Darren Kleine

The crypto space is never short on drama, particularly when it comes to issues around consensus. The latest bit of spicy controversy springs from a proposition to “slash” and “tombstone” two validators through a community vote in the Cosmos ecosystem.



The Neutron consumer chain, secured by Cosmos, recently experienced a “double-signing” event by two reportedly reputable validators. On the Cosmos chain itself, this would normally result in the automatic slashing of funds and a penalty called “tombstoning,” whereby the nodes are permanently banned from validating.



But since Neutron is a consumer chain secured by Cosmos via “Replicated Security,” the punishments must instead be doled out via an ongoing community vote called <a href="https://dev.mintscan.io/cosmos/proposals/818">Prop #818</a>, scheduled to end on Aug. 23. <a href="https://www.blockworksresearch.com/">Blockworks Research</a> Analyst, <a href="https://twitter.com/EffortCapital?ref_src=twsrc%5Egoogle%7Ctwcamp%5Eserp%7Ctwgr%5Eauthor">David Rodriguez</a> speaks about the debate on the 0xResearch podcast (<a href="https://open.spotify.com/episode/09tVo8N7sjNo7rAejcSdRv?si=9AZkURQUSq6iVNlpi1IBAg">Spotify</a>/<a href="https://podcasts.apple.com/us/podcast/vertex-built-for-cross-margin-low-latency-trading-darius/id1651683074?i=1000624664334">Apple</a>).&nbsp;



Rodriguez goes into further detail about the incident that sparked the controversy, <a href="https://blockworks.co/news/cosmos-hub-validators-slashed">previously explained to Blockworks</a>. During a rolling upgrade of Neutron, validators were expected to upgrade to the latest version.&nbsp;



Rodriguez says that two validators appeared to have accidentally “double-signed” the block, meaning they submitted two signed messages for the same block — a big “no-no,” he says.



Being that the <a href="http://blockworks.co/news/neutron-cosmos-replicated-security">consumer chain</a> is “very new tech,” Rodriguez says, penalties like slashing and tombstoning are not yet automated. “The concern was, what if a consumer chain accidentally slashed the validators when they didn&#8217;t do anything wrong?”&nbsp;



Instead, the <a href="http://blockworks.co/tag/cosmos">Cosmos</a> Hub communities must “decide whether or not a validator should be slashed,” he says.



Rodriguez says that it appears that neither of the validators exhibited malicious intent with the double-signing, but certain community members argue that whether or not the act was intentional, “code is law.”



<h2 class="wp-block-heading">Not worth the risk?</h2>



If a validator double-signed on the Cosmos Hub, “they would&#8217;ve been [automatically] slashed and tombstoned,” he says.&nbsp;



“Why aren&#8217;t we taking this exact same approach and setting the exact same precedent for consumer chains?” Rodriguez asks. “There&#8217;s a lot of validators right now that are looking at this and going, ‘Well, the risk-return for validating a consumer chain is not worth it.’”



“The validators don&#8217;t want to be penalized for unintentionally double-signing or doing something else negative to these consumer chains.”



“You’ve got to set a precedent here,” he says, “that these validators should be slashed — and maybe Neutron or the consumer chain should reimburse the validator.”



“We should vote after slashing and tombstoning these validators to un-tombstone them and bringing them back into the validator set,” he says. “It&#8217;s very important to set a social precedent.”



Ultimately, Rodriguez says, the incident might “put the value prop of replicated security and interchain security in harm&#8217;s way.”



A planned upgrade for automated slashing is in the works, Rodriguez notes, “but it&#8217;s just unfortunate that this event is happening while Replicated Security is on training wheels.”&nbsp;



<h2 class="wp-block-heading">Slash first, ask questions later</h2>



<a href="https://www.blockworksresearch.com/">Blockworks Research</a> analyst <a href="https://twitter.com/@purplepill3m">Ren Yu Kong</a> adds, “I would always err to the side of slashing first.” He suggests that after a slashing, the community could follow up the incident with a veto committee that could potentially “undo that slash.”



“For these systems that largely depend on crypto economic security, you need to have that guarantee that the slashing is going to happen instantaneously or that it’s within the code.”



