Understanding ICS 2.0 (Partial Set Security) in 15m

ATOM Economic Zone
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Given the launch of ICS 2.0, referred to as Partial Set Security (PSS), we have been tasked to build a financial model as part of a grant submission to the Atom Accelerator DAO (AADAO). Given the prevalent misconceptions regarding shared security models, we recognized the critical need to address this matter. Our proposed solution involved developing a comprehensive financial model to elucidate the underlying mechanics, it also included an educational video targeted to popularize this update to the broader community.

Abstract:

This video covers all the extensive knowledge every Cosmonaut should be aware of regarding the InterChain Security 2.0 and the PSS, in only 15m.

Unleashing ATOM’s Potential: The Transformative Impact of Partial Set Security and ICS 2.0 on Cosmos

The Cosmos ecosystem has long been recognized for its foundational role in blockchain innovation, particularly through its development of the Tendermint consensus algorithm and the Inter-Blockchain Communication (IBC) protocol. However, despite ATOM’s contributions to the success of other Layer 1 (L1) chains, many have argued that it lacked a distinct, proprietary use case. Cosmos’ expansion phase saw it act as a launchpad for various projects, yet ATOM itself struggled to establish a unique identity beyond being the foundational blockchain in the Cosmos Network. This was the context in which ATOM’s economic model emerged.

Now, with the introduction of InterChain Security (ICS) and its next evolution, ICS 2.0, ATOM is positioning itself as a game-changer within the decentralized space. ICS 2.0, particularly its implementation of Partial Set Security (PSS), addresses key limitations in scalability while fundamentally altering the market dynamics of security, staking, and governance within the Cosmos Hub. In this blog, we’ll delve into how ICS 2.0 and PSS set the stage for ATOM to become the linchpin of a more secure, competitive, and expansive Cosmos.

The Current State of the Cosmos Hub

The Cosmos Hub, unlike other blockchains within the Cosmos ecosystem, is not an appchain. It doesn’t serve a specific application, which is often seen as a limitation but is, in reality, its strength. This neutrality allows ATOM to position itself as the coordinator and security provider of the ecosystem, leveraging its validator set to offer security to other chains without competing directly with them. The Cosmos Hub’s role as the backbone of the Cosmos network gives it the flexibility to specialize in securing other blockchains, rather than building its own suite of applications.

The current implementation of ICS allows other Cosmos chains to “borrow” the security of the Hub by utilizing its validator set. This is known as “replicated security,” where the full validator set of the Cosmos Hub provides security for consumer chains. While effective, this model has been criticized for its lack of scalability and the heavy constraints it imposes on the ecosystem.

ICS 2.0 and Partial Set Security: Addressing Scalability

Partial Set Security (PSS), which fundamentally changes how security is allocated across the network. Unlike replicated security, PSS allows a subset of validators to secure a chain rather than the entire validator set. This shift towards modularity increases scalability and efficiency by allowing validators to choose which chains they wish to secure, granting them more freedom and autonomy in the process. With this new model, ATOM evolves from a monolithic security provider into a more flexible and permissionless system that can accommodate a broader range of consumer chains without imposing overwhelming security costs.

This marks a departure from the previously centralized system where the entire validator set had to validate each consumer chain. Instead, each validator becomes sovereign, deciding independently which chains to secure based on their own strategies and risk management. This permissionless nature opens the door to increased competition between validators, which is expected to improve the overall quality and value of security services offered by the Hub.

With InterChain Security, the demand for ATOM increases significantly, as validators must stake ATOM to participate in securing consumer chains. This competitive dynamic not only enhances the security of the network but also introduces new revenue streams for validators, creating a more dynamic market for ATOM.

Impact on ATOM’s Tokenomics

One of the most profound implications of Partial Set Security is the shift in how ATOM is valued. Previously, ATOM’s valuation was closely tied to its staking rewards and the revenues generated by the two consumer chains that used its security: Neutron and Stride. However, with ICS 2.0, the valuation of ATOM becomes more complex and multifaceted. Different validators will offer varying returns based on the chains they secure.

This change turns ATOM into a commodity that powers a competitive marketplace of validators. Investors will need to carefully assess which validators offer the best risk-reward profiles based on the consumer chains they support, effectively decentralizing risk management across the entire validator set.

Implications for Consumer Chains

From the perspective of consumer chains, PSS presents a more cost-effective and customizable option for securing their networks. Instead of relying on the full validator set, consumer chains can now select a subset of validators that meet their specific security needs. This opt-in approach reduces costs while maintaining flexibility, making it an attractive option for both new and established projects looking to leverage the Cosmos SDK and IBC for interoperability.

