Replicated Security (RS) is a new technology that lets a Cosmos blockchain share its economic security with another using the Inter-Blockchain Communication protocol (IBC).
Replicated security adds to this mechanism, but across multiple blockchains: the Provider Chain provides the validator set and staking token, and the Consumer Chain provides rewards and checks that validators are not misbehaving.
This requires communications between the Provider and Consumer chains, which are handled by sending messages over IBC. For example, the Provider chain regularly sends information about validators and their stake to the Consumer chains. If a validator misbehaves, the Consumer chain sends a message to the Provider chain to trigger the slashing of their tokens.
As the most secure and valuable blockchain in the Cosmos ecosystem, the Cosmos Hub is the designated Provider Chain. In turn, Replicated Security enables the Cosmos Hub to generate additional rewards for its stakers and reinforces its network effect by bootstrapping an ecosystem of tightly integrated Consumer chains.
Replicated Security also enables the Cosmos Hub community to release new features as Consumer chains without compromising the security of the Hub itself. This allows the Hub to continue evolving while achieving Practical Hub Minimalism, a design philosophy that enables the hub to launch new features without increasing the complexity or risk of the hub itself.
There are challenges and limitations to the upgrade that will have to be tackled collectively by the Cosmos community.
The most notable challenge is that there is an economic limit to how many chains a validator could secure. If too many chains are onboarded, the cost of running a Cosmos Hub validator node becomes increasingly expensive, which would be harmful to smaller validators.
The other issue is that running a new node for each Consumer chain has increased operational cost, but there is little guarantee of returns because most consumer chains' revenue starts very low and increases with the adoption and use of the chain.
The concern then is that, in the short term, these challenges may undermine the financial security of node operators and the ability of RS to scale.
For RS to successfully scale and become economically sustainable, it will need to meet the following conditions:
Successful Consumer chains,
Better revenue distribution, and
Reduced operational costs.
The limited number of chains that can initially be onboarded creates an incentive for the Hub to vet the projects that launch on RS carefully. To maximize its own expected value, the Hub should assemble a roster of the most promising applications and provide them with the support they need to be tremendously successful.
Once consumer chains start producing meaningful revenue streams, revenue distribution becomes the key to the scalability of RS. The better the distribution, the faster the validator set meets its expenses, and the sooner another chain can be onboarded.
Currently, the distribution of revenue is weighted by stake: validators receive tokens proportional to their share of the ATOM stake. Improving the distribution of the stake itself on the Hub would not only make RS more scalable, but it would also improve the decentralization of the network.
Author: Avril Dutheil, General Manager of Neutron
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