In brief Veteran developer Zaki Manian has stepped down from his role at Tendermint.

Manian claimed that founder Jae Kwon was mismanaging the Cosmos team. Others allegedly joined him in quitting.

Manian said he’ll continue working on the project.

Veteran blockchain developer Zaki Manian has stepped down from his role as director at Tendermint, where he was head of all things related to the development of the Cosmos blockchain. In an exclusive interview with Decrypt, Manian revealed that he resigned last week, but would still continue to work on Cosmos.

Internal struggles, which have consumed the startup, became public earlier this month when Manian accused founder Jae Kwon of mismanagement. Insiders told Decrypt that Manian subsequently threatened to quit the project—and take the bulk of the engineering team with him—unless Kwon stepped down from his CEO role. He also warned that the startup's new protocol would not ship unless he was given free rein.

In an interview with Decrypt today, Manian said that he was reluctant about his decision to resign.

“There are people inside the company that want to portray this as a power struggle between me and Jae, and this as an outcome and me threatening x, y and z,” he said. “But it was really me saying I don’t see a way in this arrangement to get the work done. And the best way to get the work done was for me to leave.”

Kwon declined to comment.

It’s unclear how many other developers have stepped down from the project; Manian declined to say how many have followed him out the door. At the beginning of this month the company had 40 employees.

While Manian said that the community has always been “a multi-entity ecosystem and there’s ways of working together,” the project now enters uncharted waters, with repercussions for projects far beyond Cosmos—and its investors.

The Internet of blockchains

Cosmos, one of the biggest, brightest projects in the cryptocurrency industry, is a self-described “Internet of Blockchains.” The platform's ATOM token is ranked 21, with a market cap near $814 million. At the heart of this network of decentralized interoperable platforms is a unique protocol, developed by Kwon, a well-regarded open source developer.

In 2014, he was the first to introduce byzantine-fault tolerant (BFT) algorithms into the blockchain space, and founded Tendermint to explore the ramifications of the new protocol.

The project raised its funding target of $17 million in the first 29 minutes of a 2017 public token sale; its war chest was worth some $1 billion at the height of the crypto gold rush a few months later.

Cosmos had no trouble getting high quality projects to build on top of its SDK (Software Development Kit.) Those jumping aboard included Binance, the biggest cryptocurrency exchange by volume.

In March 2019, the first iteration of the Cosmos network successfully launched, validators came on board, and the project raised $9 million in a funding round. The only thing missing was the final piece of Kwon’s grand jigsaw: the Inter-Blockchain Communication (IBC) protocol—the key to allowing any blockchain using the Cosmos SDK to easily connect to the Cosmos hub.

Cosmos in chaos

In April, Kwon told Decrypt that the new protocol was expected to be ready “within a few months.” But, when, in October, a demo failed to materialize at San Fransisco Blockchain Week, rumors of trouble and strife at Tendermint began to leak.

Insiders said that the problems started not long after the platform’s launch, in March, and the main reason was the lack of a clear strategy. But other reports suggest that this wasn’t the only issue.

A few weeks ago, news broke that Kwon was supposedly stepping down as CEO of Tendermint, taking a backseat in the Cosmos project, and starting a new one called “Virgo.”

But Kwon immediately denied the report, and said that the goal was rather to “eliminate the role of CEO,” and “decentralize Tendermint,” by implementing checks and balances from within.

Three days later Zaki Manian issued his broadsides on Twitter.

Cosmuhammad Bitcoin Jaesustein

Manian accused Kwon of “evading responsibility,” as well as neglect and negligence of the Cosmos project. He called Virgo, and Kwon’s plans to decentralize the company, “a huge lie.” And he added that his goal was to remove Kwon from work on the forthcoming IBC protocol, due to behavior that had become “an untenable distraction.”

Some prominent industry members came out in support of his position:

Of the six staffers who spoke to Decrypt on background, three expressed doubts that Kwon was still committed to Cosmos; they worried about his confusing Twitter personas, such as his new alias, Cosmuhammad Bitcoin Jaesustein; they complained about his behavior and that he appeared to be obsessed by climate change, the coronavirus and other matters unrelated to Cosmos.

They also said that Kwon was starving the project of the necessary resources needed to develop the protocol, and obstructing the hiring of engineers.

But three others, who spoke to Decrypt on background, painted a different picture, saying that other key personnel weren’t up to the job. We were also provided with a screenshot of a company memo that indicates that the hiring freeze was implemented by Manian, not Kwon, as many believed.

Manian declined to comment on those allegations.

Conflict of interest

Ironically, for a company which aims to serve as a platform for the world’s blockchains, conflict of interest has been at the heart of its issues, say critics.

Another internal memo shown to Decrypt demonstrates that shortly before Manian’s Twitter outburst, Kwon informed the team that no one with conflicting interests could serve on the board of directors of Tendermint.

Insiders loyal to Kwon alleged that this precipitated Manian’s reaction, because he and others are involved in other projects, and have their own validators, which would preclude them getting a seat on the board.

Those supporting Manian, were quick to defend their position:

“We have long had a history of collaborators. It allows us to work with some of the most exciting new projects,” a team member told Decrypt. He also claimed that Kwon had been trying to make conflict of interest a core issue for a while.

Manian insisted that rather than a conflict of interests the issue was really that nobody except Kwon was ever really in charge. “He is the central figure in the operations of the company, the image and the decision making,” said Manian.

He claimed that the engineering team asked him to step in, and help bring some more order and improve the quality of execution on IBC.

“It was never really in my self interest,” Manian insisted. “It was a better alternative to what we’re doing right now which is this very painful attempt to reorganise the whole ecosystem, which is inevitable and needed to be done, but I would have preferred to have shipped IBC first.”

He says that he is still supervising Cosmos, “in the sense that people value my opinion and insight.” An offical statement about his resignation is yet to be issued.

The investors are not amused

In March 2019, Tendermint received backing from investors Bain Capital, Paradigm, and 1confirmation.

"Who says Netflix has the best dramas? Open source and crypto have the best dramas," Salil Deshpande, who was Managing Director of Bain Capital, at the time of the investment, told Decrypt.

A well respected VC, Deshpande has chronicled other such dramas. He also made the Forbes Midas List of 100 best-performing venture investors seven years in a row, and has since started his own fund, Bain-backed Uncorrelated Ventures. He’s been watching the antics at Tendermint at a respectful distance, and has high hopes that the matter will be resolved amicably.

"Blockchain interoperability is one of only a handful of decentralized infrastructure use cases I have high conviction about, and Cosmos is by far the best technology for that use case. If they figured that out, they'll figure this out,” he said.

The wider Cosmos community, famous for its high level of involvement in the project, has also been supportive.

“I think we’ll eventually come together as a Cosmos community that is a really exciting structure,” said Manian. “Every ecosystem, if they’re successful enough is going to eventually have to grapple with some of these issues,” he added. “If we can keep the Cosmos project on track through this period of turmoil, we will be more resilient and more decentralized and better off for it.”