[on-chain proposal] - Cosmos Hub IBC relayer gas cost restitution plan - FeeGrants

Dear community and validators,

This forum post is a request for feedback and Proposal draft seeking community funding for a relayer fee-grant support system for IBC traffic on the CosmosHub.

Abstract:
This governance proposal addresses the urgent need for supporting IBC relayers on the Cosmos Hub following the recent gas fee increase. It proposes the establishment of a fee-grant support system, funded by the community, to cover gas fees for IBC relaying activities. The proposal outlines the critical role of relayers in maintaining the network’s interoperability and the negative impact of increased operational costs on their sustainability. The proposing team consisting of respected Cosmos Hub relayers suggests forming a multisig group to manage the distribution of fee-grants to vetted relayers, offering a temporary solution to prevent service degradation and ensure the continuity of efficient IBC operations on the Cosmos Hub.

What is a relayer and IBC:
The Cosmos ecosystem is known for its interoperability technology dubbed, the Inter-Blockchain Communication protocol (IBC) that uses light client verification systems to allow for trust-minimized asset and message transfers between networks. The operators of this trust-minimized bridge are permissionless actors called relayers, they listen for packets on chain-A and post verifications for those packets on chain-b. An IBC transfer consists of 3 separate transactions of which 2 are orchestrated by the relayers, this means they pay the gas for these transactions. In order to relay IBC packets these operators need to run a full node (with sufficient archive) of both networks and a separate relayer software instance that connects to these full nodes. There are several different relaying softwares with the most used being Hermes and RLY. The finality of a user’s IBC transaction is directly related to the number of relayers/instances searching for packets and the delay of these machines to their respective fullnodes. To deliver a fast-finality and redundant service it is important that there is redundancy in both the full nodes, the number of relayer instances and the number of wallets from which transactions are posted.

What is the problem at hand:
On the Cosmos hub IBC relaying is mostly seen and operating as a public good and a marketing/profiling activity. This means relayers (which are often validators) are operating the necessary infrastructure at a loss to help the network grow or grow the brand of their business. Although this is a well-known fact and a respected activity within the Cosmos there is a situation where this becomes unsustainable. We believe this point has been reached on the Cosmos hub with the most recent gas increase in proposal 843 to a base of 0.005uATOM, an increase by the factor of 5 compared to before. A median IBC TX costs ~450k gas units currently (ibc light client update + 1 packet acknowledgement/receive/timeout) coming to a cost of ~0.0025 per message type and therefore ~0.0045 ATOM (*~8.5 = $0.038) per user initiated IBC tx. Including ICA and ICS message types the Cosmos hub is doing at minimum over 400k IBC messages per month totalling >1800 ATOM spent by relayers per month (further analysis indicates a total cost of 50-75 ATOM per day ~1500-2000 ATOM per month: IBC Fees | zanglang | Flipside). Anecdotal evidence shows active relayers spending 3-4 ATOM per day (prior to 5x fee increase) with the most active ones spending north of 10-20 ATOM per day. With reducing ICF delegations across the board (due to Atom per point going down and Relayer/RPC contributions being capped at 5 points) and the fact that many Relayers are lower in the validator set it has become more unsustainable than ever. So although ICF delegations help incentivize relayers, income from these delegations doesn’t come close to covering the costs for both Infrastructure and gas fees. We are now seeing 4+ active relayers actively stop relaying by keeping their wallet empty, this hurts the experience of ATOM IBC with users not being able to transfer funds and ICS chains not getting proper security set provider updates.

