Breaking! Bittensor Ecosystem Earthquake: Allies Turn Against Each Other, $TAO Plunges 15% in Two Hours, Decentralization Mask Torn Apart?

This is not an ordinary project exit. On the morning of April 10th, a public letter from Covenant AI, operator of the Bittensor ecosystem subnets, rapidly spread on social media. Its founder, Sam Dare, signed and announced that all three of their subnets—Templar, Basilica, and Grail—would withdraw from the Bittensor network.

The market’s reaction was direct and brutal. Within two hours of the announcement, the price of $TAO plummeted over 15%, briefly touching $281. The tokens of Covenant’s subnets suffered even more severe declines, data shows SN3 dropped over 57% within 24 hours, while SN39 and SN81 both fell more than 70%. Considering SN3’s previous technical breakthrough that saw a 460% increase in March, this reversal was particularly intense.

Covenant AI is not an unknown entity. In March, they completed Covenant-72B, the largest decentralized pretraining project for large language models in crypto to date, on Bittensor. The project was praised by venture capitalist Chamath Palihapitiya, caught the attention of NVIDIA CEO Jensen Huang, and was specifically highlighted in research reports by Jack Clark, co-founder of Anthropic.

In their exit statement, Sam Dare listed multiple accusations against Bittensor, mainly questioning the authenticity of its decentralization promise. First, he questioned whether its “three-person multi-signature” governance structure is just a “decentralization farce,” accusing co-founder Const of refusing to relinquish control in practice and being able to deploy changes unilaterally. Second, he accused Const of directly suspending the “emission” reward distribution for Covenant-related subnets, effectively cutting off the team’s economic lifeline. Third, community management rights were forcibly removed, and infrastructure was abandoned. Fourth, he accused Const of selling large amounts of tokens during conflicts to pressure the market.

Const’s response did not address each point directly but redefined the event as an opportunity for governance upgrade. He mentioned a previously shelved mechanism: allowing subnet token holders to decide via on-chain voting which team should manage the subnet. He believes now is the right time to restart this discussion. Regarding Sam Dare himself, his evaluation was straightforward and harsh: “Sam clearly made this ugly decision out of malice and greed.”

The community quickly split, but most voices sided against Covenant. A common suspicion was that the team announced withdrawal at a high point and took assets with them, resembling a “rug pull.” Other project teams within the ecosystem disclosed more background details, noting that Const had provided significant early support to Sam Dare, including building the initial subnet version, transferring ownership keys, donating startup funds, and even giving Christmas bonuses. The trigger for the split, according to reports, was merely Const selling about 5% of their personal holdings and a dispute over community permissions.

Some analysts pointed out that without Const’s early support and emission incentives, Covenant could not have reached its current scale. People involved with the Bittensor ecosystem fund characterized this as “subnet owners deciding to cash out and leave.” They acknowledged that some of Sam’s accusations about centralization were not unfounded but emphasized that Const’s motives were purely for Bittensor’s development.

Meanwhile, market observers detected that a address suspected to belong to Sam Dare had sold 37k $TAO tokens on the same day, worth about $10 million.

This turmoil exposes a classic dilemma in the early development of decentralized protocols: the founder’s actual influence far exceeds any written governance framework. Although Const previously stepped down as CEO of the foundation with a “Satoshi moment” stance, this incident shows that the gap between decentralization narrative and practice still exists. The on-chain voting mechanism proposed by Const is a promising attempt, but whether it can be quickly implemented and withstand the next stress test remains critical.

The impact of the event is spreading. The withdrawal of three subnets caused about 9% of the Bittensor network’s emission rewards to be lost, and the remaining computing power and data gaps will be difficult to fill in the short term. Covenant team stated they will start anew with their research results and models, which could trigger a domino effect. Additionally, the ongoing application for the $TAO ETF and institutional investors’ entry plans may be delayed due to this public governance crisis.

Ultimately, whether this internal conflict ends with on-chain voting or evolves into longer-term reputation damage will determine if Bittensor can truly mature its decentralization narrative.

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