Moreover, the permissionless nature of ICS 2.0 encourages innovation by lowering barriers to entry. Chains that may have been deterred by the high security costs of replicated security can now launch with a smaller, more tailored validator set. This fosters a competitive environment where validators compete for consumer chain partnerships, driving innovation and improving the overall security offering in the Cosmos ecosystem.

The Future of ATOM in the Cosmos Ecosystem

The introduction of PSS transforms the Cosmos Hub from a passive coordinator into an active participant in the expansion of the ecosystem. By decentralizing security and governance across its validators, ATOM becomes a key player in the next phase of Cosmos’ evolution. The Cosmos Hub is no longer just a security provider; it is an economic zone that incentivizes innovation and competition, driving growth and development across the entire ecosystem.

This evolution positions ATOM as a community-driven capital that is uniquely suited to meet the security needs of an expanding network of consumer chains. As the market for secure infrastructure grows and the demand for Cosmos SDK increases, the Cosmos Hub will play an increasingly central role in coordinating and securing this expansion.

Conclusion: A New Era for ATOM and the Cosmos Hub

InterChain Security 2.0 mark a significant milestone in the evolution of ATOM and the Cosmos Hub. By addressing scalability issues and introducing a more competitive, permissionless security model, it paves the way for ATOM to become a cornerstone of the decentralized economy. Validators now have the freedom to specialize in securing different chains, consumer chains have more flexibility in selecting their security providers, and the Cosmos Hub is poised to meet the growing demand for secure blockchain infrastructure.

This new paradigm represents not just an upgrade for the Cosmos Hub, but a transformative shift that positions ATOM as a key player in the future of decentralized finance, governance, and infrastructure. As ATOM continues to evolve, its role as the interchain capital of the Cosmos ecosystem will become even more prominent, driving innovation and growth across the entire network.

The possibilities for ATOM are endless, and its potential as a secure, competitive, and neutral hub is only beginning to be realized. The Cosmos Hub is truly becoming the backbone of the decentralized world, and ATOM is at the forefront of this exciting transformation.

Thank you for reading!
Govmos.
pro-delegators-sign

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Can you maybe elaborate a little on this, with an example (hypothetical)? That would be great.

What risks? And how do you get the numbers 30 ton 120?

Thanks in advance?

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Certainly, let’s delve further into this highly engaging topic. To clarify, the Cosmos Hub itself is the commodity, functioning as the platform that operates the ‘competitive marketplace for validators.’ ATOM, on the other hand, exists in multiple forms: liquid, staked, and liquid staked. Its commodity aspect can only be truly evaluated in its staked form, as this is when it is fully utilized to secure the network, a fundamental aspect of the Proof of Stake system. In contrast, the liquid and liquid staked forms are more aligned with capital, which arguably cannot be classified as a commodity. The key distinction between liquid and liquid staked ATOMs is that one generates yield while the other does not, though it remains fully liquid and can be used to pay transaction fees on the network or as an on/off-ramp asset.

Let us know if you’d like a deeper exploration into this subject. As for the APRs, they were speculative estimates, and after considering your feedback, we have decided to remove them from the original post. We appreciate your insight on this point.

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This can be utilized in negative way too - if validators have bias and the co-operate not to support a chain because of personal issues or whatnot with the chain developers, it will be a dead-end for that chain

Or am I missing something here? ATOM stakers are choosing which chain to delegate partial security right?

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There are quite a few aspects you’re overlooking here. To mention just a few, the network consists of 180 validators, each bringing diverse perspectives, with some holding radically different visions. The odds to find censorship in such environment are arguably narrow. More significantly, with the introduction of Permissionless ICS, which you can review in detail along with the specifications and platform designs here: [PROPOSAL #947] [VOTING] CHIPs signaling phase: Permissionless ICS Frontend. Put simply, this will enable anyone to operate as a validator (you don’t have to be inside the top #180) and participate in the global security hub.

By combining these features with a neutral, decentralized collateral like ATOM, you have a leading platform to launch with the Cosmos SDK, arguably the most widely used development toolkit in the blockchain industry today.

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Fantastic, thanks for your energy and time that goes to your work. Have a great weekend

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@Govmos The possibilities for ATOM are endless, and its potential as a secure, competitive, and neutral hub is only beginning to be realized. The Cosmos Hub is truly becoming the backbone of the decentralized world, and ATOM is at the forefront of this exciting transformation.

I might be the only one who thinks this, but it seems to me that @Govmos does not clearly distinguish in its messages what comes from objective analysis and what comes from personal feeling. Am I right?