February 24th, 2023
How should blockchains scale is one of the great debates in contemporary crypto.
Solana apostles will argue for a massive monolithic chain in which everything from data availability to execution is handled on a single chain. Ethereum proponents will argue for modular chains that splits the execution layer from the data availability, consensus, and settlement layers, as seen in Layer-2 Rollups. Both arguments have their merits and drawbacks.
But what if there was a third way? A way to get the best of both worlds.
That is what Cosmos offers. Instead of a monolithic or modular chain, Cosmos provides an interconnected network of monolithic app-chains and the tools (Tendermint, Cosmos SDK, IBC) to build them.
In other words, instead of scaling vertically, Cosmos is scaling horizontally.
This sounds great, except that it sounds a bit sketchy security-wise. Chains like Ethereum and Solana have one massive set of validators ensuring the chain stays safe. Cosmos, as a network of independent app-chains, can’t have this. The result is that the app-chains’ security levels will vary widely. It’s a big problem and one that Cosmos has to fix if it wants to reach its full potential.
Which is why they are releasing Interchain Security.
In this article, part of our Blockchain Protocols series, we’ll give a brief overview of Cosmos’ security and discuss how Interchain Security enables Cosmos to reach new levels of security and scalability.
The most critical component of a blockchain’s security is its consensus mechanism. These mechanisms are how blockchains agree on a shared state of the digital ledger in a decentralized manner.
Put simply, consensus mechanisms are how a decentralized network can trustlessly agree on which blocks to add to the chain. Should the consensus mechanism be exploited, such as in a 51% attack, the damage to the chain is potentially catastrophic.
As each Cosmos app-chain is built using the same software stack, they all use Tendermint Core, a Byzantine-Fault Tolerant Proof-Of-Stake consensus mechanism.
It sounds fancy, but all it means is that Cosmos chains can function up to the point of 1/3rd of nodes failing and are secured economically by stakers. In this respect, Tendermint is not much different from any other proof-of-stake blockchain.
A vital part of the security of proof-of-stake blockchains is the chain’s number of stakers and validators. The more stakers a chain has, the more economic value it has securing it. This makes it more difficult for an attacker to obtain a majority of the stake, making the chain more secure.
The issue that Cosmos app-chains run into is bootstrapping an initial set of validators. There are only so many stakers and validators out there. Each app-chain can’t have a robust set of validators, especially as more and more app-chains get spun up. The result is that many app-chains have very weak security guarantees.
What Cosmos needs is shared security. That way, new app-chains can launch without worrying about bootstrapping a robust set of validators.
Enter Interchain Security.
The idea behind Interchain Security is simple: make it so that app-chains can lease the security guarantees of the Cosmos Hub.
More specifically, Interchain Security enables validators on a provider chain to use stake on that chain to simultaneously secure a consumer chain. In return for securing the consumer chain, the provider chain receives a portion of the consumer chain’s gas fees and block rewards as payment.
In the case of Cosmos, the provider chain is the Cosmos Hub (as it’s the most secure chain on Cosmos), the stake is ATOM, and the consumer chain is any app-chain looking to beef up its security.
Interchain Security removes a significant hurdle to creating an effective and safe app-chain by allowing them to lease security from the Cosmos Hub. Over time, this will enable even more app-chains to be created, and thus, an even more innovative Cosmos ecosystem.
However, even though Interchain Security is great, it is not entirely without risks. Because it can be expensive to validate multiple chains, it is possible that small validators will drop out and large validators will begin to dominate the market. Besides being a centralization risk, this would also be bad news for chains that don’t generate enough gas fees to pay the validators. In this case, they will likely have to heavily inflate their token to persuade validators to secure the chain, which is obviously not ideal for the token.
In any case, Interchain Security is a huge step forward for Cosmos, both in security and scalability.
The Cosmos vision is admirable, but it has also been relatively overlooked, especially recently with the success of Ethereum’s Merge and L2s Arbitrum and Optimism.
However, with the growing narrative momentum around app-chains, spurred on by the decision of major Ethereum DEX dYdX to migrate to Cosmos, many believe that Cosmos is a prime candidate to explode in the next bull market.
With Interchain Security taking away many of Cosmos’ security concerns, this is definitely a blockchain worth keeping a close eye on.