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Challenges and Limitations in Replicated Security?
There are challenges and limitations to the upgrade that will have to be tackled collectively by the Cosmos community.
The most notable challenge is that there is an economic limit to how many chains a validator could secure. If too many chains are onboarded, the cost of running a Cosmos Hub validator node becomes increasingly expensive, which would be harmful to smaller validators.
The other issue is that running a new node for each Consumer chain has increased operational cost, but there is little guarantee of returns because most consumer chains' revenue starts very low and increases with the adoption and use of the chain.
The concern then is that, in the short term, these challenges may undermine the financial security of node operators and the ability of RS to scale.
How Do We Solve These Issues?
For RS to successfully scale and become economically sustainable, it will need to meet the following conditions:
-> Successful Consumer chains,
-> Better revenue distribution, and
-> Reduced operational costs.
The limited number of chains that can initially be onboarded creates an incentive for the Hub to vet the projects that launch on RS carefully. To maximize its own expected value, the Hub should assemble a roster of the most promising applications and provide them with the support they need to be tremendously successful.
Once consumer chains start producing meaningful revenue streams, revenue distribution becomes the key to the scalability of RS. The better the distribution, the faster the validator set meets its expenses, and the sooner another chain can be onboarded.
Currently, the distribution of revenue is weighted by stake: validators receive tokens proportional to their share of the ATOM stake. Improving the distribution of the stake itself on the Hub would not only make RS more scalable, but it would also improve the decentralization of the network.
Finally, RS can also be monetized outside of the validators. ATOM 2.0 envisioned mechanisms to allow the Hub to accrue value from its economic zone of consumer chains. The proposal was eventually rejected, but some of the mechanisms it depicted may still be relevant to the Hub. Token swaps, for example, could be used to provide significant upside to the Hub while bootstrapping liquidity for the Consumer chains.
There are challenges and limitations to the upgrade that will have to be tackled collectively by the Cosmos community.
The most notable challenge is that there is an economic limit to how many chains a validator could secure. If too many chains are onboarded, the cost of running a Cosmos Hub validator node becomes increasingly expensive, which would be harmful to smaller validators.
The other issue is that running a new node for each Consumer chain has increased operational cost, but there is little guarantee of returns because most consumer chains' revenue starts very low and increases with the adoption and use of the chain.
The concern then is that, in the short term, these challenges may undermine the financial security of node operators and the ability of RS to scale.
How Do We Solve These Issues?
For RS to successfully scale and become economically sustainable, it will need to meet the following conditions:
-> Successful Consumer chains,
-> Better revenue distribution, and
-> Reduced operational costs.
The limited number of chains that can initially be onboarded creates an incentive for the Hub to vet the projects that launch on RS carefully. To maximize its own expected value, the Hub should assemble a roster of the most promising applications and provide them with the support they need to be tremendously successful.
Once consumer chains start producing meaningful revenue streams, revenue distribution becomes the key to the scalability of RS. The better the distribution, the faster the validator set meets its expenses, and the sooner another chain can be onboarded.
Currently, the distribution of revenue is weighted by stake: validators receive tokens proportional to their share of the ATOM stake. Improving the distribution of the stake itself on the Hub would not only make RS more scalable, but it would also improve the decentralization of the network.
Finally, RS can also be monetized outside of the validators. ATOM 2.0 envisioned mechanisms to allow the Hub to accrue value from its economic zone of consumer chains. The proposal was eventually rejected, but some of the mechanisms it depicted may still be relevant to the Hub. Token swaps, for example, could be used to provide significant upside to the Hub while bootstrapping liquidity for the Consumer chains.