[Proposal #792][ACCEPTED] Launch Neutron on Replicated Security

Sorry I missed your question initially, fortunately Effort cap just answered it :slightly_smiling_face:
Another way to see it is as a “compensation budget for the hub”. At $400 base cost per node per validator per month, that’s roughly $840 000 to be distributed across the set yearly. +1.5% increase in ATOM price also corresponds to the increase in aggregate earnings that would be required to finance that compensation budget.


Hi @Spaydh the downtime period can currently be set individually per consumer chain, but we are recommending 30,000 blocks, like Osmosis has. This should be a little less than 3 days, which is 3 times longer than the Hub itself.

We’ll get you a full set of recommended parameters for launch soon.

is there a different way to reduce the global cost to run a validator ?

I believe NTRN is only a governance token.

We very much appreciated the Twitter spaces the other day. It answered our questions and we are excited.

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machines can get cheaper over time, but $400 is pretty bare bones.

Really cool!

POSTHUMAN will support it!

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I cant say i subscribe to that reasoning as that considers the ATOM validator set to be a centralized clump, i was thinking more in line of @effortcapital calculation.

Assumed here however is that Neutron will increase the price of ATOM and seeing as there is close to 0 value accrual back to the hub (as TX fees aren’t material and the percentage is low) i dont see why this would be true at all.

We know already from other chains (for ex GRAV) that TVL is not a guiding factor in increasing the MC and economic security of a chain so dont see how that story would be different from the hub/Neutron.

To me it is clear that this proposal is a step towards freeloading on 175 Infrastructure providers by giving them crumbs merely on the hype of ICS and not actually benefiting ATOM long term at all. This added complexity and economic strain will have centralizing effects on the Cosmos Hub and there doesnt seem to be a clear benefit to weigh of against that negative.

So to summarise my points:

  • There is little to no economic value accrual back to Atom Stakers and therefore infrastructure providers of the Hub for launching Neutron.
  • Value accrual due to Economic security request is not a proven metric and there is no way to correlate Atom price to usage and success of Neutron
  • Increase in infrastructure complexity will already have a centralising effort on the hub validator set

So although larger validators like us are not scared by the increase in complexity and smaller margins we think the current proposal will have a larger impact on the Hub decentralisation than can be expected of an economically viable ICS chain. Neutron is receiving a service and should pay for it.

So although excited about ICS for this reason this current draft of Neutron will probably get a NO vote from L5


Like, how do you know? What calculations or metrics are you using to determine that things are going to happen as you say they are, especially as this is the first time ICS is being used?

I think you’re missing the purpose of the type of service Replicated Security is.

As a bootstrapping mechanism for new chains, while the Hub may be getting little revenue at first, if Neutron (and other consumer chains) are successful, MEV revenue + tx fees + ATOM becoming the dominant currency of these ecosystems can bring tremendous value to the validators and delegators.

It’s like a young startup being asked by their VCs to be profitable on day 1 or else they won’t invest in their business…that’s mostly not possible, especially in this industry.

Obviously everyone is allowed to vote how they want, but I recommend all validators wait at least 1yr to gather data and see how successful Neutron (and others) will be until we kill off the only potential avenue for value accrual for the Hub at this current time.


The proposal has been updated to include the provisional report for the audit of Neutron’s codebase by Informal Systems, which can also be found below.

This report covers the following tasks:

  1. Audit of Neutron’s custom modules and application source code
  2. Audit of the Neutron SDK, a set of CosmWasm bindings intended to be used by smart-contracts to interact with other blockchains through Neutron’s custom modules
  3. Audit of the Neutron DAO, a set of governance and tokenomics smart-contracts
  4. Audit of the WasmD fork adapted to meet the specific needs of the Neutron blockchain

The report concludes that “the Neutron design and security model in general is very well though out. Despite the general high quality, [Informal Systems] found some details that should be addressed to raise the quality of the code. One Critical Severity and one High Severity issues were found during this audit; the rest were marked as Low or Informational.”

The vulnerabilities identified in this report have since all been fixed and reviewed by Informal System. They will appear in the final version of this report.

To ensure the highest degree of security, the thorough auditing of Neutron’s codebase by Informal System, which started on the 18th of January, will continue throughout the voting period and until the 20th of April. In the unlikely event that critical vulnerabilities are found during the voting period, this continued audit would enable the binary to be replaced by a safe version prior to launch.


