Layer by Layer: Update on Cosmos Developments

The Cosmos ecosystem is home to a long list of sovereign Layer 1 (L1) chains connected by Inter-Blockchain Communication (IBC), a cross-chain messaging protocol that allows generic messages - including asset transfers - to be sent between supported chains. In many ways, the ecosystem is a microcosm of the broader L1 landscape, where many of the common challenges associated with blockchain and application development often play out within communities on a smaller scale. Because Cosmos/IBC chains are generally application-centric chains that each have their own set of validators, they also offer a unique perspective for assessing the dynamics of security, decentralization, governance, and more across various blockchain settings. 

Cosmos teams navigated these issues with notable frequency in 2022 throughout the course of building and maintaining their respective networks. One example that comes to mind is the case involving the Juno chain in March 2022, where stakeholders took the extreme step of forking the chain in order to mitigate perceived security risks imposed by a particularly large JUNO holder. Another situation that acutely captured the challenges of network security and governance was the collapse of Terra, which saw Terra developers halt the chain after the deterioration in LUNA price left the chain vulnerable to a 51% attack. The ensuing chaos also led the Osmosis team to deactivate IBC transfers between Terra and Osmosis and pass an emergency proposal allowing liquidity providers (LPs) to unstake their positions early in order to reduce their exposure to LUNA and UST.