“You don&#8217;t have to slash and then immediately burn it,” he says. “You can move stuff to a community-owned wallet and then there&#8217;s a committee of some sort that votes on whether this slashing is vetoed or it goes through.”



“The hub took an optimistic approach,” Rodriguez replies, presuming that the validators were not acting nefariously. Giving the validators the benefit of the doubt and letting social consensus decide “was probably not the right thing to do, in hindsight,” he says.



It would have been better to “slash first, ask questions later,” Rodriguez says. “If these validators did this on the Cosmos Hub or if <a href="https://blockworks.co/news/osmosis-prepares-for-v16">an Osmosis validator</a> double-signed, they would&#8217;ve been slashed immediately.”



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“I don&#8217;t know why we&#8217;re not extending those exact same rules that we already have in place — and what the precedent is for other Cosmos chains.”



“A lot of validators are concerned about whether or not they should even be validating Neutron moving forward, or another consumer chain,” Rodriguez says.



“The risk is, potentially, not worth it.”



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Cosmos community split on how to deal with ‘accidental’ double-signing on consumer chain, Neutron

Bessie Liu

The Cosmos Hub will soon receive a significant token windfall on a proposal from last year.



Proposal 78 was first introduced in May last year, designed to introduce liquid staking and interchain DeFi into its ecosystem.&nbsp;



The proposal sought a total of 150,000 ATOM tokens, an amount worth roughly $950,000. The ATOM tokens would then be invested in projects able to bring liquid staking and DeFi activity to the interchain through replicated security (RS).&nbsp;



Replicated security is a shared security model used by a network of blockchains part of the Cosmos ecosystem. The Cosmos Hub can be considered the main point of contact for the various blockchains developed within the Cosmos ecosystem.&nbsp;



Of the 150,000 ATOM tokens in the initial proposal, 50k worth of ATOM tokens were given to P2P, a proof-of-stake validator and remote procedure call (RPC) node provider, to build Neutron. Neutron is a layer-1 CosmWasm blockchain that enables smart contracts to be deployed across multiple blockchains.



So far, only 25,000 of the 50,000 ATOM has been received by the Neutron team and a <a href="https://forum.cosmos.network/t/proposal-last-call-re-allocate-prop-72-funding-from-p2p-to-neutron/11087">proposal</a> to reallocate the remaining 25,000 ATOM from P2P to Neutron is underway.



At the time of writing, almost <a href="https://www.mintscan.io/cosmos/proposals/819">97%</a> of voters are in favor of Neutron receiving the additional 25,000 ATOM, though the proposal itself has not yet reached <a href="https://www.mintscan.io/cosmos/proposals/819">quorum</a>. Voters will have until the Aug. 24 to cast their votes.



Additionally, the proposal will provide the Cosmos Hub with one of its largest allocation returns to date.&nbsp;



Now that Neutron has officially launched on RS, an estimated $12 million will be sent back to the Hub as part of an airdrop. The team called it “an expected initial return of 28x the original Prop 72 allocation.”



This amount is in addition to the initial agreement whereby 25% of all transaction fees and 25% of all MEV revenue will be given to the Hub.



Neutron plans to submit a proposal to ensure that the airdropped tokens can be used to contribute to Neutron governance.



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Cosmos devoted funds to boost DeFi activity. It scored a token windfall in return

Neutron, a blockchain designed to facilitate smart contracts within the Cosmos ecosystem, faced an unexpected pause on Tuesday, Aug. 1. Now <a href="https://blockworks.co/tag/cosmos">Cosmos</a> Hub governance is deciding on the consequences.



The problem? Some of its validators, responsible for maintaining the Neutron network, were running different versions of network&#8217;s code — an inconsistency that temporarily resulted in the halting of its blockchain.



In dealing with the aftermath, the question is whether validators should be penalized for their oversight.



Neutron had <a href="https://github.com/neutron-org/neutron/releases/tag/v1.0.4">advised</a> validators to upgrade their nodes to v1.0.4 back in July, believing that it would not cause disruptions to the network’s consensus mechanism. However, this assessment proved to be incorrect.



