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Version: 1.0

CosmWasm + ICA

This section contains a tutorial for writing smart contracts that utilize interchain accounts.

Overview​

We are going to learn how to:

  1. Install dependencies and import the libraries;
  2. Register an Interchain Account;
  3. Execute an interchain transaction.

Note: Neutron provides an implementation of an ICA controller module, which simplifies the creation and management of interchain accounts for smart contract developers. This module, however, is not your only option; you can use raw IBC packets to imitate the ibc-go implementation, or use a framework that already implements the same logic on smart contracts level.

Note: this section assumes that you have basic knowledge of CosmWasm and have some experience in writing smart contracts. You can check out CosmWasm docs and blog posts for entry-level tutorials.

The complete example​

In the snippets below some details might be omitted. Please check out the complete smart contract example for a complete implementation.

1. Install dependencies and import the libraries​

In order to start using the Neutron ICA controller module, you need to install some dependencies. Add the following libraries to your dependencies section:

[dependencies]
cosmwasm-std = "1.2.5"

# Other standard dependencies...

# This is a library that simplifies working with IBC response packets (acknowledgments, timeouts),
# contains bindings for the Neutron ICA adapter module (messages, responses, etc.) and provides
# various helper functions.
neutron-sdk = "0.5.0"

# Required to marshal skd.Msg values; the marshalled messsages will be attached to the IBC packets
# and executed as a transaction on the host chain.
cosmos-sdk-proto = { version = "0.14.0", default-features = false }
protobuf = { version = "3.2.0", features = ["with-bytes"] }

Now you can import the libraries:

use neutron_sdk::{
    bindings::{
        msg::{IbcFee, MsgSubmitTxResponse, NeutronMsg},
        query::{NeutronQuery, QueryInterchainAccountAddressResponse},
        types::ProtobufAny,
    },
    interchain_txs::helpers::{
        decode_acknowledgement_response, decode_message_response, get_port_id,
    },
    sudo::msg::{RequestPacket, SudoMsg},
    NeutronResult,
};
use cosmwasm_std::Coin;

2. Register an Interchain Account​

Neutron allows a smart contract to register multiple interchain account for within a single IBC connection. While you can implement interchain account registration in the instantiate() entrypoint, having a separate handler is probably a better idea:

// Initialize the storage for known interchain accounts.
pub const INTERCHAIN_ACCOUNTS: Map<String, Option<(String, String)>> =
    Map::new("interchain_accounts");

#[derive(Serialize, Deserialize, Clone, Debug, PartialEq, JsonSchema)]
#[serde(rename_all = "snake_case")]
pub enum ExecuteMsg {
    Register {
        connection_id: String,
        interchain_account_id: String,
    }
}

#[entry_point]
pub fn execute(
    deps: DepsMut,
    env: Env,
    _: MessageInfo,
    msg: ExecuteMsg,
) -> StdResult<Response<NeutronMsg>> {
    match msg {
        ExecuteMsg::Register {
            connection_id,
            interchain_account_id,
        } => execute_register_ica(deps, env, connection_id, interchain_account_id),
    }
}

fn execute_register_ica(
    deps: DepsMut,
    env: Env,
    connection_id: String,
    interchain_account_id: String,
) -> StdResult<Response<NeutronMsg>> {
    let register =
        NeutronMsg::register_interchain_account(connection_id, interchain_account_id.clone());

    // Get the IBC port identifier generated by Neutron for the new interchain account.
    let key = get_port_id(env.contract.address.as_str(), &interchain_account_id);

    // Add an incomplete entry for the new account to the storage.
    INTERCHAIN_ACCOUNTS.save(deps.storage, key, &None)?;
    Ok(Response::new().add_message(register))
}

In the snippet above, we create the ExecuteMsg enum that contains the Register message, and implement a simple execute_register_ica() handler for this message. This handler:

  1. Creates a message to the Neutrons interchaintxs module;
  2. Uses a helper function get_port_id() to get the port identifier that Neutron is going to generate for the channel dedicated to this specific interchain account;
  3. Initializes the storage for information related to the new interchain account (currently empty).