** above image shows many active relayers resorting to holding 0 ATOM and thereby not relaying.

Why should the community care:
The Cosmos Hub is exactly that, a hub. It is the largest onboarding avenue for users into the Cosmos ecosystem and one of the most liquid tokens across IBC. With a bad IBC/relaying experience we degrade the service quality of one of the major use cases of the Cosmos hub. Increasing the gas fee, while necessary to prevent spam attacks, has priced out relayers to the point where one of the core functions of the hub cannot provide a high quality service anymore, something that hurts the branding and investability of the hub. Transactions take longer or timeout, users will feel stuck potentially even leading to swapping to other IBC assets so as to finalize whatever on/offboarding they were doing. Simultaneously the lack of relayer support creates potential attack avenues on the Cosmoshub consumer chains as they are not kept up to date with provider set updates. Considering the manifold Cosmoshub features that rely on reliable IBC functionality (ICS, ICA, token transfers), lasting downtime could have adverse effects on the overall image and usability of the cosmos hub and the ATOM token.

The proposed solution/remedy:
This proposal draft, which has been created in collaboration by various relayer teams, including Lavender Five, CryptoCrew, Crosnest, Cosmos Spaces, Architect Nodes and IcyCRO, is seeking 8,000 ATOM (3x 2000 + Safety margin) to be send to a ⅗ multisig operated by TBD** to cover ATOM gas fees for IBC relaying to and from the Cosmos Hub for a period of 3 months.

**We are seeking 3 community representatives to join the multisig along with 2 relayer representatives. Please reach out to @Ertemann on Telegram if you are interested in participating or indicate so in this forum post! - There will be no compensation for this role or any role performed by the proposers for that matter.

The multisig address will distribute fee-grants to well known and vetted IBC operators under a fair usage agreement. Any ATOM leftover after the 3 month period can be returned or will roll over into the next period of Relayer funding if agreed upon.

This proposal does not pay relayers any ATOM, it merely offsets their native ATOM fees. It does NOT pay for the required hardware, service hours, counterparty fees and any other associated costs.

This is intended as a first step proposal to remedy the complete lock-out of ATOM IBC we see happening right now.

Feegrant Details:
https://docs.cosmos.network/main/modules/feegrant/

Multisig is responsible for signing-off on feegrant “grant” transactions to individual wallet addresses. Initially, this may need to be done manually as most major relayers “sign up” to the system with their wallet addresses, but it should be possible to automate this process in the future to reduce operational overhead and multisig fatigue.

Each operator may sign up with multiple wallet addresses, and each address will be granted one feegrant of equal value with an “expiration date” set to the end of the proposed 3-month period. For now this means relayers will only be able to leverage the Hermes software until RLY allows for feegrant wallets external of the Software’s keychain.

The feegrant will have a “total spend limit” set that will halt any further expenditure when the wallet address has exhausted the number of ATOMs granted to them.

The feegrant will have a “period limit” set that specifies the maximum number of ATOM that can be spent in a time period, for example, 10 ATOM per 24 hours. This can be used to prevent malicious operators from willfully exhausting the ATOMs granted to them by setting incorrect gas prices.

The feegrant will have a limit of allowed message types: MsgRecvPacket, MsgAcknowledgement, MsgUpdateClient, MsgTimeout, MsgTimeoutOnClose, MsgChannelOpenTry, MsgChannelOpenConfirm, MsgChannelOpenAck

**official documentation for obtaining a feegrant from the multisig and the requirements will be posted in the coming week. Any feegrant recipient will have to apply publicly - we suggest to use a cosmos forum thread for that.

FAQs:

  • What are the criteria for vetting operators, and how does one sign up?

Any operator is welcome to make a public application and go through the vetting process to gain access to the fee grant. However, any operator that has processed more than 500 IBC messages (~1% of total) in the past month can submit their application for expedited approval. The exact requirements and summarized fair use agreement will be posted shortly in the above mentioned documentation page. We would love any feedback on specific gating requirements the community deems important.

  • Wouldn’t the upcoming SKIP block SDK decrease fees again based on usage only?

The effects of EIP-1559-style fee markets on relayers cannot yet be quantified very well. This proposal is seeking to reimburse relayers for the transaction fees they spend in the future. The implementation of the Block SDK will only influence the relayer burn rate, and may be considered as a factor in upcoming multisig replenishment proposals.

