Secret Network may leave Cosmos for Arbitrum after bridge exploit

Secret Network is seeking to move SCRT from Cosmos to Arbitrum, citing security risks, weaker liquidity, and older code.

In a July 7 governance post, the privacy-focused blockchain said the plan would create a new ERC-20 SCRT token on Arbitrum through a one-time snapshot on Sept. 1. The team said native and staked SCRT balances would count, while sSCRT, bridged SCRT, contract-held tokens, and IBC assets would not qualify.

The proposal has not passed yet. The team said the move needs a community vote, and the migration will not proceed if holders reject it.

AI exploit risk drives security concerns

The team said security sits at the center of the proposal. It pointed to the recent Axelar-Secret IBC bridge exploit, which crypto.news previously reported led Axelar to disable Secret Network bridge routes after about $4.7 million in bridged assets were taken.

Secret said the exploit did not touch native SCRT, its core privacy protocol, or its confidential compute model. Still, it said the event showed the risk of old bridge paths and under-maintained code in a smaller ecosystem.

“The security risk is the part we take most seriously,” the team said. It also warned that “with AI, the cost of attacking stale code is falling across the board,” as models get better at reading contracts and finding weak points.

Cosmos liquidity pressure adds to case

Secret Network said Cosmos was the right home in 2020 because appchains, IBC, wallets, and infrastructure had stronger momentum. It now says the market has changed, with lower liquidity and fewer builders staying in the ecosystem.

Moreover, Anoma co-founder Christopher Goes warned in January that Cosmos was facing deep stress as projects such as Penumbra, Osmosis, and Noble reduced work, explored exits, or shifted resources elsewhere.

DefiLlama data shows Secret has about $1.32 million in DeFi TVL, while Cosmos chains have about $2 billion. By comparison, L2Beat lists Arbitrum One as the largest Ethereum scaling network by total value secured, with about $17.4 billion.

SCRT holders face snapshot rules

If the proposal passes, SCRT Labs plans to end official support for the Cosmos-based Secret L1 on Sept. 1. The old chain could keep producing blocks if enough validators continue running it, but that would depend on third-party support.

The team also said it will release Secret’s source code under a permissive open-source license. It proposed reducing inflation to 5% from 9% after the move, while keeping SCRT as the governance token.

Users would need to move certain assets before the snapshot. The proposal asks holders to convert eligible balances back to native or staked SCRT and move IBC assets back to their home chains.

SCRT holders reacted poorly to the proposal. CoinGecko data showed the token trading near $0.041, down about 25% in 24 hours and more than 99% below its 2021 peak.