The interchain_account_id is just a string name for your new account that you can use to distinguish between multiple accounts created within a single IBC connection.

Note: in a real-world scenario you wouldn't want just anyone to be able to make your contract register interchain accounts, so it might make sense to check the handler

After executing the execute_register_ica() handler you need to have a way to know whether the account was registered properly. As with all IBС-related events (acknowledgements, timeouts), OnChanOpenAck messages are dispatched by Neutron to respective contracts via wasm.Sudo(). So, in order to process this type of events, you need to implement the sudo() entrypoint for your contract and process the message dispatched by Neutron:

#[cfg_attr(not(feature = "library"), entry_point)]
pub fn sudo(deps: DepsMut, env: Env, msg: SudoMsg) -> StdResult<Response> {
    match msg {
        SudoMsg::OpenAck {
            port_id,
            channel_id,
            counterparty_channel_id,
            counterparty_version,
        } => sudo_open_ack(
            deps,
            env,
            port_id,
            channel_id,
            counterparty_channel_id,
            counterparty_version,
        ),
        _ => Ok(Response::default()),
    }
}

fn sudo_open_ack(
    deps: DepsMut,
    _env: Env,
    port_id: String,
    _channel_id: String,
    _counterparty_channel_id: String,
    counterparty_version: String,
) -> StdResult<Response> {
    // The version variable contains a JSON value with multiple fields,
    // including the generated account address. 
    let parsed_version: Result<OpenAckVersion, _> =
        serde_json_wasm::from_str(counterparty_version.as_str());
   
    // Update the storage record associated with the interchain account. 
    if let Ok(parsed_version) = parsed_version {
        INTERCHAIN_ACCOUNTS.save(
            deps.storage,
            port_id,
            &Some((
                parsed_version.address,
                parsed_version.controller_connection_id,
            )),
        )?;
        return Ok(Response::default());
    }
   
    Err(StdError::generic_err("Can't parse counterparty_version"))
}
  1. All possible message types that can come from Neutron are listed in the SudoMsg enum. Here we implement a handler just for one element of this enum, SudoMsg::OpenAck;
  2. If the interchain account was successfully created, you might want to know what account address was generated for you on the host zone. This information is contained in the counterparty_version variable (see the structure) , which we need to parse. If we are able to parse it successfully, we save the remote address and the connection identifier to the previously created entry in the INTERCHAIN_ACCOUNTS storage.

Note: it is required that you implement a sudo() handler in your contract if you are using the interchain transactions module, even if for some reason you don't want to implement any specific logic for IBC events.

Note: you can organise your INTERCHAIN_ACCOUNTS storage in any way that suits your needs. for example, you can also save the interchain_account_id value there to have easy access to it from inside your contract.

After your contract successfully processed the SudoMsg::OpenAck event sent by Neutron, you can start using the Interchain Account that was created for you.

3. Execute an interchain transaction​

Sending the transaction​

use cosmos_sdk_proto::cosmos::staking::v1beta1::{
    MsgDelegate, MsgDelegateResponse
};

// Default timeout for SubmitTX is two weeks
const DEFAULT_TIMEOUT_SECONDS: u64 = 60 * 60 * 24 * 7 * 2;

/// SudoPayload is a type that stores information about a transaction that we try to execute
/// on the host chain. This is a type introduced for our convenience.
#[derive(Serialize, Deserialize, Clone, Debug, PartialEq, JsonSchema)]
#[serde(rename_all = "snake_case")]
pub struct SudoPayload {
    pub message: String,
    pub port_id: String,
}

#[derive(Serialize, Deserialize, Clone, Debug, PartialEq, JsonSchema)]
#[serde(rename_all = "snake_case")]
pub enum ExecuteMsg {
    Register {
        connection_id: String,
        interchain_account_id: String,
    },
    Delegate {
        interchain_account_id: String,
        validator: String,
        amount: u128,
        denom: String,
        timeout: Option<u64>,
    }
}