  • Doesn’t the ICF pay relayers on the Cosmos hub in the form of a delegation?

While ICF delegations do acknowledge IBC relayer contributions, they do not suffice to cover relayer transaction fee expenses in light of the recent min fee increase. This proposal aims to work towards a more sustainable model, where fees spent by whitelisted relayers are covered through fee grants, and incentivization for relayer operation comes from ICF delegations.

  • I thought my part of my transaction fee goes to relayers? If not, why not incl relay costs in tx fees"

This is not the case currently, the gas fees users pay is only to cover them posting the initiation of the IBC packet. To properly relay packets in between chains 2 relayer transactions are needed, one on the source- and one on the destination chain (“receive packet” and “acknowledge packet”). Any TX thereafter the gas is paid for by the relayer. The idea to add a fee to each transaction is good and has been written out as code in the ICS-29 standard.

  • Why are relayers not pushing ICS-29? That should pay them pro-rata.

ICS-29, also known as “relayer-fee-middleware” aims to charge users for IBC transaction fees. In its current design, ICS-29 hasn’t gotten much adoption for a number of reasons. It is subject to MEV by validators misbehaving and it puts a too significant effort on the # of packets transferred and not the quality of service. It will cause a race to the bottom for relayers to the point where users pay more but relayers still don’t make a profit. Furthermore, currently only new channels can use this feature (as channel upgradeability is yet to be completed), which means that ISC-29 is no viable option for now. We would love to see this change in the future. More recent developments like permissioned IBC (ibc-sync), ABCI++ pre-block building and other solutions can help ICS-29 become better at its original goal. Additionally relayers are looking at a PFM-based fee that could be used to fund this fee-grant proposal into the future.

  • Other networks that want to use ATOM should pay for Relayer contracts and fees themselves.

Frankly we agree, and to some extent this is happening already. CryptoCrew has an agreement with Neutron and the AADAO and certain providers also have private agreements with dedicated chains. In our fair use agreement we will request relayers to operate existing relaying contracts from a different address. We don’t think it is fair to assume that all chains and all relayers are able to pay for dedicated contracts or have gotten enough credit to obtain one. We hope this proposal will promote more relayers to start back up and new ones to join and learn in an environment where they are not simultaneously losing money. Over time this will only grow IBC and thereby the Cosmos Hubs relevancy.

  • Wouldnt removing the Client update on all messages be a good way to reduce costs?

Yes, but there are some caveats here. First we need clients to be up-to-date enough to be able to verify the transaction between chains. This means we can only start reducing Client updates effectively by batching TXs. Due to the current relayer race this is not done effectively, by making more agreements together we could change this with this proposal. Secondly the RLY and Hermes software does not properly support Client checking yet, it most often defaults to always updating. This is something both Informal and Strangelove are working on to improve.

  • How can we better leverage batching to reduce costs?

The feegant multisig will set a requirement on the RPC pull times and WS batching delays for all requestors. This should have minimal impact on finality for users but can efficiently increase the IBC capacity and reduce fees. Control will be based on the aforementioned fair usage agreement.

  • How will you make sure relayers don’t empty the feegrants by using insane fee settings on their transactions?

Hard caps are set for each wallet that receives a feegrant so they may not spend more than a certain amount of ATOM within a fixed period of time. We will set up public analytics dashboards that will display the transactions and fees consumed so far by each wallet. Any one address that spends unusually more than its peers will stick out like a sore thumb, and malicious operators can be quickly identified and have their feegrants revoked.

  • Are relayers profiting from this?

No, feegrants can only be used to spend on gas and relayers can not take these ATOMs into their own control. No funding is requested to compensate relayers for time and infrastructure at this time. It does reduce costs for relayers as they will no longer have to spend their own bought/earned ATOM - one could consider this a profit, or at least a reduced deficit.

