Privacy-focused layer-1 blockchain Secret Network has proposed a strategic migration from its native Cosmos ecosystem to Ethereum layer-2 Arbitrum, citing security risks posed by artificial intelligence, declining liquidity, and a shifting developer landscape. The proposal, which requires a governance vote by SCRT token holders, marks the latest exodus from the Cosmos ecosystem as several projects seek greener pastures on Ethereum.

Why the Move?

Secret Network has been operating privacy-preserving smart contracts on Cosmos since 2020, leveraging the ecosystem's inter-blockchain communication protocol and strong early momentum. However, according to the team, the environment has changed dramatically. In a statement released Tuesday, the Secret team outlined three primary motivations for the proposed migration: security risks from AI-assisted exploitation, thinning liquidity on Cosmos, and a lack of robust tooling and developer activity.

“The security risk is the part we take most seriously,” the team said. “Old code is becoming dramatically easier to analyze … With AI, the cost of attacking stale code is falling across the board.” They specifically pointed to the recent Axelar-Secret IBC bridge exploit in June, which resulted in the loss of $4.7 million in bridged assets. While the exploit did not affect Secret's native token, SCRT, it exposed vulnerabilities that the team believes are becoming more accessible due to advances in AI models.

The release of advanced AI models such as Anthropic’s Claude Mythos 5 has dramatically increased the capabilities for discovering and potentially exploiting code vulnerabilities, the team argued. “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.” This concern is not unique to Secret Network; the broader blockchain industry is grappling with how AI can both enhance and threaten smart contract security.

Liquidity and Developer Exodus

Beyond security, Secret Network cited the thinning liquidity and developer migration away from Cosmos. The team described Arbitrum as having “deep liquidity, tooling, wallet and exchange support, and thousands of builders composing with one another.” In contrast, they noted that “liquidity has thinned” on Cosmos while builders have “drifted to other ecosystems.” The total value locked (TVL) in the Cosmos ecosystem currently stands at around $2 billion, down 88% from its peak during the 2021 bull market. Comparatively, Arbitrum is the leading layer-2 network by TVL, which is $17.4 billion, according to L2Beat. Secret Network itself has just $1.3 million in TVL on Cosmos, according to DefiLlama.

The migration proposal comes amid a broader trend of projects leaving Cosmos. In February, privacy-focused blockchain NilChain, built with the Cosmos SDK, moved to Ethereum. The Sei Network completed a full Cosmos-to-EVM transition in June, shutting down its native Cosmos transaction layer entirely. Stablecoin blockchain Noble also announced its departure from Cosmos in January. These moves suggest a growing perception that Ethereum’s ecosystem offers more robust infrastructure and user adoption.

Technical Details of the Proposal

Under the current proposal, Secret Network plans to conduct a one-time snapshot of SCRT token balances on September 1st. This snapshot will be used to issue a new ERC-20 contract for SCRT on Arbitrum. The move is intended to provide a more stable and liquid home for SCRT, ensuring its long-term viability. The team emphasized that “for SCRT to endure, it needs a new stable home, and the Ethereum ecosystem is that home.”

If the governance vote passes, the migration would involve moving the privacy-preserving smart contract functionality from Cosmos to Arbitrum. This would likely require significant technical adjustments, as Secret Network’s native privacy features are tightly integrated with the Cosmos SDK. The team has not yet provided a detailed timeline for the migration beyond the snapshot date.

Market Reaction

SCRT holders reacted negatively to the announcement, with the token falling 24% over the past 24 hours to trade at approximately 4.1 cents. According to CoinGecko, SCRT is now down more than 99% from its all-time high in 2021. The sharp decline reflects uncertainty about the migration’s outcome and the challenges facing the project.

Secret Network is not alone in facing headwinds. The broader crypto market has seen a prolonged bearish phase, and many privacy-focused projects have struggled to gain traction. Secret Network’s unique selling point—private smart contracts—has not yet achieved widespread adoption, and the project’s TVL and token price reflect that struggle.

AI and Blockchain Security: A Growing Concern

The emphasis on AI exploit risks adds a new dimension to the ongoing debate about smart contract security. AI models are increasingly being used to audit code and detect vulnerabilities, but they also lower the barrier for malicious actors to discover exploits. Secret Network’s team warned that “with AI, the cost of attacking stale code is falling across the board,” making it essential for projects to maintain up-to-date and actively maintained codebases.

The Axelar-Secret bridge exploit in June was a stark reminder of the risks. The exploit took advantage of an “infinite mint” bug in the IBC bridge, allowing the attacker to mint unlimited tokens. The team was able to identify and patch the vulnerability quickly, but the incident highlighted how old, under-maintained code can be a ticking time bomb. As AI models improve, the window for projects to address vulnerabilities is shrinking.

Some security experts argue that AI-assisted exploits are becoming more common across the industry. For instance, advanced large language models (LLMs) can now analyze Solidity and Rust codebases, identify potential attack vectors, and even generate exploit code. While much of this research is still in its early stages, the threat is real enough that projects like Secret Network are taking preemptive action by moving to a more robust ecosystem.

Secret Network’s move also underscores the challenges facing Cosmos as a hub for privacy and other niche applications. While Cosmos offers unique interoperability through IBC, its fragmented liquidity and smaller developer base have made it less attractive compared to Ethereum’s vast network effects. The departure of several high-profile projects may further weaken Cosmos’s position, though the ecosystem still hosts major DeFi and infrastructure projects.

For Secret Network, the proposed migration to Arbitrum could provide access to Ethereum’s deep liquidity pools, established tooling (e.g., wallets, exchanges, oracles), and a thriving developer community. However, it also raises questions about the project’s privacy features, as Arbitrum is a public, transparent layer-2. The team has not yet clarified how they will maintain privacy on Arbitrum, but likely solutions involve using off-chain encrypted computation or zero-knowledge proofs.

As the governance vote approaches, SCRT holders will weigh the risks and benefits of the migration. The outcome could set a precedent for other Cosmos-based projects considering similar moves. Meanwhile, the broader industry will be watching to see how AI-assisted security threats evolve and how blockchain projects adapt to the new landscape.

Source:Cointelegraph News