#[entry_point]
pub fn execute(
    deps: DepsMut,
    env: Env,
    _: MessageInfo,
    msg: ExecuteMsg,
) -> StdResult<Response<NeutronMsg>> {
    deps.api
        .debug(format!("WASMDEBUG: execute: received msg: {:?}", msg).as_str());
    match msg {
        ExecuteMsg::Register {
            connection_id,
            interchain_account_id,
        } => execute_register_ica(deps, env, connection_id, interchain_account_id),
        ExecuteMsg::Delegate {
            validator,
            interchain_account_id,
            amount,
            denom,
            timeout,
        } => execute_delegate(
            deps,
            env,
            interchain_account_id,
            validator,
            amount,
            denom,
            timeout,
        ),
    }
}

fn execute_delegate(
    mut deps: DepsMut,
    env: Env,
    interchain_account_id: String,
    validator: String,
    amount: u128,
    denom: String,
    timeout: Option<u64>,
) -> StdResult<Response<NeutronMsg>> {
    // Get the delegator address from the storage & form the Delegate message.
    let (delegator, connection_id) = get_ica(deps.as_ref(), &env, &interchain_account_id)?;
    let delegate_msg = MsgDelegate {
        delegator_address: delegator,
        validator_address: validator,
        amount: Some(Coin {
            denom,
            amount: amount.to_string(),
        }),
    };

    // Serialize the Delegate message. 
    let mut buf = Vec::new();
    buf.reserve(delegate_msg.encoded_len());

    if let Err(e) = delegate_msg.encode(&mut buf) {
        return Err(StdError::generic_err(format!("Encode error: {}", e)));
    }

    // Put the serialized Delegate message to a types.Any protobuf message.
    let any_msg = ProtobufAny {
        type_url: "/cosmos.staking.v1beta1.MsgDelegate".to_string(),
        value: Binary::from(buf),
    };

    // specify fees to refund relayers for submission of ack and timeout messages
    //
    // The contract MUST HAVE recv_fee + ack_fee + timeout_fee coins on its balance!
    // See more info about fees here: https://docs.neutron.org /neutron/modules/interchain-txs/messages#msgsubmittx
    // and here: https://docs.neutron.org/neutron/feerefunder/overview
    let fee = IbcFee {
        recv_fee: vec![], // must be empty
        ack_fee: vec![CosmosCoin::new(1000u128, "untrn")],
        timeout_fee: vec![CosmosCoin::new(1000u128, "untrn")],
    };

    // Form the neutron SubmitTx message containing the binary Delegate message.
    let cosmos_msg = NeutronMsg::submit_tx(
        connection_id,
        interchain_account_id.clone(),
        vec![any_msg],
        "".to_string(),
        timeout.unwrap_or(DEFAULT_TIMEOUT_SECONDS),
        fee
    );

    // We use a submessage here because we need the process message reply to save
    // the outgoing IBC packet identifier for later.
    let submsg = msg_with_sudo_callback(
        deps.branch(),
        cosmos_msg,
        SudoPayload {
            port_id: get_port_id(env.contract.address.to_string(), &interchain_account_id),
            // Here you can store some information about the transaction to help you parse
            // the acknowledgement later.
            message: "interchain_delegate".to_string(),  
        },
    )?;

    Ok(Response::default().add_submessages(vec![submsg]))
}

fn msg_with_sudo_callback<C: Into<CosmosMsg<T>>, T>(
    deps: DepsMut,
    msg: C,
    payload: SudoPayload,
) -> StdResult<SubMsg<T>> {
    save_reply_payload(deps.storage, payload)?;
    Ok(SubMsg::reply_on_success(msg, SUDO_PAYLOAD_REPLY_ID))
}