  • Why are you asking for such funding on the Hub only? Osmo and others increased fees too recently.

The Cosmos hub has always been the chain with one of the most IBC transactions and also one of the highest fees, this combination makes the Cosmos Hub significantly more expensive to relay for. With the recent increase of the globalfee minFee param this issue also seems to have come to a boiling point, as some relayers are shutting down shop for ATOM specifically. Other networks might have operation DAOs or foundations that create contracts with relayers. As such a possibility does not exist for the Cosmos hub, this proposal is a first step in improving the situation for IBC relayers on the hub.

  • Won’t this just create another “cartel”? How would new relayers be able to get in?

Although the multisig will have 2 relayers on them the majority will be community members. All relayers will be welcome to apply for a feegrant as long as they can meet the predetermined requirements. Collective decision making around Relayer configuration can actually significantly improve efficiency and performance. This proposal will most likely remove some of this competition and “free market” principles for relayer operators, that is something voters should take into consideration for better or worse.

  • Why is this even needed?

Seamless and trustless interoperability is one of the core USPs of the Cosmos hub. Immaculate user experience is paramount when it comes to adoption of the IBC protocol and the Atom Economic Zone. We believe it’s in the best interest of the Cosmos hub community to support relayer operators in providing the best-possible service quality by offsetting their transaction fees through the proposed infrastructure.

Best regards,
Ertemann - Lavender.Five Nodes
Claimens - CryptoCrew Validators
Tricky - Cosmos Spaces
Jerry - IcyCRO
Architect - Architect nodes
David - Crosnest

EDIT December 13th 2023 - addition of multisig/onboarding info

Onboarding requirements

  1. Be a relayer on the hub and relay on channels to active and important counterparty chains**
  • stride
  • neutron
  • osmosis
  • kujira
  • crescent
  • persistence
  • juno
  • secret
  • evmos
  • quicksilver
  • injective
  • kava
  • archway
  • comdex
  • umee
  • lum network
  • akash
  • noble
  • axelar
  • gravity bridge
  1. Have > 10 IBC txs relayed for any of the channels connected to the listed chains in the past 30 days. For the baseline we use Map of zones
  2. The multisig will re-evaluate the Chains and thereby the grantees on a monthly basis
  3. Operation is allowed with the following relayer softwares: ts-relayer, go-relayer (RLY), rust-relayer (Hermes)
  4. relayer must set batch_delay / polling frequency of at least 500ms or more
  • block time / batch delay = ~5s / 0.5s => max 10 txs per block per account
  • if any account posts more than 10 txs into one block: misbehaviour
  1. packet efficiency > 10%
  2. Multiple wallets per entity are eligible > every account that is eligible within the outlined criteria

**relaying to other chains using the feegrant is allowed as well, its merely for qualification

Onboarding steps

  1. Apply via Github PR & provide relayer account address
  2. Automation checks eligibility
  3. Multisig confirms - Sends fee-grant message
  4. Review of eligibility on a monthly basis

A tier system will be followed for the total daily budget:

  • Low tier - 5 ATOM daily spend limit

  • High tier (top 10 accounts by effected packets confirmed) - 50 ATOM daily spend limit

The oversight committee (multisig members) reserves the right to evaluate and revoke whitelistings on a daily basis. Furthermore, the oversight committee has the right to evaluate and update the onboarding parameters if needed. Reasons for revocation include but are not restricted to: spamming (unnecessary or unnatural transactions), misbehavior against onboarding criteria (batch delay, efficiency), use of feegrants for non-IBC related messages, making use of misconfiguration by mistake of the multisig.

Analytics and multisig

Clemens from CryptoCrew has created a repository for the relayer-dao (GitHub - clemensgg/ibc-relayer-dao) and has setup analytics and automation to help the multisig operate the feegrants.

