You might have already seen concepts like Replicated Security, Mesh Security, Interchain Alliance, and ‘Rollapps’ across your Twitter timeline.
Today, I’m here to help you understand the basic differences between these security layers and their impact on the app-chain thesis. In this first part of a two-part series, we’ll delve into Replicated Security and Mesh Security.
Replicated Security is a shared security system within the Cosmos ecosystem that allows smaller app-chains (consumer chains) to utilize the validators of the Cosmos Hub (provider chain) in order to secure their networks.
By utilizing the Inter-Blockchain Communication Protocol (IBC), the provider chain transmits messages that include crucial information about its validators, such as their identities and voting power determined by staked tokens, to the consensus engine of the consumer chain.
The consumer chain receives and incorporates this information to validate and verify transactions or activities taking place on the provider chain.
2/ Replicated Security is a new upcoming feature of the Cosmos Hub, that will be introduced with the Lambda Upgrade (V9).
Originally named Interchain Security (ICS), specifically Interchain Security V1.
As of today the correct term to use is Replicated Security.
In return for providing security, the provider chain receives a percentage of the gas fees generated by transactions on the consumer chain.
This mutually beneficial arrangement allows smaller projects to bootstrap their chains with enhanced security and resilience against exploits while creating additional value streams for the native token, $ATOM.
Drawbacks of Replicated Security
There have been two potential challenges identified in the implementation of Replicated Security, along with proposed solutions.
The first challenge associated with Replicated Security is the economic burden it places on validators aiming to secure multiple consumer chains. Running an additional node for each consumer chain increases operational expenses, while the revenue generated from these chains initially starts at a low level and gradually grows over time.
As a result, smaller validators may face financial challenges in covering these operational costs, especially in the initial stages.
Additionally, the accessibility that comes with the nature of opt-in security may cause the “subset problem”. This flaw implies that while the overall group of validators may be secure, a subset within that group may contain malicious validators, posing a potential risk if they opt into a consumer chain.
To tackle these challenges, various solutions can be explored to enhance Replicated Security. It is essential to prioritize the growth and profitability of consumer chains, optimize the distribution of revenue among validators, and seek strategies to minimize infrastructure costs.
12/ In total, Replicated Security should generate anywhere between $900k to $7.7M in year 1 for ATOM stakers.
With a base case of $3.3M, this would equate to ~0.1% of non-ATOM inflationary yield for ATOM stakers at the current ATOM staked market cap. pic.twitter.com/wfXdSJsQ1h
— Blockworks Research (@blockworksres) June 1, 2023
Regarding Opt-in security, one potential solution involves limiting the power of each validator on a consumer chain.
Nevertheless, it is crucial to acknowledge that attackers can still take advantage of this vulnerability by creating multiple validator accounts. Although there may be secure scenarios for opt-in security, the Cosmos Hub prioritizes the broader security perspective and avoids unwarranted risks.
The inherent flaw of opt-in security lies in the uncertainty of when the system might become compromised.
Until a solution to the subset problem is discovered, opt-in security will not be implemented.
What is Mesh Security?
Mesh Security introduces an alternative approach to enhancing security within the Cosmos ecosystem.
With Mesh Security, chains collaborate to strengthen security in a bidirectional or multilateral manner by harnessing the combined market caps of participating chains.
The co-founder of Osmosis, Sunny Aggarwal, describes this model as drawing parallels to the principles observed within NATO, where collective defense obligations ensure security in the face of attacks, often associated with a degree of economic interdependence.
Understanding the differences between Replicated and Mesh Security
In contrast to Replicated Security, Mesh Security offers a distinct advantage by removing the requirement for validators to deploy extra nodes or share validators across chains.
Image Courtesy: Osmosis Zone
Instead, delegators holding staked tokens on one chain can opt to re-stake their bonded tokens with validators of their preference on a partnering chain.
Collaborate to strengthen each other’s security
Chain sovereignty retention
No rent to landlord chains, no reliance on dominant chains
Delegator-centric design where their role will be prioritized over validators
For example, delegators who have staked tokens on JUNO can decide to re-stake their tokens with validators from OSMOSIS. By doing so, they contribute to the security of both chains, without having to run additional nodes or spread out additional resources between the two.
In the event of misbehavior by the selected validator, the staked tokens are slashed on both chains. It is safe to assume that no validator would want this to happen, given the higher level of consequence.
So, how about delegators?
For taking on this additional slashing risk, they will be incentivized by receiving staking rewards from the partner chain in proportion to the amount of CometBFT power that their home chain is securing for the partner. Keep in mind, it would also be up to mesh consumer chains to divert a portion of their staking rewards to re-staked assets securing them.
TLDR: Cross-staking means extra rewards, but delegators take on more risk.
Replicated vs Mesh? Nah, Replicated AND Mesh.
Taking into account the above explanations, it seems like Replicated Security is designed to cater specifically to early-stage projects that choose to depend on the validators of the Cosmos Hub instead of establishing their own validator set.
As these projects progress and mature, they can then have the chance to seamlessly transition to Mesh Security, which relies on substantial market caps.
This transition allows them to leverage the Cosmos Hub validator set while gradually attaining complete sovereignty, moving on from previously paying rent towards the Hub in exchange for security.
If they have reached a substantial level of growth at this point, they would be able to leverage their native token’s marketcap to participate in the alliances between chains using Mesh Security to secure their networks.
Replicated Security has already been launched, with Neutron being the first-ever chain to adopt this security model.
This provides a revolutionary approach to protocols that are considering launching their own app-chain.
As observed across the board, teams often have to raise incredible amounts of funds for both security and ecosystem development. Ava Labs raised $290 million, while Near Protocol raised $350 million.
With a solution like Replicated Security, we may soon observe the emergence of protocols launching their own app-chains. This will allow them to reap the full benefits of sovereignty and customization, which they were previously unable to achieve due to a lack of funds to bootstrap their launch.
On the other hand, Mesh Security is currently in the development phase. As per a blog post by Osmosis, the development process will involve three phases.
Phase 1 will focus on constructing the architecture and deploying it on testnet.
Phase 2 will involve testing and deploying the architecture on low-capital Cosmos consumer chains, while also garnering support for its implementation.
Finally, Phase 3 will entail the deployment of an open-source mainnet.
We’ll know where to be keeping our eyes out for updates!
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