// Add storage for reply ids
pub const REPLY_ID_STORAGE: Item<Vec<u8>> = Item::new("reply_queue_id");

pub fn save_reply_payload(store: &mut dyn Storage, payload: SudoPayload) -> StdResult<()> {
    REPLY_ID_STORAGE.save(store, &to_vec(&payload)?)
}
  1. First we need to import the MsgDelegate type from the cosmos_sdk_proto library. This is required to marshal the message and put it to the IBC packet sent by the ICA module;
  2. Then we implement a handler for the new ExecuteMsg::Delegate handler, execute_delegate(), and add it to our execute() entrypoint;
  3. Inside the execute_delegate() handler, we get the interchain account address from the storage, form a Delegate message, form an IBCFee structure that specifies fees to refund relayers for submission of ack and timeout messages, put it and the formed Delegate message inside Neutron's SubmitTx message and execute it as a submessage. Inside the msg_with_sudo_callback() function, we set up the reply payload using the SUDO_PAYLOAD_REPLY_ID value.

We need to execute the SubmitTx message as a submessage because Neutron returns the outgoing IBC packet identifier for us as a message reply. This IBC packet identifier is necessary to later determine which To process it, we need to implement the reply() handler:

#[entry_point]
pub fn reply(deps: DepsMut, env: Env, msg: Reply) -> StdResult<Response> {
    match msg.id {
        SUDO_PAYLOAD_REPLY_ID => prepare_sudo_payload(deps, env, msg),
        _ => Err(StdError::generic_err(format!(
            "unsupported reply message id {}",
            msg.id
        ))),
    }
}

fn prepare_sudo_payload(mut deps: DepsMut, _env: Env, msg: Reply) -> StdResult<Response> {
    let payload = read_reply_payload(deps.storage)?;
    let resp: MsgSubmitTxResponse = serde_json_wasm::from_slice(
        msg.result
            .into_result()
            .map_err(StdError::generic_err)?
            .data
            .ok_or_else(|| StdError::generic_err("no result"))?
            .as_slice(),
    )
    .map_err(|e| StdError::generic_err(format!("failed to parse response: {:?}", e)))?;
    deps.api
        .debug(format!("WASMDEBUG: reply msg: {:?}", resp).as_str());
    let seq_id = resp.sequence_id;
    let channel_id = resp.channel;
    save_sudo_payload(deps.branch().storage, channel_id, seq_id, payload)?;
    Ok(Response::new())
}

pub fn read_reply_payload(store: &mut dyn Storage) -> StdResult<SudoPayload> {
    let data = REPLY_ID_STORAGE.load(store)?;
    from_binary(&Binary(data))
}

pub fn save_sudo_payload(
    store: &mut dyn Storage,
    channel_id: String,
    seq_id: u64,
    payload: SudoPayload,
) -> StdResult<()> {
    SUDO_PAYLOAD.save(store, (channel_id, seq_id), &to_vec(&payload)?)
}

IBC Events​

After we saved the IBC packet identifier, we are ready for processing the IBC events that can be triggered by an IBC relayer: an acknowledgement or a timeout. In order to process them, we need to add a couple of new handlers to the sudo() entrypoint:

#[cfg_attr(not(feature = "library"), entry_point)]
pub fn sudo(deps: DepsMut, env: Env, msg: SudoMsg) -> StdResult<Response> {
    match msg {
        // For handling successful (non-error) acknowledgements.
        SudoMsg::Response { request, data } => sudo_response(deps, request, data),

        // For handling error acknowledgements.
        SudoMsg::Error { request, details } => sudo_error(deps, request, details),

        // For handling error timeouts.
        SudoMsg::Timeout { request } => sudo_timeout(deps, env, request),

        SudoMsg::OpenAck {
            port_id,
            channel_id,
            counterparty_channel_id,
            counterparty_version,
        } => sudo_open_ack(
            deps,
            env,
            port_id,
            channel_id,
            counterparty_channel_id,
            counterparty_version,
        ),
        _ => Ok(Response::default()),
    }
}

// Interchain transaction responses - here we just save ack/err/timeout state
pub const ACKNOWLEDGEMENT_RESULTS: Map<(String, u64), AcknowledgementResult> =
    Map::new("acknowledgement_results");