Functions include:

  • monitoring of feegrant state (prom exporter + grafana)
  • relayer efficiency metrics (indexer + prom exporter + grafana)
  • PR checking for onboarding

The oversight committee consists of:

Clemens (CryptoCrew): cosmos1705swa2kgn9pvancafzl254f63a3jda9ngdnc7
Ghazni (StakeCito): cosmos1qm5agp78atuf9pyalsq4w30mzc3lxtj0vgq2qe
luisqa (Interbloc): cosmos1ze09kc5ackut7wc4pf38lysu45kfz3ms86w3em
tricky (CosmosSpaces): cosmos1a8x3fn37gjnglcr25fsfyr6c5m4ed5euwvae2n
Ertemann (Lavender.Five Nodes): cosmos1xfl6qve3plepgk7wlgxypem5ngntavrnkng3vz

Multisig address - cosmos14r8ff03jkyac2fukjtfrfgaj8ehjlhds5ec2zp

24 Likes

So the choice is between “cover the ibc gas fees” or “no IBC on the Hub”.

What are we waiting for? Let’s go on chain and approve this!

Of course I like that the relayers are not trying to cover their ops costs or profits (defo cudos for this and thank you for your service) + that this is a 3 month time bound prop.

I do believe that in-protocol incentivization is probably a few months away from full, wide spread adoption. So hopefully, we will only need to renew this FeeGrant agreement just once or twice.

5 Likes

This sounds good to me. support

2 Likes

Strong no.

Instead of reducing inflation, now validators ask for additional payment, covering a service, with which relayers actively try to capture delegates from ICF and by users. This is also not the first time validators have received payments for relaying, so this is no solution to the underlying problem.

In my opinion relaying is a wallet / UX issue. Instead of relying on validators to relay, users should be able to relay their transaction themselves, or having an open bid market. Stop centralizing power around validators, it is already bad that all decisions are made by a small group of validators. Giving relaying power to a selected few just centralizes the issue further essentially allowing them to put proposals like this up: “cover the ibc gas fees” or “no IBC on the Hub” (which is not true btw.)

Also: Why should Cosmos Governance incentivize bot traffic? Let the bot operators pay for themselves. Please provide an analysis on the distribution of wallets for the relaying fees. I expect only a small amount of fees is generated by normal users. Give us some data where the fees are coming from.

Transaction costs are one of the revenues for the network and this prop wants to “self-fund” them, essentially taking one of the main revenue sources away.

If this proposal would be about the best interests of the chain, it would be a RFP (request for proposal) where ANYONE can submit bids to run relayers for Cosmos Hub, with a selection process instead of an insider group of validators. This should also include / consider the ICF delegation program in total. This would allow an open market / auction for relayer operations.

Please be aware that relayers are NOT being paid, they are merely asking for the pool to cover the gas fees that are involved in relaying.

All infrastructure (full nodes + relayer machines), time spend, support and other activities are still costs incurred by the relayer operator. A choice they make to indeed, as you say, strengthen their brand and attract delegations.

as to your question about where the TXs come from, an over majority is Transfers between Osmosis and the hub and ICA to Stride. There will probably be arbitrage bots within that set of users but they too are just using the network and delivering a service. They will still have to pay the Gas to initiate their own IBC transaction.

And just to be clear, we are not stating that IBC will stop on the hub if this proposal does not pass. I think it is likely to see a reduced service level though as we see already. I agree that self-relaying can be a good solution, but is that in the room with us right now?

And just to re-iterate, everyone is welcome to get a feegrant as the above draft clearly stated. This is exactly the reason why we did NOT go with a RFP like proposal for now, as that locks out all relaying to a lucky few winners often for higher costs. It might happen in the future if that is what the community prefers but me personally i like this short term solution where nobody has outsized wins a lot better.

2 Likes

I see this a very well made proposal and the matter is urgent but the cure to pay costs for the relaying validators is just short-term revival. Cosmos core should brainstorm a sustainable solution for one of the major usecase of the Hub, IBC. None of the relayers should run the infrasfructure with an loss and quit validating bc it comes unsustainable, none of the users should suffer from longer transactions times and feel stucked or timeouts.

