Launching a Layer 0 or Layer 1 chain requires a high level of technical competency, as the team has to build a form of consensus, SDK, or modular stack to host applications.
More difficult, chains have to assemble a group of node operators. As part of launching a new chain, developers must consider node operators who will maintain good uptime and upgrade their systems promptly to avoid a network halt. Developers must communicate to validators when there are upgrades and lead organizing efforts to coordinate node operators. This effort takes developers’ attention away from the product they are building.
When applications launch on these types of chain, they compete with other applications for block space, resulting in long transaction times and high gas prices for users. In addition, large blocks slow down the network as the system adds complexity.
Because of this, chains are turning to interchain security to provide a better developer environment and frictionless upgrades for node operators. Interchain security is the ability of one set of validators (on the ‘parent’ chain) to secure and create blocks for multiple chains (‘child’ chains). For delegators, this means that they can use one protocol staking token to secure multiple networks.
Three of Figment’s supported networks implement interchain security to benefit the network by keeping block sizes small, block times short, and gas costs low. Avalanche and Polkadot currently have deployed a form of shared security for applications through the form of subnets and parachains. Cosmos Hub is targeting launching interchain security in August/September of 2022.
Delegators on the Cosmos Hub can expect to earn additional ATOM or native tokens from the child chains, on top of the rewards they already receive from protocol staking on the Hub. It’s up to the consumer chain whether delegators earn native tokens or ATOM. Prop72, which requested funding to support consumer chains launching with CosmWasm and liquid staking features, adds another layer where those protocol staking ATOM will be able to compound their rewards through liquid staking. Core developers are building incentives for token holders to delegate all of their ATOM on the Hub, receive rewards from the Hub and the child chains, and use liquid staking features to continue to access the rest of the Cosmos.
Interchain security mechanics
In the simplest terms, interchain security is where a child chain collects its transactions, collapses them into a small package with just the essential information, and sends that package to the validators on the parent chain. Validators then certify that this package is correct, sign the block, and send it back to the child chain.
Interchain security aims to ‘spread the load’ of transactions across different chains to reduce the number of transactions held within one block. When there are many transactions within a block, the time it takes to process a block increases. When block times increase, the chain’s security is at risk. It costs more gas to make a block because it is computationally complex and requires more processing time.
Layer 0 protocols (chains without smart contracts) will use different terminology for child chains. Cosmos refers to them as Consumer chains because the chains are ‘consuming security.’ Some have also referred to them as ISC, Interchain Security Chains.
Interchain security and ATOM
Token holders have the benefit of only delegating on the Cosmos Hub while earning rewards for security from all the chains that have launched as a child chain on the network. The move to interchain security also represents a move away from the original vision of the Hub. Initially, the Hub was designed to run in tandem with other interoperable chains. In practice, this meant the value of ATOM is used to stake and secure the chain, as the reserve currency for the ecosystem, and for voting on governance.
Once interchain security goes live on the network and the Hub’s validators can earn block rewards for validating on all the consumer chains, delegators will have access to many tokens. As the child chains roll out features like CosmWasm and liquid staking, there will be less to govern on the Hub, and tokens from child chains can be used to participate in governance.
Governance on the Hub will not disappear; rather, it will narrow in scope to focus on approving consumer chains. The native tokens on the child chains will dictate governance and not be tied to supplying security.
The goal of launching this interchain security is to have a system by which consumer chains can replace upgrades and changes to the code without having to upgrade the Hub itself. This will reduce the opportunities for delegators to miss rewards because node operators will not have to go offline to upgrade their nodes. Ultimately, with interchain security enabled, Hub stakers will be able to earn multiple native tokens and additional ATOM, use liquid staking tokens to stack rewards, and navigate the Cosmos, offering multiple different avenues of revenue in a frictionless environment.
Interchain security as infrastructure
Ultimately, interchain security allows chains to focus on the product they’re building, rather than coordinating with validators, researching consensus mechanisms, and deploying SDKs. Application layer chains can launch and develop their application, leaving the team building Layer 0 protocols to focus on supplying the infrastructure.
The Cosmos Hub’s core team is focused on building the roads and telephone lines for the next version of the internet. Interchain security aims to alleviate the struggles of application layer chains developing that infrastructure. In the future, applications will be able to run their services and products with the flexibility and security necessary. The Cosmos Hub makes this effort possible by building a suite of features, including interchain security, essential for Web 3.