/// Serves for storing acknowledgement calls for interchain transactions
#[derive(Serialize, Deserialize, Clone, PartialEq, Eq, JsonSchema, Debug)]
#[serde(rename_all = "snake_case")]
pub enum AcknowledgementResult {
    /// Success - Got success acknowledgement in sudo with array of message item types in it
    Success(Vec<String>),
    /// Error - Got error acknowledgement in sudo with payload message in it and error details
    Error((String, String)),
    /// Timeout - Got timeout acknowledgement in sudo with payload message in it
    Timeout(String),
}

Successful Response​

Let's have a look at how to handle a successful Response event (a non-error IBC Acknowledgement):

fn sudo_response(deps: DepsMut, request: RequestPacket, data: Binary) -> StdResult<Response> {
    deps.api.debug(
        format!(
            "WASMDEBUG: sudo_response: sudo received: {:?} {:?}",
            request, data
        )
        .as_str(),
    );

    // Get the channel identifier and the sequence identifier to be able to understand
    // which transaction is acknowledged by this packet, and for which Interchain Account.
    //
    // WARNING: RETURNING THIS ERROR CLOSES THE CHANNEL.
    // AN ALTERNATIVE IS TO MAINTAIN AN ERRORS QUEUE AND PUT THE FAILED REQUEST THERE
    // FOR LATER INSPECTION.
    // In this particular case, we return an error because not having the sequence id
    // in the request value implies that a fatal error occurred on Neutron side.
    let seq_id = request
        .sequence
        .ok_or_else(|| StdError::generic_err("sequence not found"))?;
    // WARNING: RETURNING THIS ERROR CLOSES THE CHANNEL.
    // AN ALTERNATIVE IS TO MAINTAIN AN ERRORS QUEUE AND PUT THE FAILED REQUEST THERE
    // FOR LATER INSPECTION.
    // In this particular case, we return an error because not having the sequence id
    // in the request value implies that a fatal error occurred on Neutron side.
    let channel_id = request
        .source_channel
        .ok_or_else(|| StdError::generic_err("channel_id not found"))?;

    // Read the information about the transaction that we previously executed and saved to state.
    //
    // NOTE: NO ERROR IS RETURNED HERE. THE CHANNEL LIVES ON.
    // In this particular example, this is a matter of developer's choice. Not being able to read
    // the payload here means that there was a problem with the contract while submitting an
    // interchain transaction. You can decide that this is not worth killing the channel,
    // write an error log and / or save the acknowledgement to an errors queue for later manual
    // processing. The decision is based purely on your application logic.
    let payload = read_sudo_payload(deps.storage, channel_id, seq_id).ok();
    if payload.is_none() {
        let error_msg = "WASMDEBUG: Error: Unable to read sudo payload";
        deps.api.debug(error_msg);
        add_error_to_queue(deps.storage, error_msg.to_string());
        return Ok(Response::default());
    }

    deps.api
        .debug(format!("WASMDEBUG: sudo_response: sudo payload: {:?}", payload).as_str());

    // Parse the response to Vec<MsgData>.
    //
    // WARNING: RETURNING THIS ERROR CLOSES THE CHANNEL.
    // AN ALTERNATIVE IS TO MAINTAIN AN ERRORS QUEUE AND PUT THE FAILED REQUEST THERE
    // FOR LATER INSPECTION.
    // In this particular case, we return an error because not being able to parse this data
    // that a fatal error occurred on Neutron side, or that the remote chain sent us unexpected data.
    // Both cases require immediate attention.
    let parsed_data = decode_acknowledgement_response(data)?;

    // Iterate over the messages, parse them depending on their type & process them.
    let mut item_types = vec![];
    for item in parsed_data {
        let item_type = item.msg_type.as_str();
        item_types.push(item_type.to_string());
        match item_type {
            "/cosmos.staking.v1beta1.MsgDelegate" => {
                // WARNING: RETURNING THIS ERROR CLOSES THE CHANNEL.
                // AN ALTERNATIVE IS TO MAINTAIN AN ERRORS QUEUE AND PUT THE FAILED REQUEST THERE
                // FOR LATER INSPECTION.
                // In this particular case, a mismatch between the string message type and the
                // serialised data layout looks like a fatal error that has to be investigated.
                let _out: MsgDelegateResponse = decode_message_response(&item.data)?;
            }
            _ => {
                deps.api.debug(
                    format!(
                        "This type of acknowledgement is not implemented: {:?}",
                        payload
                    )
                    .as_str(),
                );
            }
        }
    }