… wonder how much mid-high txs would cost if the users pays the costs fully instead of relayers and what if these paid fees would then come back as staking rewards

Let’s do this. Witval will support the proposal

Very supportive of this, IBC is the backbone of the ecosystem and that we still don’t have users actually paying their IBC costs is insane to me. @Syed is there any plan from informal to address this effectively?

3 Likes

Thank you for the thoughtful write up, whilst I agree that the current approach to funding relayers with off-chain agreements and delegations is unsustainable, my main concern with the proposal is as you highlighted:

This proposal will most likely remove some of this competition and “free market” principles for relayer operators, that is something voters should take into consideration for better or worse.

Relayers ensure liveness of the network and timely packet delivery. Putting certain relayers in a privileged position to have their relaying fees funded whereas other relayers would not be subsidised does not seem like the ideal solution and seems somewhat unfair. I understand that you would want to avoid subsidising malicious transactions that are simply to drain the allocated amount for the feegrant but it would be good to clarify in more detail the criteria for being eligible for the feegrant. I think it is reasonable to look at the existing relayers in the past 3 months and already sign up all of those to be eligible within the 500 message criteria, without requiring them to manually sign up.

Additionally feegrant only covers costs on one chain and not for an entire packet lifecycle between source and destination which I also think is a big drawback. For those interested, here is an article detailing some of the trade-offs between different on-chain relayer funding approaches - Moving Relayer Incentives On-Chain: Fee Middleware, Fee Grant and Budget Modules | by IBC Protocol | The Interchain Foundation | Medium

However, I think all of this is ultimately a short term solution and agree that using ICS29 in the medium term makes more sense.

I wanted to address some of your comments on ICS29 in the proposal:

Why are relayers not pushing ICS-29? That should pay them pro-rata.
ICS-29, also known as “relayer-fee-middleware” aims to charge users for IBC transaction fees. In its current design, ICS-29 hasn’t gotten much adoption for a number of reasons. It is subject to MEV by validators misbehaving and it puts a too significant effort on the # of packets transferred and not the quality of service. It will cause a race to the bottom for relayers to the point where users pay more but relayers still don’t make a profit. Furthermore, currently only new channels can use this feature (as channel upgradeability is yet to be completed), which means that ISC-29 is no viable option for now. We would love to see this change in the future.

I don’t have data on actual usage and assume it is not actively added to any channels yet, but there are 25 / 107 chains with fee middleware wired up including Archway, Cronos, Juno, Kyve and Terra to name some. At least this would contribute towards the rollout once channel upgradability is released (latest Jan 2024).

In terms of the MEV race to the bottom, we discussed this on an issue. It is not clear validators would misbehave, but even from the perspective of a user, if this did happen, the packet still gets delivered. If relayers consistently saw a validator taking the fees as a block proposer, they would not relay the packet when the specific validator is the proposer.

I think the biggest open question for ICS29 is how do you determine what a reasonable amount to pay actually is to ensure that the gas fees are covered on source and destination chain, infrastructure costs are covered and I also think it isn’t unreasonable to give a small additional incentive purely as profit to the relayer, however this is up to chains to decide. There is an issue open on this subject.

From my perspective, relayers are responsible for ensuring the ibc network is live and packets get delivered. There is always going to be a trade-off on speed of delivery and cost but purely from the user perspective, you just want your packet to be delivered for as cheap as possible - I’m assuming this is what you mean by a race to the bottom for relayers?

6 Likes

WhisperNode fully supports this proposal. We went through 11 $ATOM in 1/2 days with the new fees already relaying. Without some support we’d be forced to shut down relaying certain chains. Great job drafting and thinking this through.

3 Likes

Agreed - we need a tech solution - and we have it already, aka Fee Middleware. With that, costs for relaying can be baked into the tx fees we pay - part going to validators on each chain for validating the tx, part going to relayers in each chain for both costs of relaying, and maybe even a profit percentage.

