Noble: ICS v1 Update

Hello Cosmos Community!

I’m Jelena Djuric, founder of Noble. It has been so exciting to see the energy and positive feedback from the Cosmos community around the launch of native USDC. There are currently over 22 million USDC issued on Noble and we expect that number to grow significantly in the coming months, particularly as the dYdX Chain begins the migration, enabled by CCTP, of significant collateral from Ethereum to Cosmos. Noble’s goal is to see the IBC ecosystem become a hotbed of activity, with many novel use cases and appchains recognizing both the value and power of the Cosmos stack and the benefits of native stablecoin and RWA liquidity. We have been so encouraged by the positive reception and support Noble has received from other Cosmos appchains around the launch of USDC, including Osmosis, Kujira, Sei and many others. It’s been gratifying to see native USDC become a catalyst for some in the broader crypto ecosystem to recognize the significant benefits of sovereign appchains and IBC.

As many of you are aware, Noble’s integration into replicated security, or “ICS v1”, has been an item on the roadmap since the chain’s conception. We initially proceeded with caution in ICS integration given changes to the protocol’s slashing mechanism; however, these concerns were addressed and our integration plans have been fully on track over the last few months. That said, in order to facilitate the launch of the Noble chain in advance of full ICS integration, a genesis Proof of Authority (“POA”) validator set was put together, which consisted of a subset of 20 Cosmos Hub validators. This interim set up provided Noble with a high level of chain stability and security while setting the stage for a relatively simple and straightforward ICS migration. It was the full intention of the Noble team to adopt ICS before the end of the year and we have taken many steps around the integration process. For example, we integrated the ICS protocol into Noble and worked closely with the Hypha team to put together a comprehensive plan for testing the migration before it was set to reach mainnet. Further, we’ve worked extensively with Noble’s POA validator set on multiple upgrades and have run a successful persistent testnet to ensure the reliability of the Noble chain. That said, we now believe it would be best to delay ICS integration for Noble and the reason for this post is to provide transparency to the community on the reasoning in this regard.

Noble is early in its development and, in the absence of a native token for the network, relies entirely on transaction fees to drive validator and staker compensation. Currently, Noble’s model prioritizes low transaction fees in order to facilitate liquidity migration to the Cosmos ecosystem and to encourage payments use cases that compare favorably to other blockchains from a user cost perspective. Noble intends to be cost competitive with platforms that are native asset issuers of USDC and other well adopted stablecoins and RWAs. Outbound IBC transactions are where the majority of transaction fee revenue for Noble is expected to accrue given users’ familiarity with exchanges and other platforms that charge an exit or withdrawal fee. As an IBC out transaction represents a form of “exit” from Noble, this is a natural point of capture. That said, Noble’s current model aims to ensure as little friction as possible given its stage of development, the priority given to user experience and its goal of proliferating native assets throughout the Interchain.

As a result, given Noble’s fee model under current volumes and near term projections, Noble’s integration as a consumer chain would mean that ICS validators would be operating at a loss out of the gate. While various factors might change with respect to the overall market conditions within the cryptocurrency ecosystem, figures so far demonstrate that current volume would not meet the profitability standards for all 180 Cosmos Hub validators. We think the risk is high that either Noble is not accepted to replicated security at this time or, potentially even worse, Noble joins ICS and is viewed as a failure due to validators not being able to cover their costs. We want to protect Noble as well as the broader Cosmos community against this very significant risk.

To be clear, ICS continues to be on Noble’s roadmap but a key precondition is that Noble, Hub validators and ATOM stakers are set up for success from an economic perspective. This includes, among other things, additional assets being issued on Noble (which the Noble team is working hard to deliver) and more work on an optimal fee model which strikes the right balance between user experience and appropriate stakeholder compensation. Ideally, Noble is mature enough to be admitted to the AEZ some time in mid-2024. Although timing is impossible to predict and circumstances always change, this is a target the Noble core team is striving for internally. We believe it is prudent to give ourselves, our users and our stakeholders more time to assess a feasible and sustainable economic model that takes into consideration various incentive structures within the general blockchain ecosystem and does not necessarily rely on a native token in the near term.

To conclude, I want to personally extend my thanks to community members who have supported Noble and the launch of native USDC - it has been so gratifying to see the burgeoning liquidity and excitement around the Interchain! Noble remains aligned with the Hub and we are looking forward to working to hit the milestones around ICS acceptance in 2024.

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Thanks for the thoughtful letter, Jelena!

We’re super excited about Noble and its success as the Cosmos ecosystem’s home for stablecoins. In fact, the Informal Hub and Hypha Hub Team’s funding for 2024 is mostly in the form of USDC issued on Noble.

We’ve been working closely with Noble on their economics as relates to ICS, and the ICS integration on the Noble chain. We appreciate the Noble team’s mature approach to tokenomics, and support their decision to defer ICS launch until they can knock it out of the park for the Hub validator set.

