This past week, Cosmos has just created a new milestone, successfully moving Stride to Interchain Security (ICS). Despite this, the blockchain community is still engaged in various discussions around this new model, especially about its effectiveness. In the following article, let's review the eye-catching information around the Cosmos ICS model, everyone!
the latest update
On July 19, Stride became the first active network on the Cosmos Network to successfully migrate to the Interchain Security (ICS) system. By switching to this new mechanism, Stride will be able to take advantage of the security provided by ATOM’s validator system.
This move will be beneficial in terms of security, as the network will not use STRIDE’s native tokens for validation consensus, but instead the validators of the Cosmos Hub will be able to “rent” this validation process. To understand the security mechanism of Interchain Security, readers can find relevant information in the article below.
It is worth mentioning that this is not the first consumer chain to use ICS. Back in May 2023, Neutron became the first official network to generate blocks on this security mechanism. Stride is a project that has set a milestone of "successful replacement" in a previous operating state. This milestone shows that the ICS network will be safe if there are active networks on Cosmos that want to change the mechanism.
The next consumer chain project expected to participate in ICS will be Duality.
Problems with ICS mechanisms
However, the debate within the community has arisen with many Twitter accounts stating that Cosmos is running into a “dilemma” with its system design.
Specifically:
According to a report from Chronus One, at the current ATOM exchange rate and reward levels, small validators will not be able to cover the cost of validating operations. As more consumer chains join the network in the near future, the cost issue will become more complicated. The cost of running a Tendermint node is approximately $600 per month, and each consumer chain causes the validator to run a separate node.
However, if a “higher tax” solution is implemented for chains that wish to rent security from ATOM validators, this barrier will create little incentive for projects to participate in the ecosystem. The specific case of Stride in Cosmos is this: 15% of staking rewards are reallocated to the Cosmos Hub.
If the reward is increased after each block on the network, ATOM will face the problem of issuance and inflation.
Could a different security mechanism be the solution?
As Cosmos shared, three different security mechanisms will be applied, including replication security (which is considered the V1 version of Interchain security mentioned above), opt-in, and mesh security. To avoid going into technical details, I will summarize the differences between the three mechanisms as follows:
Replication safety: Validators must operate all nodes that support the consumer chain.
Opt-in: Validators only choose to operate nodes for consumer chains they deem “economically profitable.” Of course, this will involve trade-offs in security and may not be as robust as Interchain.
Mesh security: In simple terms, a validator group can delegate operations to another validator group of the consumer chain. When the authorized validator violates the consensus mechanism, the group that authorized the validator will also suffer economic losses, i.e. slashing.
Therefore, it can be seen that in order to solve the node operation cost problem mentioned above, Cosmos created two other certified "rental" mechanisms. However, this solution (as mentioned above) is not perfect because it sacrifices some security issues and the network is broken down into specific "validator groups" for several consumer chains.
Cash flow solution?
Ironically, the phrase "all problems can be solved when the price goes up" is the most complete solution for Cosmos. As the price of ATOM increases, the income of validators will also increase, offsetting the fixed cost of running a node. However, this is somewhat of a "chicken or egg" game. When the network is not established, without capital injection, economic problems cannot be solved and the network has no foundation to build on.
In this section, I can only summarize some recent product infrastructure updates related to Cosmos. It is important to note that... the following information does not mean that funds will flow into the system, thus solving the above problems.
In addition, Cosmos has integrated a circuit breaker module. This is seen as an emergency circuit breaker that helps prevent the risk of attackers from attacking the Interchain ecosystem.
As early as March 2023, Circle announced that it would support USDC on the Cosmos Network.
In terms of internal parts, one can mention the Osmosis exchange’s announcement of a 50% reduction in token inflation, or the update of dydx concerning the product structure.
Conclusion
Thus, we have taken a look at the latest updates regarding Cosmos’ ICS mechanism, as well as an analysis of the issues facing this ecosystem.
I hope this helps and I look forward to seeing you again in a new post.