Privacy-focused layer-1 blockchain Secret Network has put forward a proposal to migrate from the Cosmos ecosystem to Arbitrum, an Ethereum layer-2 scaling solution. The move is driven by concerns over artificial intelligence (AI)-powered exploit techniques that make aging code increasingly vulnerable. The team also highlighted thinning liquidity on Cosmos and a broader exodus of builders to other ecosystems.

Security Risks from AI and Old Code

In a detailed statement released on Tuesday, the Secret Network development team emphasized that security is the primary driver behind the proposed migration. “The security risk is the part we take most seriously,” the team wrote, pointing to the growing ease with which AI can analyze and exploit legacy smart contract code. The recent Axelar-Secret IBC bridge exploit, which led to a $4.7 million loss in bridged assets, was cited as a concrete example of the dangers posed by under-maintained infrastructure.

The team argued that advancements in AI, particularly models like Anthropic’s Claude Mythos 5, have drastically lowered the cost and effort required to find and exploit vulnerabilities. “Attacks that used to take deep manual effort are getting cheaper as models get better at reading contracts, tracing assumptions, and turning a forgotten edge case into a working exploit,” the statement reads. This phenomenon, they warned, is making stale code a far more significant liability than in the past.

Secret Network has been operating privacy-preserving smart contracts on Cosmos since 2020. At the time, Cosmos offered strong momentum and a vibrant ecosystem of interconnected blockchains. However, the landscape has shifted dramatically. “The environment has changed,” the team explained, noting that the tooling developers once relied on has become less reliable, and many key projects that anchored the Cosmos ecosystem have migrated elsewhere.

Liquidity and Builder Exodus

Beyond security, liquidity fragmentation is a major factor in the proposed move. The Secret team described Arbitrum as having “deep liquidity, tooling, wallet and exchange support, and thousands of builders composing with one another.” In contrast, they said liquidity has thinned on Cosmos, making it harder for projects to attract capital and users. The total value locked (TVL) across the Cosmos ecosystem currently stands at roughly $2 billion, an 88% decline from its 2021 peak. Arbitrum, by comparison, leads all layer-2 networks with $17.4 billion in TVL, according to L2Beat.

Secret Network’s own TVL has dwindled to just $1.3 million on Cosmos, as per DefiLlama. This decline reflects a broader trend: projects built on Cosmos are increasingly seeking greener pastures. In February, privacy blockchain NilChain, also built on the Cosmos SDK, moved to Ethereum. The Sei Network completed a full transition from Cosmos to an Ethereum Virtual Machine (EVM) environment in June, shutting down its native Cosmos transaction layer entirely. Stablecoin issuer Noble likewise announced its migration from Cosmos to Ethereum in January.

“For SCRT to endure, it needs a new stable home, and the Ethereum ecosystem is that home,” the team asserted. The proposal includes a one-time snapshot of SCRT balances scheduled for September 1, which will be used to issue a new ERC-20 SCRT token on Arbitrum. Current SCRT holders will be able to claim equivalent tokens on the new network.

Market Reaction and Governance Vote

The announcement has not been well received by SCRT holders. The token plunged 24% in the past 24 hours, falling to $0.041, down over 99% from its all-time high in 2021. The sharp decline reflects uncertainty about the migration’s outcome and the potential for further disruptions.

The proposal is subject to a governance vote among SCRT token holders. If approved, the move would represent another significant departure from the Cosmos ecosystem, which has seen a steady stream of projects exit in search of greater liquidity, developer activity, and security assurances. The Secret Network team argues that the move is essential for the project’s survival, particularly in an era where AI-driven exploit tools are rapidly evolving.

Security researchers have long warned that AI models capable of reading and analyzing smart contract code could accelerate the discovery of zero-day vulnerabilities. The Claude Mythos 5 model, released by Anthropic earlier this year, demonstrated advanced capabilities in code comprehension and vulnerability detection. While such models can also be used for defensive purposes, the Secret team believes the offensive potential outweighs the benefits for under-resourced projects.

To mitigate risks during the transition, the team has proposed a multi-phase migration plan. After the snapshot, the new ERC-20 token will be deployed on Arbitrum, and bridging infrastructure will be set up to allow users to move their assets. The team plans to maintain the old Secret Network chain for a limited period to ensure a smooth transition, but will eventually sunset it if the vote passes.

The migration proposal also addresses the issue of developer attrition. Many decentralized applications (dApps) built on Secret Network have already expressed interest in moving to Arbitrum, where they can leverage existing DeFi protocols, wallet integrations, and superior tooling. The team believes that a unified presence on Arbitrum will attract new builders and revive the ecosystem.

Critics, however, question whether the move will solve Secret Network’s underlying challenges. The token’s steep decline suggests investor skepticism about the project’s ability to regain traction even on a new network. Additionally, the migration itself introduces technical risks, including potential issues with contract upgrades, token supply consistency, and user adoption.

In the broader context, Secret Network’s proposal highlights a growing trend among Cosmos-based projects to seek refuge in Ethereum’s more mature layer-2 ecosystem. The Cosmos Inter-Blockchain Communication (IBC) protocol was once hailed as a breakthrough for cross-chain interoperability, but the exodus of high-profile projects suggests that liquidity and developer activity continue to gravitate toward Ethereum’s network effects.

As the governance vote approaches, the crypto community will be watching closely. If Secret Network successfully migrates to Arbitrum, it could set a precedent for other struggling Cosmos chains contemplating a similar move. Conversely, a failed vote could leave the project stranded on a shrinking ecosystem with diminishing prospects.

The team remains optimistic, stating that the migration is “the best path forward for SCRT holders and the broader Secret community.” They have promised to provide detailed technical documentation and support throughout the process to minimize disruption.

Source:Cointelegraph News