I don't think you'll have a choice because you're not really going to develop AI unless you limit the directions it can evolve in some meaningful way otherwise you'll probably just have something that's more like a computer cancer where you just have it basically mutating faster than it can handle.

I think the only way to develop sentient AI is to give it some effective challenges and rewards and then have nearly infinite amounts of cycles of iterations try to build living code.

It's kind of like here on Earth for evolution to happen there had to be certain challenges for evolution to select against and if we don't set some type of environmental limitations and sort of like goals then you don't have any specific or focused enough goal for the organism to evolve to whether it's a computer or biological.