I dont think i am at all missing the purpose of replicated security at all. Chains dont have to be profitable at all, they can then still pay infra providers.

The revenue proposed here with current numbers i see on other chains doesnt seem significant enough to support any lower tiered validator. I think this is a real decentralisation risk to the hub and think we should be honest about that.

All for supporting startups, but they can think of a way to support the infrastructure providers that give them that platform. An airdrop to stakers or minimal fees does not do that.


I think on the contrary we’ve been very mindful of potential centralization risks and the livelihood of infrastructure providers:

  1. We kickstarted the research and conversations around the sustainability of ICS with Informal, Hypha and other core teams of the Cosmos Hub
  2. We openly discussed the potential issues as well as short and long term remedy in our publications and on Spaces
  3. We are testing out a soft opt-out feature that would allow the bottom x% of the voting power to opt-out of running a consumer chain while preserving its economic security. The validators would bear no additional cost and still get their rewards. It hasn’t been included in the proposal so far because it hasn’t been tested out in production-like conditions, which we’re planning to address on testnet next week.
  4. We kickstarted conversations on how to improve the stake distribution and design alternative revenue distribution models which would allow Replicated Security to scale much faster while preserving the financial stability of the validator set.

@Ertemann hey, could you please share here the solutions you would recommend, if any, to address the problems you mentioned?

The growth of the ATOM economic zone

Hey @Ertemann. I think you raise some really important points. I’ll respond to them with my own thoughts, and also mention briefly the work that Neutron and core teams are doing to mitigate the centralisation risks you mentioned above.

This is primarily in response to


  • Consumer chains will take time to become profitable. They need time to prove themselves.
  • Picking winners is less likely to be effective than off-boarding losers.
  • The ATOM economic zone will have emeregent qualities, we cannot predict the Interchain relationships in it.
  • More chains (that have strong teams behind them and provide strong use case) in the zone means more potential for synergies to develop between them.
  • It is not only the consumer chain’s burden to prove themselves. Some are not yet launched so they lack data. They may bring sustainable value in the future. We have no way of knowing.
  • The Hub community needs to design a system that mitigates the centralizing effects of RS you mentioned.
  • We are currently researching ways to make running consumer chains sustainable for small validators.

The Cost and Value of Replicated Security

How many chains in the cosmos ecosystem are profitable (or even allow validators to break even)? How many of these chains have sustainable tokenomic models?

I think what you mentioned here is interesting:

In this message, the value proposition of Replicated Security emerges. Replicated Security is powerful precisely because chains can dedicate their resources to generating real value based on user activity. These chains don’t have (nor do I think they should) inflationary token distribution to fall back on. They are incentivized purely to attract actual revenue and growth to pay for their leased security.

In the long run, this is beneficial for the Hub. It will be clear which chains are generating revenues and value.

What does this look like in the context of a consumer and provider chain relationship?

It looks like a strong team launching a chain that is tokenomically aligned with the Hub and then having the time to attract the users and build up to the scale at which tokenomic alignment can pay off for both consumer and provider. But, I think you know this @Ertemann, and your primary argument is that you are not convinced that Neutron has a sustainable model.

First, we don’t know yet if their model will do that. It might not only do that but pay off by an order of magnitude or more to infra providers. It might not.

Like @effortcapital said, validators should wait for 1 year before drawing conclusions about the consumer chains in the ATOM economic zone.

In the mean time, we need to find out how to mitigate the centralizing effects this has on validators.

##Drawing parallels from the history of economic development

Even more than this being like a start up and vc relationship (where one directly funds the other with liquidity), it is like the relationship between a developing nation and its manufacturing or industrial sector (where one provides the security and resources for growth).

In nearly all cases of strong economic development, a country succeeds because it subsidises and protects its industry and manufacturing sector until it is able to be globally competitive. All of its agricultural, industrial, and financial policy targets resource-allocation toward the sectors that strengthen its overall economy (economic zone).

Actually, this is the general pattern throughout history for economically developed and developing nations (purely financial Hubs like Singapore, Hong Kong are exceptions).

Those that don’t follow this pattern, try to pick winners top-down, or don’t link their economic growth to actual exports (feedback loops from the market) end up in financial crises and have their growth stifled.

