Cosmos Governance Gives Greenlight to Interchain Security

The v9-Lambda upgrade, expected to take place next week, brings a new feature that may be key to Cosmos’ future

article-image

BT Side/Shutterstock modified by Blockworks

share

In a nearly unanimous vote which concluded on Tuesday, Cosmos’ community members staking the ATOM token approved a proposal to launch the next major upgrade to the Cosmos Hub.

The v9-Lambda upgrade will establish the first version of interchain security (ICS) — also known as replicated security — a service the Cosmos Hub will provide to a new generation of consumer chains in the Cosmos ecosystem.

Those consumer chains, in turn, will bring value to the Cosmos Hub, according to proponents — such as Zaki Manian, co-founder of Iqlusion.

“The right way to think about ICS is it’s in the family of staking primitives, like Eigenlayer: What Eigenlayer is to Ethereum, ICS is to Cosmos,” Manian told Blockworks.

The network upgrade — expected to go live March 15 —  was approved by over 99% of voters comprising about 58% of ATOM staked, which is seen as a vote of confidence in the network, according to Avril Dutheil, general manager of Neutron, known online as Spaydh.

“We expected it to be successful, but we didn’t expect how well received it was — it was a bit of a landslide,” he said in a Tuesday interview as the voting period neared its end.

Neutron is a smart contract platform that will likely be the first consumer chain to make use of the new ICS feature.

The project, Dutheil said, finalized the incorporation of a non-profit foundation today, and the foundation will formally submit a proposal to Cosmos governance in early April to launch its chain.

If all goes to plan, Neutron should be live in the second half of April.

“We’re kind of like pioneers or guinea pigs, depending on how you see it,” he said.

With interchain security, the Cosmos Hub loans out its validator set — and the security provided by bonded ATOM — to a consumer chain, which accordingly avoids the need to bootstrap its own validators for security. In exchange, the Cosmos Hub receives a fee.

“In the long term, we should be aiming for projects that are going to be successful and large enough in scope that they can support themselves based on fees themselves,” Dutheil said.

Manian has thought a lot about value accrual for the Hub, going back to his involvement in the development of the tokenomics revamp known as ATOM 2.0, which the community rejected in a governance vote last November, but is now being incorporated in a more piecemeal approach.

“From a fee-revenue-to-market-cap point of view, ATOM is one of the worst chains,” Manian said. “The Cosmos ecosystem is thriving, but ATOM [is not].”

And while ICS is a step in the right direction, “[it’s] not the most important thing happening in Cosmos this year,” he said.

That honor goes to derivatives exchange dYdX and Circle’s USDC stablecoin, which, if successfully onboarded, has the potential to replace the liquidity lost in the collapse of Terra USD (UST) in May 2022.

Terra, a separate chain built using the Cosmos SDK, was a boon for Cosmos, as it provided an IBC-compatible stablecoin, which Cosmos lacked.

USDC can be a catalyst

The launch of USDC on Cosmos was originally intended to come with the launch of a chain using ICS, Noble. 

But in a setback for the ecosystem, the Noble team backed off, opting instead to start out with a limited permissioned validator set under a consensus system called proof-of-authority.

Manian and Dutheil are both optimistic that Noble will eventually see the adoption of ICS as necessary. “In no one’s eyes is proof-of-authority a long term solution,” Manian said.

In the meantime, there are other milestones to worry about, such as the migration of liquid staking platform Stride, which has said that it will become one of the first consumer chains.

“Let’s see ICS in production,” Manian said. “It is fantastic that Neutron is launching. It’s fantastic that Stride is going to do this migration.”

Down the road, he said, Noble will be able to reconsider adopting ICS closer to the time that dYdX is ready to launch its version 4 app chain on Cosmos.

Updated, March 9, 2023 at 5:52 am ET: Clarified the name of the general manager of Neutron.


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Decoding crypto and the markets. Daily, with Byron Gilliam.

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Industry City | Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

Brooklyn, NY

SUN - MON, JUN. 22 - 23, 2025

Blockworks and Cracked Labs are teaming up for the third installment of the Permissionless Hackathon, happening June 22–23, 2025 in Brooklyn, NY. This is a 36-hour IRL builder sprint where developers, designers, and creatives ship real projects solving real problems across […]

recent research

REPORT_Template.png

Research

The Sonic blockchain is leveraging redesigned airdrop incentives and its FeeM program to propel DeFi activity and attract institutional capital, setting the stage for ecosystem growth. Within this environment, leading protocols Shadow Exchange and Silo are poised to asymmetrically benefit due to innovative features and favorable valuations, despite facing ecosystem dependency and competitive pressures. This positions them as compelling, potentially shorter-term, investment opportunities contingent on Sonic's sustained success.

article-image

Bitcoin needs a price, but its magic runs deeper

article-image

Circle had a pretty successful first day of trading, but what’s next for the stablecoin issuer?

article-image

Solana’s USDC caught a boost after being paired with the TRUMP memecoin

article-image

The stablecoin issuer’s successful first day of trading is likely to spur more crypto IPOs, industry watchers say

article-image

Job openings rallied and continuing claims stalled ahead of May’s employment report

article-image

A group of Twitch streamers battle for bitcoin. Will their chats help them?