    if let Some(payload) = payload {
        // update but also check that we don't update same seq_id twice
        ACKNOWLEDGEMENT_RESULTS.update(
            deps.storage,
            (payload.port_id, seq_id),
            |maybe_ack| -> StdResult<AcknowledgementResult> {
                match maybe_ack {
                    Some(_ack) => Err(StdError::generic_err("trying to update same seq_id")),
                    None => Ok(AcknowledgementResult::Success(item_types)),
                }
            },
        )?;
    }

    Ok(Response::default())
}

pub fn read_sudo_payload(
    store: &mut dyn Storage,
    channel_id: String,
    seq_id: u64,
) -> StdResult<SudoPayload> {
    let data = SUDO_PAYLOAD.load(store, (channel_id, seq_id))?;
    from_binary(&Binary(data))
}

pub fn add_error_to_queue(store: &mut dyn Storage, error_msg: String) -> Option<()> {
    let result = ERRORS_QUEUE
        .keys(store, None, None, Order::Descending)
        .next()
        .and_then(|data| data.ok())
        .map(|c| c + 1)
        .or(Some(0));

    result.and_then(|idx| ERRORS_QUEUE.save(store, idx, &error_msg).ok())
}

pub const ERRORS_QUEUE: Map<u32, String> = Map::new("errors_queue");
  1. We get the sequence and channel identifiers to retrieve the information about the interchain transaction from our local storage. Note: we could instead parse the raw data from the RequestPacket, but it feels more natural to save the required information when sending the transaction and to retrieve it from the state when processing the response;
  2. We parse the response data and start iterating over the message responses, determining the message type for each of them and (potentially) executing custom logic for each message.

Note: if your Sudo handler fails, the acknowledgment won't be marked as processed inside the IBC module. This will make most IBC relayers try to submit the acknowledgment over and over again. And since the ICA channels are ORDERED, ACKs must be processed in the same order as corresponding transactions were sent, meaning no further acknowledgments will be process until the previous one processed successfully.

We strongly recommend developers to write Sudo handlers very carefully and keep them as simple as possible. If you do want to have elaborate logic in your handler, you should verify the acknowledgement data before making any state changes; that way you can, if the data received with the acknowledgement is incompatible with executing the handler logic normally, return an Ok() response immediately, which will prevent the acknowledgement from being resubmitted.

Error​

fn sudo_error(deps: DepsMut, request: RequestPacket, details: String) -> StdResult<Response> {
    deps.api
        .debug(format!("WASMDEBUG: sudo error: {}", details).as_str());
    deps.api
        .debug(format!("WASMDEBUG: request packet: {:?}", request).as_str());

    // WARNING: RETURNING THIS ERROR CLOSES THE CHANNEL.
    // AN ALTERNATIVE IS TO MAINTAIN AN ERRORS QUEUE AND PUT THE FAILED REQUEST THERE
    // FOR LATER INSPECTION.
    // In this particular case, we return an error because not having the sequence id
    // in the request value implies that a fatal error occurred on Neutron side.
    let seq_id = request
        .sequence
        .ok_or_else(|| StdError::generic_err("sequence not found"))?;