As it relates to us, this is relevant because:

  • The ATOM economic zone is going to take time to develop and will have emergent properties.
    • We don’t yet know what relationships will develop between chains that are secured by the Hub, and the Hub’s role in those relationships.
    • We can assume that the more chains that share this zone, the more potential there is for synergies to develop that enable the Hub (and its consumer chains) to outcompete other chains and shared security models. Ultimately, this will drive value to the Hub and position it strongly to succeed for decades to come.
  • We need to be in a position to enable strong teams to lease security despite having unproven economic returns.
    • In this way, winners can emerge and chains that don’t obtain some metric of meaningful growth (DAUs, cross-chain transactions, MEV, fees) can be off-boarded.
    • This is the principle of fostering competition rather than arbitrarily picking winners.


I think you will argue that it’s not sustainable because smaller validators will be unable to support operating costs, and the effect of this would be to centralize the validator set and in turn reduce the quality of the security provided by the Hub.

In turn I’d say that rather than solely being the burden of the consumer chain to prove it’s worth before it launches, it’s also the burden of the provider chain to ensure its validator set is capable of sustaining the load that it asks them to take on in order to drive long-term economic growth.

Maintaining a healthy validator set

To mitigate the centralizing effects of replicated security until the consumer chains can have a chance to prove themselves, the Neutron team and others like Hypha, Informal, and the ICF have been researching ways to ease the operational burdens for smaller validators.

Some ideas that have emerged are soft-opt out , conditional basic income (distributing a payment based on conditions). There are additional ideas that need further research as well. Each mitigation obviously has a different set of tradeoffs and risks.

Within the coming weeks, a paper will be released that explores this design space and gets the ball rolling to discuss the path forward that the community believes is best.

After all, many of the smaller validators add a ton of value to the Hub, and are probably still an untapped resource for the Hub community.


Being mindfull is different though of the design showcased here in the draft. With all due respect, intentions dont matter, the final proposal does.

We are requested to provide feedback on the current proposal and that does NOT include either opt-out mechanisms or alternative revenue distribution mechanisms as you propose here in point 3/4.

To come back to the question of @tom , what is a potential solution? → Inflation.

This mechanic has been a core part of Cosmos stake incentivisation from the start and even the Hub still follows it. It will instantly resolve any of the economic disincentives for infrastructure providers. Alternatively Neutron can look into airdropping or paying validators (similar to Kujira) or forcing revenue splitting (like for ex Stride) - chains that both run without inflation but with proper incentives for stakers and validators.

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Definitely yes! We are super excited about the first consumer chain using replicated security - Neutron

Looking forward to the official launch!

Opt-out mechanism is a very bad precedent for Replicated Security.

If you opt-out of validating for consumer chains, why should you continue to receive a security subsidy for validating the Hub when the entire purpose of the Hub was to become a security provider for consumer chains?

The more the validators lean on inflation, the worse off ATOM is.

Validating is not a public good; it is a business. If you believe in the long-term vision of the ATOM and the economic zone, then unfortunately, there is a risk all validators must take that they may operate at a loss in the interim.

We can’t expect Neutron and other consumer chains to make validators/stakers whole at inception and even if Neutron gives 100% of fees to validators for 1yr, it likely won’t change the economics of RS in the short-term.

ATOM price appreciation alone drastically changes the validating economics, and the more we rely on inflation the worse price appreciation we can expect (in my opinion).


I personally believe the centralizing forces of RS is drastically overstated.

We can fix stake distribution through more liquid staking and simple improvements in wallet UI.

Inflation cannot be the answer.


Hi everybody just very briefly, I want to say that on a personal level I trust the neutron team and I very frequently make decisions based on personal trust, but this one is not even solely based on personal trust.

They had the guts to go first. So to me this means a couple of things:

  • I don’t need to understand the economic model because I don’t think anybody does

  • If the proposal is sane (it is) and the code doesn’t have crazy hidden slashing functions that attack the hubs validators (it doesn’t) then I’m voting yes

Do I think that ICS will be in its ideal form at launch? Hell no. We’re going to grind on that thing for years. We’re going to improve it, we’re going to make it better, we’re going to make it easier, and we’re going to figure out how to model economies around it. The thing is that in order to do that stuff, well we need to start doing stuff, and neutron stood up and volunteered to be the first, if our organization never makes a penny on it, but neutron leads to the community figuring out how to model RS/ ICS economies every single penny of the $500,000 was well spent, as well as every minute of every validator and community members time on neutron.