Why Interchain Security Models Rely on Shared Liquidity Pools

New L2s and app-chains must bootstrap their own validator sets and staking tokens, creating billions in idle security capital. This leads to weaker, attackable networks with TVL-to-security ratios below 1.0.

• High Inflation to attract validators
• Centralization risk from low validator count
• Capital inefficiency across the ecosystem

Protocols like EigenLayer and Babylon allow staked ETH/BTC to be restaked as cryptoeconomic security for other chains. Shared liquidity pools create a unified security marketplace.

• Reusable capital: $10B+ TVL secures multiple services
• Slashing leverage: Violations are punished by the pooled stake
• Lower barriers: New chains rent security instead of bootstrapping it

Security converges via light clients and bridges that verify state proofs. Shared liquidity pools back these verification networks, making fraud economically impossible. Projects like LayerZero and Polygon zkEVM rely on this model.

• Economic finality: Fraud proofs are backed by pooled stake
• Fast attestation: ~500ms for state verification
• Shared risk: Attack cost is the entire pool, not a single chain

The line between DeFi liquidity and chain security blurs. AMM pools on Uniswap or Curve can directly underwrite bridge safety, as seen with Across Protocol. Security becomes a composable DeFi primitive.

• Yield-bearing security: Stakers earn fees from secured services
• Dynamic pricing: Security cost fluctuates with pool TVL and risk
• Protocol-owned security: DAOs can bootstrap chains with their treasury

Independent chains must bootstrap their own validator sets and staking tokens, creating sub-critical security budgets vulnerable to 34% attacks. This is the core scaling bottleneck for app-chains and rollups.

• Security Cost: A new L1 requires $1B+ in staked value for baseline security.
• Attack Surface: Low-value chains are perpetual targets for reorgs and double-spends.
• Economic Waste: Capital is locked in silos, unable to secure the broader ecosystem.

The Cosmos Hub's Interchain Security v1 allows consumer chains to lease the Hub's validator set and its $50B+ staked ATOM. Security is a service paid for with transaction fees and native token inflation.

• Shared Slashing: Malicious activity on a consumer chain leads to ATOM slashing.
• Capital Efficiency: Chains launch with enterprise-grade security from day one.
• Protocol Analogue: This is the blockchain equivalent of AWS's shared responsibility model, abstracting infrastructure risk.

EigenLayer creates a generalized marketplace for cryptoeconomic security by allowing ETH stakers to opt-in to secure additional services (AVSs). It turns $20B+ of staked ETH into a reusable security primitive.

• Pooled Collateral: A single restaked ETH position can secure multiple rollups, oracles, and bridges simultaneously.
• Slashing for Intent: Penalties are enforced for proven misbehavior, not chain failures.
• Market Dynamics: Security costs are set by supply/demand for restaked capital, not monolithic governance.

Shared sequencer networks like Espresso and Astria apply the same principle to rollup sequencing. They create a liquid market for block space ordering secured by a decentralized set of stakers.

• Liquidity for Censorship Resistance: A large, shared bond makes transaction censorship economically irrational.
• Interoperability Byproduct: Chains using the same sequencer set get native cross-rollup atomic composability.
• The Shift: Moves security from chain-specific PoS to network-wide economic security for a critical middleware layer.

Leasing security from a liquidity pool introduces systemic risk and governance dependencies. The security provider becomes a central point of failure.

• Correlated Slashing: A bug in one consumer chain could slash the entire shared pool.
• Governance Capture: The hub (e.g., Cosmos Hub, EigenLayer) gains veto power over chain upgrades and economics.
• Market Risk: Security becomes a commodity subject to price volatility of the underlying stake (e.g., ETH, ATOM).

The end-state is on-chain security derivatives: dynamically priced, risk-adjusted bonds that can be allocated across thousands of services. This is the DeFi-ification of cryptoeconomic security.

• Risk Engines: Oracles like Chainlink will price slashing risk based on chain activity and code audits.
• Tranching: Stakers will choose between high-yield/high-risk and low-yield/insured security pools.
• Ultimate Goal: A global capital market where security is a liquid, composable asset class.

