At Informal Systems, we are currently helping to build out Interchain Security. There is an exciting dynamic that we think will arise once it is fully operational on the Cosmos Hub.

Review of Interchain Security

Interchain Security will allow Cosmos chains to lease security to each other. What this means, in practice, is that validators on one chain (the security provider) will be able to validate on another (the security consumer). If a validator misbehaves on the consumer chain, they get slashed on the provider chain. In this way, large chains such as the Cosmos Hub will be able to lease their security to smaller chains, thereby rendering them more secure at launch.

How consumer chains pay for this leased security is a critical part of the Interchain Security design. Consumer chains will send a portion of their fees and staking rewards back to the provider chain, to be distributed among the delegators of all the validators validating on a consumer chain.

Earning Rewards on Many Chains

This is where it gets interesting. Interchain Security will allow ATOM holders to earn staking rewards on a large number of Cosmos chains, just by staking their ATOMs. Consumer chains will benefit both from robust security from the Cosmos Hub validator set, and by getting their tokens in the hands of the Cosmos community of early adopters. The Cosmos Hub will benefit by giving its stakers access to early stage tokens, and by increasing the utility and value of the ATOM. It’s win-win. Interchain Security will be like an automatic and frictionless airdropping system.

How will this look to an average ATOM staker? Validators on the Cosmos Hub will opt in to validate new consumer chains. Different validators will opt into a different set of consumer chains, and their delegators will receive some of their staking rewards in these tokens. Your choice of validator will become much more important. Currently, most people choose validators by looking for low fees, name recognition, and competence. With Interchain Security, your validator will also be part of curating the Cosmos ecosystem on your behalf – choosing which consumer chains to validate on, with staking rewards accruing back to you. Some validators may choose to validate on bigger and better known consumer chains, while others may focus on newer chains, looking for hidden gems and outsized returns. Some may focus on particular use cases, like decentralized exchanges or privacy chains.

This will create a vibrant ecosystem of validators and consumer chains, with validators acting as an early stage filter and helping their delegators to find and earn on promising new Cosmos chains.

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