Privacy-focused blockchain Secret Network has proposed a major shift from the Cosmos ecosystem to Ethereum layer-2 network Arbitrum, following a $4.7 million bridge exploit that exposed security risks in aging code. The plan, outlined in a July 7 governance post, would introduce a new ERC-20 SCRT token on Arbitrum via a one-time snapshot on September 1, 2026.
Security and AI risks drive the move
The team cited the recent Axelar-Secret IBC bridge hack—which led Axelar to disable bridge routes—as a key motivator. While the exploit did not affect native SCRT or the core privacy protocol, it underscored vulnerabilities in legacy bridges. “The security risk is the part we take most seriously,” the team said, adding that artificial intelligence is making it increasingly cheap and easy for attackers to scan old code and craft reliable exploits.
Cosmos losing liquidity and projects
Secret Network acknowledged that Cosmos was the right home in 2020, but noted the ecosystem has since lost momentum. Total value locked (TVL) across Cosmos chains has fallen about 88% from its 2021 peak to roughly $2 billion, while Secret’s own DeFi TVL sits at just $1.32 million, according to DefiLlama. By contrast, Arbitrum leads Ethereum scaling with $17.4 billion in total value secured. The departures of other projects—such as Noble, NilChain, and Sei Network—underline a wider trend away from Cosmos.
Migration details and token impact
If community vote approves the proposal, SCRT Labs will take a snapshot of balances on September 1. Only native and staked SCRT will qualify for the new ERC-20 token; bridged SCRT, sSCRT, contract-held tokens, and IBC assets will be excluded. Holders must convert ineligible positions back to native SCRT before the snapshot. After migration, the SCRT supply inflation would drop from 9% to 5%, while SCRT remains the governance token. Official support for the Cosmos-based Secret L1 ends on September 1, though the chain could persist if validators continue operations independently. SCRT Labs also plans to release the source code under an open-source license.
SCRT holders reacted negatively to the news. The token dropped about 24% in 24 hours, trading near $0.041—more than 99% below its 2021 peak.
