Secret Network Warns of AI Exploit Risks in Proposed Arbitrum Plan

Secret Network, a privacy-focused layer-1 blockchain known for running encrypted smart contracts, has proposed relocating from its long-time Cosmos environment to Ethereum’s Arbitrum layer-2. The move, announced Tuesday by the project team, is framed as a response to what it calls increasing security and liquidity risks on the current stack—risks the team says have been intensified by rapid progress in AI-assisted code analysis.

The proposal is expected to require a governance vote. If approved, Secret Network plans a one-time snapshot of SCRT balances on Sept. 1 to enable the issuance of a new ERC-20 SCRT token contract on Arbitrum.

Key takeaways

• Secret Network says “old code” on Cosmos is becoming harder to keep safe, arguing AI is reducing the cost of finding and exploiting vulnerabilities.
• Arbitrum is positioned as the destination due to deeper liquidity and stronger developer and infrastructure support.
• A June bridge exploit that resulted in $4.7 million lost in bridged assets did not affect Secret’s native SCRT token, but the team cites it as evidence of growing cross-chain risk.
• Secret’s Cosmos TVL is reported at about $1.3 million, while Arbitrum’s total value secured is cited at $17.4 billion (L2Beat).
• SCRT holders reacted negatively to the announcement, with CoinGecko data showing a 24% drop over 24 hours to $0.041.

Why Secret Network wants out of Cosmos

In a forum post, the Secret team said the “environment has changed” since the project launched privacy-preserving smart contracts on Cosmos in 2020. The team’s central rationale is security: it argues that vulnerabilities in older, “stale” code are becoming easier and cheaper to analyze, and that AI tools lower the barrier for attackers.

“The security risk is the part we take most seriously,” the team wrote, adding that with AI, the cost of attacking outdated code is falling “across the board.”

The team tied this concern to recent incidents, pointing to an Axelar-Secret IBC bridge exploit that it says spotlighted the danger of aging or under-maintained code. According to the forum post, the release of increasingly capable AI models—such as Anthropic’s “Claude Mythos 5,” referenced in earlier reporting by Cointelegraph—raises the likelihood that attackers can more quickly discover weaknesses and turn edge cases into working exploits.

Cross-chain stress: the $4.7M bridge incident and what it implies

Secret Network’s proposal follows a bridge exploit reported earlier this year. In June, an exploit involving Secret’s bridge resulted in the loss of $4.7 million in bridged assets, though the team said it did not impact the native SCRT token.

While the exploit did not directly compromise SCRT itself, the team’s broader message is that cross-chain plumbing—often built on components that may not receive rapid upgrades—can become an outsized risk as the threat landscape changes. The proposal effectively treats that bridge incident as part of a pattern: if the cost to find and exploit weaknesses continues to fall, the practical burden of keeping all components secure becomes harder over time.

Earlier coverage from Cointelegraph described the “infinite mint” bug behind the $4.7 million loss, emphasizing how bridge logic can be fragile when assumptions fail. Secret’s latest move suggests the project believes switching to a different execution and ecosystem environment could help reduce some of those risks.

Arbitrum as a liquidity and tooling upgrade

Beyond security, Secret also argued that Cosmos has weakened as a growth hub. In its Arbitrum pitch, the team described Arbitrum as offering “deep liquidity, tooling, wallet and exchange support, and thousands of builders composing with one another.” It also stated that “liquidity has thinned” on Cosmos while developers have “drifted to other ecosystems.”

The team warned that Cosmos tooling stability is “shakier than it used to be,” and said several projects that previously anchored the Cosmos ecosystem have migrated elsewhere.

In practical terms, this shift matters for Secret Network because privacy-focused applications often rely on consistent liquidity, reliable developer tooling, and accessible integrations. A thinner ecosystem can translate into weaker DeFi participation, fewer composability pathways, and more friction for users—especially when projects depend on bridging, exchanges, wallets, and dApp integrations to reach liquidity.

What the numbers say—and how the market reacted

Secret’s proposal arrives amid a wider migration trend from Cosmos to Ethereum-based execution environments. The forum post cited declining Cosmos DeFi depth alongside rising Ethereum layer-2 scale.

According to the figures referenced in the announcement, the total value locked across the Cosmos ecosystem is around $2 billion, down 88% from its peak during the 2021 bull market. By comparison, Arbitrum is cited as the leading layer-2 by total value secured at $17.4 billion, based on L2Beat data. DefiLlama figures also placed Secret’s Cosmos TVL at about $1.3 million.

Market reaction has been sharply negative for SCRT. CoinGecko data referenced in the update shows the token down roughly 24% over the past 24 hours to around $0.041, representing a drop of more than 99% from its 2021 peak.

The broader context is that Secret is not alone in leaving Cosmos. In February, NilChain—a privacy-focused chain built with the Cosmos SDK—announced its move to Ethereum. Sei Network completed a full transition away from Cosmos in June by closing its native Cosmos transaction layer and operating on Ethereum. Noble, a stablecoin blockchain, was also reported earlier as having announced its migration from Cosmos to Ethereum in January.

For observers, this matters because it suggests a structural reallocation of development effort and liquidity toward EVM and large layer-2 environments—even when projects originally benefited from Cosmos’s modular design.

How the migration would work if governance approves

Secret Network’s plan includes a governance step and a technical token migration path. The team said it will conduct a one-time snapshot of SCRT balances on Sept. 1. The snapshot will then be used to issue a new ERC-20 SCRT contract on Arbitrum.

This design choice is notable because it signals the project intends to maintain a continuity mechanism for existing holders rather than treating the transition as a completely separate token. Still, the details of the migration—such as timing relative to the governance vote, how bridging or redemption would be handled during the transition window, and how ecosystem integrations will migrate—remain contingent on the governance outcome.

With that in mind, the next items to watch are the governance vote itself and any follow-on proposals that spell out the operational timeline, liquidity migration plans, and security controls for the Arbitrum deployment. The team’s argument centers on AI-driven risk and aging code assumptions—readers will want to see how the new architecture and maintenance practices address those concerns in practice.

This article was originally published as Secret Network Warns of AI Exploit Risks in Proposed Arbitrum Plan on Crypto Breaking News – your trusted source for crypto news, Bitcoin news, and blockchain updates.