When validators using two distinct node versions attempted to process differing transactions, the inconsistency caused a disagreement regarding each transaction&#8217;s validity. This lack of consensus meant that the network could not agree on the contents of the next block, leading the chain to stop until the issue could be resolved.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Chain Halt Post-Mortem ✴️ Around 17:05 UTC on 1st August 2023 the Neutron chain was halted. 👉 The full post-mortem investigation is detailed here: <a href="https://t.co/JwbYBrklRf">https://t.co/JwbYBrklRf</a> Investigations revealed this to be due to some validators running different versions of the Neutron…&mdash; Neutron ✴️ (@Neutron_org) <a href="https://twitter.com/Neutron_org/status/1689228844127956992?ref_src=twsrc%5Etfw">August 9, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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This series of events led the network to propose its <a href="https://dev.mintscan.io/cosmos/proposals/818">first governance measure</a> to slash Replicated Security validators on the Cosmos Hub. ‘Slashing’ refers to the process of penalizing validators by reducing or confiscating a portion of their staked tokens due to malicious or negligent actions.



Replicated Security is a mechanism by which the Cosmos Hub extends its <a href="https://blockworks.co/tag/validator">validator</a> set to other blockchains in an effort to enhance their security. In return, these chains provide revenue to the Cosmos Hub&#8217;s validators and delegators by sharing a part of their transaction and application fees.



“Although the two validators did not maliciously intend to double sign on Neutron, the intent of operators cannot be hard coded into the system,” <a href="https://www.blockworksresearch.com/">Blockworks Research</a> analyst David Rodriguez said. “The Cosmos Hub is currently going through the difficulty that many chains will face in the coming years — is code law or is social consensus law?”



Rodriguez points out that shared security systems have varying methods of handling slashing. For example, Eigenlayer prioritizes slashing first, and then allows community members the chance to veto the decision.



In the case of Replicated Security, the network adopts an optimistic approach.&nbsp;



“Replicated Security takes an optimistic approach that gives the community the ability to slash once a ‘slash packet’ is sent to the Hub,” he said. “In my opinion, when it comes to shared security systems, we must slash regardless of intent unless the slash event is so large that it structurally changes the security of the Hub.&#8221;



Rodriguez’s sentiment is not shared entirely by other Cosmos community members, however. <a href="https://blockworks.co/tag/neutron">Neutron</a> founder Avril Dutheil believes the validators should not be penalized.



“The ‘optimistic’ slashing that currently exists for Replicated Security is a short-term solution until the ‘untrusted protocol’ is rolled out,” Dutheil told Blockworks. “This mechanism results in a bit of a training wheel scenario which has some benefits: Coordinating Cosmos Hub validators to perform changes that could put their ATOM stake at risk can be challenging, as they will naturally tend to be more conservative — they value protecting their ATOM stake more than helping the consumer chain launch/restart.”



Dutheil asserts that validators shouldn&#8217;t be penalized so long as they are not purposely attempting to attack the network.



“[This] helps get these initial hurdles resolved faster,” he said.



At the time of writing, almost 91% of voters have rejected <a href="https://dev.mintscan.io/cosmos/proposals/818">the penalization proposal</a>, with only 9% of voters in favor of slashing the network’s validators — though only 14.25% of eligible voters have opted to participate so far.



Correction Aug. 11, 2023 at 12:20 pm ET: The Neutron chain halted on Aug. 1 not Aug 10.



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Cosmos governance considers penalizing validators for Neutron standstill

Neutron, a blockchain network designed to bring smart contracts into the Cosmos network by using CosmWasm (Cosmos WebAssembly), has received a green light from the Cosmos Hub, the interchain service provider for Cosmos, to launch on Replicated Security (RS).



After conducting several audits, implementing core modules, and successfully deploying on the testnets, the Cosmos Hub initiated an on-chain vote to determine if Neutron was ready to launch on RS.&nbsp;



RS, previously known as interchain security, is a shared security model designed by the Cosmos Hub which offers advanced security to projects launching as a consumer chain on the Hub.