Shared liquidity pools must be large enough to secure billions in cross-chain volume, but capital efficiency is inversely proportional to security. A pool securing $10B+ TVL across 50+ chains faces a >100x leverage ratio, making it a systemic single point of failure.\n- Risk: A correlated exploit drains the canonical bridge, freezing all connected chains.\n- Example: The Wormhole hack demonstrated a $326M vulnerability in a single liquidity pool.

Proof-of-Stake security for shared sequencers (e.g., EigenLayer, Babylon) relies on decentralized validator sets. In practice, a small cartel controlling >33% of the stake can censor or reorder cross-chain transactions for maximal extractable value (MEV).\n- Risk: Centralized node providers (e.g., AWS, Google Cloud) create latent collusion vectors.\n- Mitigation: Models like Cosmos ICS penalize downtime, but live slashing for censorship remains unsolved.

Optimistic bridges (e.g., Nomad, Across) and intent-based systems (e.g., UniswapX) depend on external price oracles. A manipulated price feed on one chain can trigger a cascading liquidation avalanche across all secured chains, draining the shared liquidity pool.\n- Risk: A 10% oracle deviation can lead to >50% pool insolvency via recursive liquidations.\n- Defense: Protocols like Chainlink CCIP use decentralized oracle networks, but cross-chain latency creates arbitrage windows for attackers.

Shared security assumes finality. A deep reorg on a major provider chain (e.g., Ethereum) can invalidate thousands of dependent cross-chain states, forcing mass slashing or creating a "double-spend across chains" scenario. Light clients and fraud proofs are too slow to react.\n- Risk: A 7-block reorg on Ethereum could collapse the economic security of all EigenLayer AVSs for ~90 seconds.\n- Reality: This is a low-probability, existential risk that current models simply accept.

Isolated chains must bootstrap their own validator staking pools, creating high inflation costs and low capital efficiency. Security becomes a marketing expense, not a network effect.

• Result: New L2s often start with <$100M TVL, making them trivial to attack.
• Consequence: Investors face systemic risk from under-collateralized bridges and light clients.

Models like EigenLayer, Babylon, and Cosmos ICS treat pooled capital as reusable security collateral. Staked assets secure multiple services simultaneously.

• Mechanism: Restakers provide cryptoeconomic slashing guarantees for AVSs, rollups, and bridges.
• Outcome: Capital efficiency multiplies, creating a flywheel where more applications attract more pooled stake, raising the cost of attack for all.

Native bridges relying solely on LayerZero or Axelar messages are only as secure as their often-underfunded quorum. Liquidity-based bridges like Across and Chainlink CCIP use pooled capital as the canonical security layer.

• Key Insight: The liquidity pool is the verifier. Fraud proofs slash pool funds, not just a small validator bond.
• Builder Action: Design bridges where the economic security (TVL) scales independently of the underlying chain's security.

The future yield stack isn't DeFi farming; it's selling security as a service. Protocols that aggregate and underwrite security (e.g., EigenLayer AVSs, Hyperliquid L1) capture fees from all secured chains.

• Metric to Track: Total Value Secured (TVS) vs. TVL. TVS should be a multiple of TVL.
• Red Flag: Chains with high TVL but low TVS are inefficient capital sinks vulnerable to re-staking drains.

Monolithic security is dead. We're moving to markets for data availability security (EigenDA, Celestia), settlement security (shared sequencers), and oracle security (Chainlink).

• Builder Mandate: Don't roll your own validator set. Rent it from the cheapest, most secure provider for each module.
• Investor Mandate: Back the base-layer security primitives, not the countless chains built on top of them.

Shared liquidity pools create interconnected failure modes. A major slashing event on EigenLayer could trigger liquidations across every AVS and chain it secures, reminiscent of 2022's CeFi contagion.

• Critical Design: Robust, isolated slashing conditions and circuit breakers are non-negotiable.
• Due Diligence: Audit the rehypothecation chains and liquidation waterfalls of any "shared security" asset.