We’d like to thank John Letey and the Noble engineering team for the improvements they’ve made to the standalone to consumer migration protocol in preparation for Noble’s launch. The fact that the Noble ICS integration has been perfected will make it fast and easy to launch Noble on ICS when the time comes, and their improvements will make things smoother for other consumer chains in the meantime.

We’d also like to thank the validators who participated in Noble’s ICS testnets. Their work will mean that it’s much faster to launch Noble when the time comes, although we’ll be doing additional testnets and a rehearsal at that time.

Lastly, we are working on several improvements to ICS which will make the economics more flexible for Noble, and all other consumer chains. Improving ICS economics is our main R&D focus for 2024, and we have a few features in the pipeline. Variable commission rates will allow validators to set a higher commission on consumer chains, allowing them the flexibility to recoup their infrastructure costs on consumer chains. Partial Set Security will allow far fewer validators to run infrastructure for consumer chains. This will allow most validators the choice of whether or not to run on a given consumer, as well as concentrating rewards for those who do. We’ll have more detailed specifications of these features and implementation plans in time to start work in Q1 2024.

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Glass half empty, huh?

I tend to trust Jehan’s word when he says they’ve been working with Noble to make it a success. It’s better this way instead of them just yeeting the chain and compounding the current economic issues surrounding ICS V1.

Tomato tomahto, I suppose.

Again? This is the second time that Noble delays ICS, but this time with an absurd argument. ICS literally bootstrap new chains and guess what, Noble is a new chain. The argument of transition as mature chain is ridiculous and concerning, my trust for this team is gone. And as for Noble argument, if ICS is for chains with already revenue, let’s just do some BD going to get KAVA on ICS! Enough of being trolled by Noble.

Personally I would rather see Nobel on ICS at a loss in the short to medium term (similar to Neutron and Stride). Having a successful chain using ICS is probably worth the cost at this moment in time. Atom stakers and validators should be able to see the big picture here.

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Makes sense. I actually think Noble’s current POA system is more decentralized and secure than any proof of stake system, particularly for a product like USDC issuance.

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Thanks for the great work Jelena to bring Circle’s CCTP to the Cosmos ecosystem, the first non-EVM implementation of CCTP, which is critical for the success of the dYdX Chain. We fully support Noble joining as a consumer chain either now or later, if costs are the concern, @jtremback there are plenty of NTRN or ATOM in the community pool to be put to good use for this, bringing native USDC, CCTP and the launch of dYdX is one of the most if not the most significant development so far in Cosmos. The AADAO didn’t think about funding Noble to join as consumer chain by covering validators’ costs? @Youssef The AADAO now funds validators participating in Cosmos testnets, for a critical consumer chain such as Noble, which is necessary for the dYdX chain, we should ensure Noble can join as a consumer chain asap and not delayed because of the costs concerns. As a critical component for the dYdX chain and the wider Cosmos ecosystem, it is of the utmost importance that Noble is decentralized and secured by the Cosmos hub

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Sunny, the main use case for Noble’s USDC is of course dYdX v4, with Circle’s CCTP launching on the 28th November, the same day as the full trading launch on dYdX, not being a coincidence. dYdX v4 is a major competitor of Osmosis, especially since now you are also trying to offer perps and other trading products. You are a co-founder of Osmosis, so you don’t want to help your competitors. Hence, I take your advices about Noble with a grain of salt. The goal has always been for Noble to join as a consumer chain, and this is better done sooner than later. This shouldn’t be delayed because of costs concerns, the Cosmos hub community pool, AADAO, etc., have more than enough funds to cover validator costs for Noble for many months

The timing of this announcement is very interesting, right after the Atom Halving proposal. Suddenly after Proposal 848 approval and the inflation is cutted in half, for the first time Noble is concerned about ICS revenue and validators sustainability. I see a correlation here, Noble clearly is influenced by Propo 848 because made ICS less appealing, is it Noble going to be the first consumer chain of Atom1, Jae fork? I guess Atom use case is going to be just money after all, congrats 848 team for losing Noble.

Hi Jelena,

Great work! Appreciate what you’ve done for ecosystem.

Economics is a valid concern. You could create a signaling proposal and test your assumptions. Ie, if validators are happy to take the cost early or not. You could see what individual accounts and small/mid/large validators vote for.

This is a business decision on your end as well as validators’ end. Meaning you should look at small/mid validator’s vote and decide based on that.

Bringing this concern is a great way to communicate as you set expectations early on. Which is a lot more important than actual cost.

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Thanks for the update. Best wishes.

Watch what you say, please stay calm and don’t tear the community apart.

Is it possible that noble use atom for transactions fee ? You don’t really need a token. If the hub make revenue on tx fee it can cover relayer cost and ics.

Great transparency update Jelena ^.^

Appreciate you keeping the broader community informed rather than sitting on the integration delay without saying anything.

To anyone upset by this announcement, I think it’s important to recognize that there has been a lot of negative dialogue around ICS and validator costs, and this is a very reasonable response to that dialogue.

