Thank you for taking the time to write this up, it helps a lot with understanding what they’re trying to do.
I found this, but I don’t know if it answers the question (the link leads to some techspeak in their “whitepaper” so that may clear some up as well), as finding liability =/= recovery as far as I would guess:
Security: Tendermint consensus is not only fault tolerant, it is also accountable. If the blockchain forks, there is a way to determine liability.
In this section they are talking about the “inter-blockchain communication,” which require the “fast-finality” consensus algorithms so there won’t be any forks and blocks are instantly trustworthy.
Things are transferred via something that looks like smart contracts, which is a little odd (and reminds me of the lightning network) but because there is no underlying blockchain (like a stacks, eth, or btc) then that’s the only thing you can do. I suppose if there was a reorg on one chain then the connected ones would also have to reorg, causing a domino effect, which means the entire “internet of blockchains” would topple way too fast.
I suppose this why the instant-finality is required, but if the BFT/PoS is able to be exploited to create re-orgs then technically a malicious blockchain could topple the entire network.
I found this quote from here:
But because probabilistic guarantees do not protect against reorgs, transferring assets securely across chains via IBC is impossible. This prompts the question: How can Cosmos zones interoperate with pre-existing blockchains absent finality?
Peg zones are our solution. A peg zone is an account-based blockchain which bridges zones within Cosmos to external chains like Bitcoin or Ethereum. It acts as an adaptor zone — or a “finality gadget”, in Casper-speak — which translates finality for probabilistically finalized blockchains by imposing a “finality threshold” at some arbitrary number of blocks to achieve pseudo-finality. Generally, this “translator” zone design can be classified as a 2-way peg (2WP).
Seems like they are assuming reorgs will never happen. Do you think that’s safe/possible to assume simply because they have “instant finality” through their consensus algorithm? Can a blockchain ever be “reorg-proof”?