It’s just that current IBC channels can’t be upgraded to include that feature yet.

So yeh, this Fee Grant isn’t a clean or ideal solution, but it’s the best short term fix till Fee Middleware is deployed everywhere (soon?)

I disagree that a long term service contract removes the free market.

The hub can fire the privileged set if service is unsatisfactory.

Sincerely, long time ICS29 hater.

1 Like

Yes from us of course. There is no logical reason to vote no for this.

Proposal is very modest compared to everything else we have seen in Cosmos Hub in last months.

1 Like

Supportive of this. Although it is a quick fix, the general idea is good and can be improved over time if a permanent solution doesn’t come. a question, There are many validators who are already funded/supported by the ICF FD program, I know that is not enough but are we setting that aside for human and tech resources?

Hello everyone ,

Inter Blockchain Services is not validating the hub but as IBC supporters we could not afford the cost , just for osmosis / cosmos we used morea than an ATOM by hour( like the other active one ) , and with the use of ICA more and more the hight cost is clearly a problem . Authz is a fast and easy way to “fix” the problem temporarily

1 Like

I support this idea.

Validators and Relayers should be rewarded as much as they work for sustainable network. I think it’s OK to pay a little bit too much for them not only gas-fee. But as it’s written in Q&A and others says, basically users should pay that money. So I want to know what and when solution will come next. ICS-29? Self-relaying?(I don’t know what it it and even non dev ppl like me can do it.). Or this is just short term solution while team are discussing about it.

Strongly against this.

Either there is a way to fund all relayer or we shouldnt fund them at all. Only funding a self declared subset is market distortion since foundation delegations are often bound to also running relayers which will be easy for these teams but costly for others.

On the short term I see clear benefits for this proposal. Also supportive of ICS29 short/medium-term.

On the long term I would be very curious to hear how a design or approach to a solution should look like? And what can core teams do to help, from the perspective of the signers of this proposal?

My weakly held opinion is as follows: Some say “IBC should be invisible” and users should not even know what protocol or infrastructure is underlying their interoperability needs. But IBC is already invisible for most teams, and also to users. I think of IBC relaying as an end-to-end concern, reaching into the domain of application development/SDK, and up to wallets and front-ends. Most interest in solving the issue of IBC operational costs historically was from teams lower in the stack (IBC-go, Skip, Hermes relayer, validators). I think this is simply because incentive misalignment, not trying to blame or make a hero of anyone. So I’m wondering how can (dis)incentives bring more involvement from teams higher in the stack and how can we move away from the mentality that IBC should be free. The signing teams on this proposal are probably best positioned to signal the need for such an approach. WDYT?

1 Like

Thank you for that write-up!

Yes ICS-29 can work although for now we at least (lavender.Five) remain sceptical. I dont think thats for now what we want to discuss with the proposal though. It is intended as an interim solution to have Cosmos Hub relaying function again while not paying anyone directly to do that. All teams are welcome as long as they can comply with a small and simple ruleset.

The race to the bottom mentioned refers to that incentivizing based solely on # of packets transferred causes the system to default to a low-latency competition environment. One where charging a smaller fee, frontrunning, over-spending on Gas and setting up cheaper and cheaper infrastructrure is incentivised. It moves importance of redundancy to being the fastest to get to a packet in the cheapest way. In such a system (as we see at low latency trading firms and other similar businesses) costs will keep increasing until transferring the most packets will not necesarilly generate enough fees to cover them anymore, as a result efforts centralise around the few fastest businesses or fees have to increase to accomodate smaller teams to compete and still make money from relaying.

That is why many teams, us included, think a mixed approach of base/Sla compensation and Packet based bonuses will be better than just incentivizing the # of packets. That what it is still a free market but one where we do not race to a new net negative scenario.

3 Likes