    // WARNING: RETURNING THIS ERROR CLOSES THE CHANNEL.
    // AN ALTERNATIVE IS TO MAINTAIN AN ERRORS QUEUE AND PUT THE FAILED REQUEST THERE
    // FOR LATER INSPECTION.
    // In this particular case, we return an error because not having the sequence id
    // in the request value implies that a fatal error occurred on Neutron side.
    let channel_id = request
        .source_channel
        .ok_or_else(|| StdError::generic_err("channel_id not found"))?;
    let payload = read_sudo_payload(deps.storage, channel_id, seq_id).ok();

    if let Some(payload) = payload {
        // update but also check that we don't update same seq_id twice
        ACKNOWLEDGEMENT_RESULTS.update(
            deps.storage,
            (payload.port_id, seq_id),
            |maybe_ack| -> StdResult<AcknowledgementResult> {
                match maybe_ack {
                    Some(_ack) => Err(StdError::generic_err("trying to update same seq_id")),
                    None => Ok(AcknowledgementResult::Error((payload.message, details))),
                }
            },
        )?;
    } else {
        let error_msg = "WASMDEBUG: Error: Unable to read sudo payload";
        deps.api.debug(error_msg);
        add_error_to_queue(deps.storage, error_msg.to_string());
    }

    Ok(Response::default())
}

This handler is very similar to sudo_response(). Unfortunately, current ICA implementation does not allow you to get the exact error string that was returned by the host chain; your controller code can only know that something went wrong on the other side.

Timeout​

fn sudo_timeout(deps: DepsMut, _env: Env, request: RequestPacket) -> StdResult<Response> {
    deps.api
        .debug(format!("WASMDEBUG: sudo timeout request: {:?}", request).as_str());

    // WARNING: RETURNING THIS ERROR CLOSES THE CHANNEL.
    // AN ALTERNATIVE IS TO MAINTAIN AN ERRORS QUEUE AND PUT THE FAILED REQUEST THERE
    // FOR LATER INSPECTION.
    // In this particular case, we return an error because not having the sequence id
    // in the request value implies that a fatal error occurred on Neutron side.
    let seq_id = request
        .sequence
        .ok_or_else(|| StdError::generic_err("sequence not found"))?;

    // WARNING: RETURNING THIS ERROR CLOSES THE CHANNEL.
    // AN ALTERNATIVE IS TO MAINTAIN AN ERRORS QUEUE AND PUT THE FAILED REQUEST THERE
    // FOR LATER INSPECTION.
    // In this particular case, we return an error because not having the sequence id
    // in the request value implies that a fatal error occurred on Neutron side.
    let channel_id = request
        .source_channel
        .ok_or_else(|| StdError::generic_err("channel_id not found"))?;

    // update but also check that we don't update same seq_id twice
    // NOTE: NO ERROR IS RETURNED HERE. THE CHANNEL LIVES ON.
    // In this particular example, this is a matter of developer's choice. Not being able to read
    // the payload here means that there was a problem with the contract while submitting an
    // interchain transaction. You can decide that this is not worth killing the channel,
    // write an error log and / or save the acknowledgement to an errors queue for later manual
    // processing. The decision is based purely on your application logic.
    // Please be careful because it may lead to an unexpected state changes because state might
    // has been changed before this call and will not be reverted because of supressed error.
    let payload = read_sudo_payload(deps.storage, channel_id, seq_id).ok();
    if let Some(payload) = payload {
        // update but also check that we don't update same seq_id twice
        ACKNOWLEDGEMENT_RESULTS.update(
            deps.storage,
            (payload.port_id, seq_id),
            |maybe_ack| -> StdResult<AcknowledgementResult> {
                match maybe_ack {
                    Some(_ack) => Err(StdError::generic_err("trying to update same seq_id")),
                    None => Ok(AcknowledgementResult::Timeout(payload.message)),
                }
            },
        )?;
    } else {
        let error_msg = "WASMDEBUG: Error: Unable to read sudo payload";
        deps.api.debug(error_msg);
        add_error_to_queue(deps.storage, error_msg.to_string());
    }

    Ok(Response::default())
}

This handler looks exactly the same as the previous one. The Timeout event, however, should be treated with extra attention. There is no dedicated event for a closed channel (ICA disables all messages related to closing the channels). Your channel, however, can still be closed if a packet timeout occurs. This means that if you are notified about a packet timeout, you can be sure that the affected channel was closed.

Note: it is generally a good practice to set the packet timeout for your interchain transactions to a really large value.

If the timeout occurs anyway, you can just execute RegisterInterchainAccount message again to recover access to your interchain account.