Bittensor plots after internal drama crashes TAO token

Bittensor plots recovery after internal drama crashes TAO token, following a sharp internal fallout that shook investor confidence

ContentsCovenant AI exit sparks governance concernsTAO price drop hits institutional momentumThe recovery plan focuses on the Locked Stake modelThe dispute triggered a rapid sell-off and raised concerns about governance within the decentralized AI network.

The crisis emerged after Covenant AI, a key subnet developer, exited the ecosystem. The departure erased roughly 25% of TAO’s value within a day and sparked wider scrutiny of the project’s leadership structure.

Covenant AI exit sparks governance concerns

Covenant AI founder Samuel Dare publicly criticized Bittensor’s leadership, accusing it of operating under “fake decentralization.” He claimed that decision-making power remained concentrated among a small group, despite claims of distributed governance.

Dare alleged that emissions to Covenant AI subnets were suspended without proper process. He also said moderation control was overridden and infrastructure was deprecated unilaterally. These actions, he argued, reflected centralized control rather than community-driven governance.

Covenant AI had been a major contributor to the network. Its Covenant-72B model gained recognition as a significant milestone in decentralized AI. The model was trained across dozens of contributors using accessible hardware, reinforcing Bittensor’s open innovation narrative.

The fallout intensified after reports that Covenant AI sold around 37,000 TAO tokens. The sale, valued above $10 million, fueled speculation of a coordinated exit. This further pressured the token and unsettled retail investors.

TAO price drop hits institutional momentum

The market reaction was immediate and severe. TAO fell from around $337 to nearly $254 within hours, marking a drop of over 25%. Although the token later recovered slightly, it remained under pressure.

The timing of the incident raised additional concerns. Days before the dispute, asset manager Grayscale had moved forward with plans tied to Bittensor exposure. The firm had amended its filing to convert its Bittensor Trust into a spot exchange-traded fund.

Following the controversy, confidence around that effort weakened. The trust itself saw a decline, reflecting growing caution among institutional participants. The episode has introduced uncertainty into Bittensor’s broader market narrative.

The recovery plan focuses on the Locked Stake model

Bittensor cofounder Jacob Steeves has proposed a recovery plan aimed at restoring trust. The strategy centers on a feature called Locked Stake, designed to add a time-based commitment layer to token holdings.

Under this model, subnet operators can lock their tokens for a fixed duration. Commitment would then be measured through both stake size and lock period. The mechanism aims to discourage sudden exits and improve network stability.

Steeves acknowledged that the feature was developed before Covenant AI’s departure, but was not implemented in time. He described this delay as a critical mistake that may have contributed to the recent price shock.

Efforts are already underway to maintain network operations. Members of the mining community are working to sustain affected subnets. Some former contributors may also return to support continuity.

The governance proposal will be presented to the community during an upcoming public discussion. The outcome could shape Bittensor’s next phase as it seeks to rebuild credibility.