Ethos: Democratizing the Price of Sovereignty for new chains

Exploring Ethos's approach to sustainable and secure blockchain sovereignty.

One of the most challenging and discussed areas of blockchain design nowadays is the sustainability of a project long term, and the options available for it to be viable long term. Many decisions depend on the outcome the project desires. Do you want to build some sort of blockchain infrastructure to allow for new chains to deploy on top of yours? Do you have an app in mind that requires dedicated blockspace not shared with the rest?

The answers of the questions above lead to different outcomes and possibilities, but amongst all of them, there's always a topic in mind, and that's the price of sovereignty. In this article, we will expand on this idea, the options available nowadays, and how Ethos is targeting that problem.

Introduction

Once a project decides to launch its own sovereign chain, a dilemma occurs: how do you maintain the security of your ecosystem without diluting tokens, if your model is not yet sustainable?

That has been one of the pain points of many Cosmos blockchains. As explained in this article, maintaining a node by a validator can take around $500 per month and validator. If your chain has around 150 validators, that's $1M per year only on infrastructure, and then those validators need to pay for salaries and run a profitable business.

The model so far for many new chains has involved a foundation with a high amount of token supply to slowly deploy and subsidize part of those infrastructure costs until the project finds product market fit and it can be sustainable, but the price action of the token and its distribution can be severely impacted by that time, and with it come also security issues.

That's why many options are available now:

• Partial Set Security by the Cosmos Hub (as we explored in a previous article )

• Dymension with their rollApps (as we explored in this previous article )

• Restaking through Eigenlayer (as explored here)

Amongst many others. Each of them comes with the potential drawback of giving away sovereignty for security, and that's why many chains have decided to go through the hustle of building a standalone L1 instead. And it is in this last point where Ethos comes into play.

Ethos

Precisely trying to solve the issues mentioned above, Ethos allows any L1 to become a sovereign chain, bootstrapping an initial network and allowing them to adjust their security premises via restaked ETH on Eigenlayer.

Ethereum stakers can restake their ETH on EigenLayer by delegating their tokens to operators who support Ethos. These operators allocate the delegated stake to an elected set of Guardians, who validate the Ethos Layer 1 chain (called “Guardian chain”). Through the mechanism they call Opt-In Shared Security, these Guardians can co-validate or delegate to secure any combination of L1 chains, extending the security of restaked ETH beyond the Ethereum ecosystem. Guardians are allowed to choose which chains to validate on.

Ethos architecture

On one hand, a validator will need to run an Ethos node ("Guardian chain", the layer 1). Additionally, they will need to run a node for each new chain they opt into, and finally they need to connect to an Ethereum node, though not necessarily run it.

If this sounds familiar, it is because the approach is very similar to that of PSS (partial set security). In this case, however, the main difference is the fact that the chains secured by Ethos would have the security of Ethereum rather than Atom, making it less "Cosmos aligned" but with a more stable and recognized asset.

Ethos AVS contract

The AVS contract deployed on Eigenlayer is the element that allows interactions between ethereum stakers, ethos operators and Guardians. As defined in [this article](https://medium.com/cosmostation/ethos-powering-sovereign-chains-with-eth-security-41907ea0938d), it defines the slashing rules and rewards.

Guardian chain

The Guardian chain can be understood as a L1 blockchain for which the "Guardians" will need to run a node, and chains which want to leverage Ethos will be able to connect via those Guardians and the restaked ETH allocated by the Ethos operators.

Ethos will initially launch with a Proof-of-Authority (PoA) consensus mechanism, with plans to transition to Proof-of-Stake in the future. Through PoA, Ethos elects network validators based on their identity or reputation rather than their staked amount, in a similar manner as Noble. Their identity is formally vetted by the network, with the ability to cross-check the information in the public domain. These validators, called Guardians, are responsible for validating the Guardian chain and securing the network.

Ethos operators on EigenLayer delegate their stake to Guardians based on their performance and reputation (note that in some cases the operator and the guardian might be the same entity). Through Ethos's Opt-In Shared Security mechanism, these Guardians opt into taking additional responsibility, securing (co-validating) multiple L1 chains. This process extends the security of restaked ETH beyond the Ethereum ecosystem.

Vote extensions

Through Cosmos SDK, Ethos leverages the power of ABCI++ and Vote Extensions. Vote Extensions force validators to come to a consensus on some arbitrary data before every block is produced. Each validator can vote if the data is accurate, and if a quorum is reached it is published at the beginning of the block. In Ethos, this is used by guardians Guardians to come to consensus on stake updates that happen on the Ethos AVS, thereby bridging data from Ethereum to the Guardian Chain. When Ethereum stakers delegate more ETH to Ethos operators on EigenLayer, or when operators reallocate their delegated stake, these changes are reflected on the Guardian chain through vote extensions.

Once the stake updates are recorded on the Guardian chain, they can then be propagated across all sovereign chains that are co-validated by the Ethos Guardians. This ensures that the security provided by the restaked ETH is accurately represented and updated across the entire network of Ethos-powered L1 chains.

Execution Layer Tokens

Execution Layer Tokens are the native tokens of Ethos Integrated Chains. These tokens aren’t used as the staking token for the integrated blockchain. Instead, they are used for their intended purpose, which can be viewed as increasing their utility rather than losing it.

By isolating the consensus layer, the execution layer token value is no longer tied to inflation schedules, Total Value Staked, and other security factors. It will likely follow the performance of the execution layer and the applications built on top, allowing for a fairer and more accurate pricing mechanism.

Since there is no need to stake the execution layer token, it will have a different distribution and user behavior compared to traditional PoS coins. This can result in more DeFi adoption for the token and better access to liquidity for users of other networks.

Ethos as a roadway for new chains

Once we've understood how Ethos works, we can see how it links with the topic we introduced. Building a standalone chain and the incentives and security upfront is certainly a very complex topic which has not aged well for many projects.

If a new project with enough complexity to need its own dedicated blockspace and chain decides to go and become its own chain, as we've discussed previously, can take many different roads, but if it doesn't want to subsidize many validators until it becomes sustainable, or doesn't want to inflate a new token and rush it, it makes sense to become a secured chain.

Why Ethos?

A question that comes to mind when thinking about Ethos is why would we go through the trouble of creating a new L1 (guardian chain) when we could use Eigenlayer directly. An answer to that, and also to the question of this topic, is that the process of onboarding new AVSs or operators is not easy, and Ethos makes it easy and secure.

To fully grasp what that means, let's see a situation in which two potential new chains want to launch, and are considering becoming an AVS via Eigenlayer or joining Ethos (which has its own AVS contract deployed and secured with more than $2bn). If they were to launch each as an AVS, they must search for Eigenlayer operators to collaborate with them, and it is not an straightforward process. Meanwhile, if they were to launch as an Ethos chain, they can do it without that struggle and with $2bn or more as security.

On top of that, it leverages a pristine asset such as staked ETH instead of Atom (in the case of PSS), which some projects might view as an additional positive advantage, and PSS chains give part of their sovereignty to Atom.

ETH stakers looking for additional yields can delegate stake to consumer chains in Cosmos and Consumer chains looking for supplemental security get access to the massive stake pool of Ethereum.

Conclusion

Ethos is a validator coordination layer providing crypto-economic security to integrated chains. By reducing the price of sovereignty, chains can lower provider revenue and/or redirect a portion of it to grow and incentivize a healthy ecosystem. Ethos benefits all stakeholders in the network: security consumers pay less, and providers take on less cost, creating a more sustainable and secure blockchain environment.