reported by CoinGecko.
The network had been on an upward trajectory recently, with TAO rallying 30% over the past month due to institutional interest and technological advancements. Just days before the crash, the network’s subnets collectively held a market cap of over $1.5 billion.
Covenant AI’s leadership has accused Bittensor of practicing ‘decentralization theatre.’ In an open statement on X, Covenant AI Founder Sam Dare criticized Jacob Steeves, also known as Const in the community and co-founder of Bittensor, for centralizing control under a decentralized guise. Dare argued that this included suspending token emissions to subnets, removing moderation rights from his team’s channels, and leveraging token sales during disputes.
In response, Steeves denied these claims on X, stating he couldn’t suspend Covenant AI’s emissions or strip away the team’s community control. He also mentioned selling less than 1% of his investment in Dare’s ventures.
Despite discussions about network governance, the exit was marked by financial maneuvers that upset many market participants. Before the announcement, Dare reportedly sold a significant amount of subnet alpha tokens, exacerbating market pressures and impacting retail investors.
The conflict appeared to have escalated from a minor administrative issue on Discord when Steeves revoked Dare’s ability to delete messages amid community criticism, leading to Dare’s exit.
Bittensor has faced setbacks in its technical reputation. Covenant AI was key in developing Subnet 3 (Templar), enabling decentralized AI model training comparable to Bitcoin mining for AI models. The project trained the Covenant-72B, achieving competitive scores and gaining praise from industry leaders like NVIDIA’s Jensen Huang.
In response to this crisis, Bittensor aims to implement ‘lock-based subnet ownership’ to stabilize its ecosystem. This measure will inform investors about token unlocks in advance, allowing them to adjust pricing or switch management teams proactively.
Despite these challenges, institutional support for Bittensor remains strong, with plans for expansion and the potential approval of a Grayscale TAO ETF on the horizon.