Consumer chains are able to benefit from the Cosmos Hub’s validator network and increase their own security through revenue sharing.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">3/ Replicated Security is a shared security model. The Cosmos Hub will be able to offer security to new projects launching as Hub-secured consumer chains. The Consumer Chain is a blockchain that leases security from the Hub.&mdash; Cosmos Hub ⚛️ (@cosmoshub) <a href="https://twitter.com/cosmoshub/status/1627705297971171329?ref_src=twsrc%5Etfw">February 20, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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The <a href="https://www.mintscan.io/cosmos/proposals/792">proposal</a> passed with a 61% voter turnout rate on Friday last week.&nbsp;



Of them, over 90% of community members voted in favor of the proposal, with only 1% voting against and almost 9% choosing to abstain.&nbsp;



According to Avril Dutheil, the general manager of Neutron, passing proposal 792 will make Neutron the first chain to launch on RS, establishing it as a <a href="https://www.stakingrewards.com/">top-10</a> proof-of-stake chain by economic security. He believes this will position Neutron as the central, neutral smart-contracting platform for the entire Cosmos ecosystem.



The Cosmos ecosystem is made up of a network of blockchains, but individually launching app chains can often be quite costly, as it is extremely resource intensive and requires complex infrastructure.&nbsp;



Additionally, as appchains require security to be successful, having a diverse validator set is equally important — something smaller app-chains that are just starting off may struggle with at launch.&nbsp;



Neutron is designed to resolve this problem by enabling various smart contracts to deploy on the Cosmos Hub.&nbsp;



“This is a major milestone for the Hub because it demonstrates that the technology is functional and that it can attract promising projects such as Neutron, Duality and Stride,” Dutheil said. “It also helps refine all of the processes involved in launching a consumer chain, making it easier for future projects to join the ATOM Economic Zone.”



Launching Neutron can also bring benefits to the Cosmos Hub as the platform will be able to bring various dapps onto the Hub, generating more revenue without having to search for additional validators. 



Given the challenges that RS faces around its economic model and infrastructure costs, Dutheil believes that Neutron is a great first consumer chain for the Hub to have.&nbsp;



“By providing developers the ability to launch applications as smart contracts, Neutron essentially allows Replicated Security to scale from day one,” he said. “Through Neutron, developers can enjoy the benefits of Replicated Security without any additional cost to the Hub and its validator set.”



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Neutron Becomes First Cosmos Chain to Launch on Replicated Security

Macauley Peterson

The v9 Lambda upgrade to the Cosmos Hub came off without a hitch shortly after 4:00 am ET on Wednesday.



The new software version, which has been in the works for over a year, enables a new kind of app chain to launch, one which doesn’t need to establish its own security through a unique validator set to establish consensus. The network would instead piggyback on the four-year-old <a href="https://blockworks.co/tag/cosmos" target="_blank" rel="noreferrer noopener">Cosmos</a> Hub and its 175 validators.



Cosmos Hub’s decentralized set of <a href="https://hub.cosmos.network/main/validators/overview.html" target="_blank" rel="noreferrer noopener">validators</a> worked in concert to briefly pause the chain and initiate Lambda at a predetermined <a href="https://www.mintscan.io/cosmos/blocks/14470501" target="_blank" rel="noreferrer noopener">block height</a>.



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<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Lambda Upgrade is successfully completed ⚛️ Replicated Security is live on the Cosmos Hub!<a href="https://twitter.com/hashtag/Cosmonauts?src=hash&amp;ref_src=twsrc%5Etfw">#Cosmonauts</a> get ready for the next phase&#8230;  It’s time to onboard Consumer Chains! The dawn of the Atom Economic Zone begins today 🔥 <a href="https://t.co/4C2DcH2XC2">pic.twitter.com/4C2DcH2XC2</a>&mdash; Cosmos Hub ⚛️ (@cosmoshub) <a href="https://twitter.com/cosmoshub/status/1635917476331438080?ref_src=twsrc%5Etfw">March 15, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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Blockworks spoke to Avril Dutheil, who is managing the Neutron project, a smart contract platform which expects to go live in mid-April and make use of the hallmark feature of Lambda: interchain security (ICS), also known as replicated security.



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Blockworks: You’re the first project that’s actually going to be using ICS, is that right?