Much better to have Noble join ICS and be able to present a sustainable revenue model for the hub and its validators than start a relationship with the hub from a place of animosity.

Noble has already brought a lot of value to the ecosystem, and will bring so much more value in the coming months in ways that might not yet be apparent to everyone. Think they deserve a bit of patience here.

20 validators is decentralized enough. When you get more revenue and thus higher AUM is at risk, that is when you need to decentralize more.

Correct decision. Well done.

I am all for Kava on ICS. If it’s possible (ie the Kava team wants it) and it is financially a good deal for Cosmos Hub validators, let’s do it.

Context:

The key revelation in the post is the decision to postpone the ICS integration for Noble, shedding light on the economic considerations and challenges associated with the current fee model. It alludes to potential hurdles related to the profitability standards for validators.

Analysis:

  1. Nuanced Security Models: The decision by Noble to delay ICS integration showcases the need for more nuanced security models in the blockchain space. It suggests that a one-size-fits-all approach, especially when it comes to the costs associated with ICS, might not be the most suitable for all projects. This highlights a market fit for partial-set security models that can adapt to the economic realities of individual chains.

  2. Prudent Decision for Economic Viability: Noble’s emphasis on ensuring economic success for itself, Hub validators, and ATOM stakers before ICS integration is a prudent move. It acknowledges the economic challenges associated with the current fee model and demonstrates a commitment to protecting stakeholders from potential risks. This decision reflects a thoughtful approach to economic sustainability, aligning with the broader goals of the Cosmos ecosystem.

  3. Reconsidering Validator Count Impact: The post indirectly raises questions about the decision to have 180 validators on the Cosmos Hub. The notion that ICS integration might lead to validators operating at a loss for certain chains prompts a reconsideration of whether a lower validator count could enhance the economic viability of integrating various chains into the Hub’s security model. This highlights the importance of balancing decentralization goals with economic efficiency.

Conclusion:

In conclusion, Noble’s decision to delay ICS integration appears well-considered, taking into account economic sustainability and the unique circumstances of the project. This highlights the evolving nature of security models and suggests a need for more flexibility in accommodating diverse economic structures within the Cosmos ecosystem. The decision also prompts a broader reflection on the trade-offs associated with validator count on the Cosmos Hub and its impact on ICS integration costs.


We fully align with the choice made by Noble and invite the community to open discussions on the topics we raised in out analysis. Thanks for reading,
pro-delegators-sign

On running an ICS chain being unprofitable for validators: have the team considered running as ICS chain but with higher soft opt-out threshold, like 80% (so only 20% of VP would need to run the node)? That would require less validators to sign, and top validators for sure do earn enough to cover this.

Anyways, thanks a lot for the update!

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Feel like this is something that needs more attention, anyway. We keep seeing some efforts to continuously expand the set, but it might be approaching the time to consider going back toward 150.

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Thank you, @Jelena647, for sharing the rationale behind Noble decision to delay the migration on Cosmos Hub Replicated Security.

As a cosmonaut yourself, you are showing care about the Cosmos Hub by being particularly careful in timing Noble joining ICS.

Noble model of not having a token and relying on transaction fees adds an element of uncertainty for validators, even if Neutron is in a similar position due to the absence of token inflation shared with the Hub.

Noble concern about validators being unable to cover their costs is undoubtedly legitimate.

However, the ICS dynamic goes beyond security and touches on alignment and network effect.

We saw Stride and Neutron becoming leading chains of the ecosystem shortly after joining ICS.

It is difficult to predict if Noble joining ICS will translate into a net increase that will put the Noble Chain on the right path toward reducing the concerns of validators’ costs.

Still, based on the growing TVL of Stride and Neutron and the number of transfers from/to the Cosmos Hub, it is worth considering the positive effect of joining the ATOM Economic Zone.

Currently, Noble data doesn’t consider the network effect of joining the AEZ.

The Cosmos Hub has recently been able to regain the spotlight; the latest tweet of Cosmos Hub reached almost half a million impressions: https://x.com/cosmoshub/status/1728519681236177234?s=20

This is undeniable proof of the renewed excitement around the Cosmos Hub for the recent developments.

It is my assumption that the alignment between Cosmos Hub and Noble could create a powerful network effect within the AEZ in combination with Neutron and Stride. This purely speculative aspect is undoubtedly exciting because we are pioneering a new kind of network effect in the blockchain industry, which is possible only because of ICS.

This is an industry of pioneers; it is the tradition of innovators to be brave and jump into the unknown; this might sound scary, but it has been the secret to succeeding in this industry.

Be first, experiment, and get rewarded.

I hope that, especially if validators share the will to onboard Noble now in this forum, the Noble team could reconsider the timing and start the journey of shaping the AEZ with Cosmos Hub, Neutron, and Stride.

Thank you again for the update; I look forward to Noble joining ICS in the near or distant future.

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