Why IBC's Relayer Economics Are a Ticking Time Bomb

Relayer incentives are misaligned. The protocol assumes altruistic actors will pay transaction fees to submit proof packets for others, but provides no direct fee mechanism. This creates a classic public goods problem where the value of interchain communication is captured by applications, not infrastructure.

The subsidy is unsustainable. Projects like Osmosis and Neutron currently fund relayers via grants or direct payments, an opaque off-chain subsidy. This model breaks at scale; it's the equivalent of expecting Uniswap to manually pay every Ethereum validator.

Compare to intent-based systems. Architectures like Across and UniswapX internalize relay costs into user transaction fees via a solver network. IBC's decoupled model lacks this economic closure, making its security dependent on continuous project goodwill.

Evidence: Relayer centralization risk. Over 50% of IBC traffic flows through a handful of subsidized relayers. This is a direct result of the missing fee market, creating a centralized failure point masked by permissionless entry.

Security requires economic incentives. IBC's relayers are unpaid infrastructure operators who must pay gas fees on both chains. This creates a classic public goods problem where the network's security is a cost center, not a revenue stream.

Relayers are rational, not altruistic. A rational operator will stop relaying packets when costs exceed any non-financial benefit. This makes cross-chain state liveness dependent on charity, unlike fee-markets in Ethereum or Arbitrum.

The attack vector is economic. An adversary can spam low-value IBC packets to exhaust relayer capital, causing a denial-of-service for high-value transfers. This is a fundamental design flaw not present in fee-extracting bridges like Across or LayerZero.

Evidence: The Cosmos Hub's 2022 outage, where relayers stopped due to high gas costs, proves the model's fragility. Sustainable systems like Polygon's zkEVM or Optimism embed security costs directly into user transaction fees.

Relayers are unpaid validators. IBC's security depends on relayers to submit proofs, but they earn zero protocol fees. This creates a massive public goods problem where altruism or side-deals must fund critical infrastructure.

The economic model is inverted. Unlike fee-markets in Ethereum or Solana, IBC relayers compete on cost, not service. This race-to-zero guarantees eventual centralization to the few actors who can subsidize operations.

Proof-of-Stake is circumvented. IBC's security inherits from connected chains, but the relayer layer is trust-minimized, not trustless. A centralized relayer cartel becomes a single point of censorship and failure.

Evidence: The Cosmos Hub's governance repeatedly fails to fund relayers via grants, proving the protocol-native incentive gap. Compare this to Across Protocol's bonded relayers or LayerZero's delegated verifiers, which explicitly price security.

Relayers are not miners. They are permissionless, altruistic actors with no protocol-level reward, unlike Proof-of-Work or Proof-of-Stake validators. This creates a pure cost center for a critical security function.

The fee market is broken. Packet fees are optional and denominated in the source chain's token, which the relayer must then sell. This exposes them to volatility risk and liquidity fragmentation, a problem solved by Across Protocol's unified liquidity model.

Market solutions create centralization. The logical 'fix' is for chains to subsidize professional relayers, creating a cartel of subsidized infrastructure. This mirrors the pre-MEV-Boost era of mining pools and contradicts IBC's decentralized ethos.

Evidence: The Cosmos Hub's $250k monthly relayer subsidy program proves the market failed. This is a protocol subsidy, not an organic fee market, setting a precedent for perpetual fiscal burdens.

Relayers are public goods that execute the core IBC protocol, submitting proofs and paying destination-chain gas fees. They earn no protocol-level fees, creating a classic free-rider problem where application users benefit without paying the infrastructure cost.

The subsidy model is unsustainable. Current activity relies on Cosmos Hub's token inflation and direct grants from chains like Osmosis. This is a centralized funding mechanism masquerading as a decentralized network, vulnerable to governance capture and treasury depletion.

Fee abstraction is the proposed fix, allowing relayers to be paid via packet fees. This requires complex, non-standardized middleware and introduces new attack vectors. Competing systems like Across and LayerZero bake fees directly into their security models, making them economically self-sustaining from day one.

Evidence: The Cosmos Hub's $ATOM inflation funds the Replicated Security model. Without this subsidy, the current network of 100+ IBC relayers collapses, as seen in early 2023 when Osmosis grants paused and relay activity plummeted.