Avril Dutheil: We’re the first to have signaled our interest in interchain security, we’re the first to receive funding for doing so. We’re likely to be the first to launch on interchain security as well, but that kind of depends on governance.



Blockworks: How would you characterize the interchain security debut in the pantheon of Cosmos upgrades? Cosmos is marked by this very interesting political dynamic, oftentimes very tumultuous.



Avril Dutheil: To a large extent, I think this is actually a good sign. In political systems, we tend to say, democracy is de-census. You don’t have democracy if you don’t actually have conflict. It’s actually a good thing to see dissent to some extent.



In general, it’s been resolved in Cosmos when we get dissent, and it usually leads to stuff getting done in the end. I think the most recent example [was] the <a href="https://blockworks.co/news/cosmos-ecosystem-will-soon-vote-on-atom-2-0-revised-white-paper">Atom 2.0 white paper</a> and vision <a href="https://blockworks.co/news/no-with-veto-cosmos-community-rejects-atom-2-0-white-paper">getting rejected</a>. To me, it was a surprise that the proposal itself, which was just a signaling proposal, got rejected entirely.



But what’s actually more interesting to me now is that <a href="https://www.blockworksresearch.com/research/the-implications-of-atom-2-0" target="_blank" rel="noreferrer noopener">a lot of these ideas</a> are actually getting built, but by specific teams that form around the ideas. So, for example, the governance vision is getting built by the likes of <a href="https://docs.daodao.zone/docs/introduction/welcome-to-dao-dao" target="_blank" rel="noreferrer noopener">Dao Dao</a>, [which] is actually going to be deploying on Neutron as well.



The Allocator [to fund new projects] is following a similar pattern, and the Scheduler [which would manage block space] is also being picked up by another team that has been working on MEV in Cosmos since day one. Basically all the main ideas, perhaps except inflation — the initial large mint of ATOM tokens that was proposed in <a href="https://www.mintscan.io/cosmos/proposals/82" target="_blank" rel="noreferrer noopener">Prop 82</a> — are actually getting built, but in a more piecemeal approach, essentially.



Blockworks: Compared to what the original vision was, do you think [the piecemeal approach] will be better as a result?



Avril Dutheil: For the Allocator, the products and the way they should be built are much more straightforward. And so it’s more of a question of having a good understanding of exactly which market the primitives work in, which is somewhat different from other DeFi primitives because it’s catering more towards inter protocol, DAO-to-DAO or even institutional clientele rather than retail consumers, and so designing the product with this in mind will be important as well as having good engineers that can make it happen in a way that’s very secure.&nbsp;



This is also getting built with smart contracts within the Cosmos Hub economic zone. I also think this is a really good outcome, especially since the initial idea was for the Allocator to be released as a consumer chain that would be secured by replicated security.



The problem, in my opinion, is when it comes to the economic model of ICS, for the short and perhaps medium term, I don’t see ICS scaling to dozens and dozens of chains — because the revenue that it generates will take time to bootstrap, but the cost on validators is pretty much instant.



It’s tough to launch a new consumer chain until the validators roughly achieve breakeven on the previous ones, because otherwise you end up adding pressure onto the bottom of the set, and that can turn into a centralizing force over time.



Mitigating this effect — distributing stake more equitably, distributing the revenue in perhaps different ways to achieve breakeven fast — and then the potential for opting in or out of replicated security are all avenues that are being explored in order to make this economic model more friendly to the bottom of the validator set.&nbsp;



Blockworks: Where do you position Neutron among other longer-running smart contract platforms like <a href="https://blockworks.co/tag/juno" target="_blank" rel="noreferrer noopener">Juno</a> and Evmos?



Avril Dutheil: I think there’s a fundamental difference between the two which is that, traditionally in Cosmos — well, actually any smart contract platform — as an application builder I have to choose which feature set and which market I’m actually going to be operating in. So that means if I’m interested in privacy I’ll probably choose Secret Network because they have this feature, but I’ll also be constrained by the size of their market.&nbsp;



In Cosmos, you can have token transfer functions very easily even as a smart contract application, but interoperability beyond that point — at least until Neutron launches — is not a solved problem. You can’t use interchain accounts because they were designed and built with other Cosmos SDK modules in mind…and interchain queries aren’t a thing that’s available to smart contracts either. When we started building Neutron, they weren’t a thing at all — they were an idea.



