Cosmos Mesh: Symmetric Settlement Infrastructure via Cosmos Zones and IBC

Miscellaneous
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Motivation

The benefits of bringing equity markets on chain are many and obvious:

  • Trades are settlements

  • Always on trading

  • No counterparty risk

Much is made of the regulatory hurdles to such an arrangement, but those are (finally) coming down, revealing the very real technical challenges involved in creating the requisite infrastructure. No single chain can handle the volume generated by a major equities market. Further, Solana, which comes close, suffers from reliability issues that make it a non starter.

Architecture

The proposed infrastructure consists of two zone types along with relayers

  • Asset zones: Simple, authoritative ledgers of who owns how much of a single asset.

    • Accepts settlement instructions and executes atomically

  • Pair zones: Implement an AMM for a single trading pair.

    • Connected via IBC to two asset chains, posts atomic settlement instructions to both on withdrawal.

    • Pair zones maintain large caches of both assets on their respective zones. Settlement happens on the pair zones and IBC is used for withdrawals only.

    • Pair zones act as settlement chains if a traditional order book is desired.

This separation of concerns allow aggregate throughput well exceeding what any single blockchain can do while at the same time aligning the incentives of validators with those of assets in question. It also allows the issuer of each asset type to implement their own compliance layer for its own zone. Lastly, it allows for market based discovery of desirable trading pairs.

Security and Validator Economics

  • Low volume zones can use ICS to secure their zone without requiring a validator set.

  • High volume zones can use their own validator set, with enhanced security through cross-staking.

Open Questions

  • Is the latency of such an architecture acceptable? My gut instinct is it’s fine for everything but high speed trading.

  • What kind of structure is best suited for pair zones and relayers? Single entity or relayer specialists?

Next Steps

Technical validation: I need some folks who know Cosmos better than I do to look at this and tell me if it’s feasible. If it is, well, let’s build it!