[Neutron] flips the script of general smart contract platforms on its head, because when you opt to deploy on Neutron primarily, you’re not choosing to deploy only on Neutron, you know that — because of Neutron’s features which enable your protocol to interact with other chains — you’ll be able to leverage feature sets from their other blockchains.



For example, let&#8217;s say I want to do private voting or sealed auction bids for my DeFi protocol or its governance. I can route the votes or the trades through <a href="https://blockworks.co/tag/secret-network" target="_blank" rel="noreferrer noopener">Secret Network</a> or Penumbra in order to anonymize them or conceal them — meaning that, I can get access to the privacy feature without being deployed on a private chain. I can get access to high speed by onboarding <a href="https://blockworks.co/tag/sei-network" target="_blank" rel="noreferrer noopener">Sei [Network]</a> and having some of my protocol’s logic run on Sei and then route trades that require that feature through Sei. 



So there will be a market on Neutron, but there are also markets on Juno, on Secret Network, <a href="https://blockworks.co/tag/osmosis" target="_blank" rel="noreferrer noopener">Osmosis</a> and the others.



And rather than being siloed onto one of these markets and knowing that it’s going to be difficult and will require tremendous engineering work to be able to onboard these other markets, you know that comes right out of the box.



Blockworks: Would there be impediments to upgrading Juno along these same lines?



Avril Dutheil: It’s much easier to make changes to a blockchain before it’s live. That being said, eventually I believe these functions will also be present on other chains. The thing though is that there’s a lot of engineering work required to make it work…We had to code the solutions in a way that is to a large extent not compatible with another Cosmos SDK chain, so even adapting it would require quite a bit of time in terms of engineering.



Blockworks: The design philosophy sounds a bit like <a href="https://blockworks.co/tag/axelar">Axelar</a>. Is that a fair comparison?&nbsp;



Avril Dutheil: I think there’s a bit of that, for sure. I do believe we’re working towards the same direction. The main difference between Axelar and Neutron is the technological stack that we built our interoperability on. For Axelar they built their own bridge system which is dedicated to Axelar. It is flexible enough to bootstrap interoperability between numerous chains with very diverse ecosystems. In our case, we mostly rely on <a href="https://blockworks.co/tag/IBC">IBC</a> [Inter-blockchain Communication]…because we think that it is likely going to be the long-term winner in terms of the actual protocol that is used to make blockchains communicate.&nbsp;



The main advantage of IBC is that it does not introduce any additional trust assumptions. If you trust the blockchains that you’re interacting with, you can trust IBC because the relayers — the third parties that are actually making it work — don’t have the power to change anything as long as you have the <a href="https://www.blockworksresearch.com/glossary#light-client-node" target="_blank" rel="noreferrer noopener">light clients</a> on both sides.



And so that’s a very interesting design philosophy and it’s also point-to-point, rather than having one chain that connects everything else together which would then act as a centralized point of failure. With IBC you can actually have a much more diverse network topography.



There are limitations to IBC — the main one being that, while IBC runs fine in Cosmos SDK blockchains, in most other environments running light clients inside a virtual machine takes a lot of gas and computation to verify all of the proofs. And so currently it’s difficult to make it widely adopted.&nbsp;



Blockworks: Are you optimistic that the impediment to having IBC working with Ethereum are going to be resolved?



Avril Dutheil: I wouldn’t be surprised if we see that this year, or conservatively next year — I’m sure it will be in production, yes.



The interesting thing of IBC is it specifies very little, meaning you can build very diverse applications on top of it. It’s very flexible beyond just ordering and the structure of the very basic messages and how you connect two chains. Beyond this, the sky&#8217;s the limit in terms of the applications you can build on it.



When IBC expands to these other chains, then suddenly our infrastructure, in the same manner, expands to these other chains, meaning that it will most likely be possible in the future to control accounts on Ethereum from a smart contract on Neutron, and I don’t believe it will require too much engineering to actually make that happen, once IBC is there.



The interview has been edited for clarity and brevity.



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